**Exhibit 10.16**

 

**SCOTSMAN HOLDINGS, INC.EMPLOYEE STOCK OPTION PLAN**

 

**INCENTIVE STOCK OPTION AGREEMENT**

 

**THIS INCENTIVE STOCK OPTION AGREEMENT**(this “Agreement”) is made as of the          dayof                       ,by and between Scotsman Holdings, Inc., a Delaware corporation (the “Company”),and                                             (the “Optionee”).

 

**WHEREAS,**the Companyand its stockholders have approved the Scotsman Holdings, Inc.                       Employee Stock Option Plan (the “Plan”), pursuant to which the Company may,from time to time, enter into stock option agreements with certain of itsemployees eligible to participate in the Plan;

 

**WHEREAS,**theOptionee is now in the employ of the Company or an Affiliate of the Company asa Key Employee, and the Company desires to have the Optionee remain in suchemploy and to afford the Optionee the opportunity to acquire, or enlarge, theOptionee’s stock ownership in the Company so that the Optionee may have adirect proprietary interest in the Company’s success; and

 

**WHEREAS,** theCommittee has, pursuant to its authority under the Plan, granted to theOptionee an Award in the form of an Incentive Stock Option to acquire up to thenumber of shares of the Company’s Common Stock set forth in **Section 1** below in accordance with the provisions ofthe Plan and subject to the terms and conditions of the Plan and thisAgreement.

 

**NOW, THEREFORE,** inconsideration of the mutual undertakings and obligations of the parties hereinand other good and valuable consideration, the parties hereby agree as follows:

 

1.                                       Grant of Option.           Subjectto the terms, conditions and provisions of this Agreement and the Plan, theCompany hereby grants to the Optionee an Option to purchase up to #                 shares of the Company’s Common Stock, par value $.01 per share (this “Option”),which Option is intended to be an Incentive Stock Option.  The Optionee accepts this Option subject toall of the terms, conditions and provisions of this Agreement and the Plan, andagrees to be bound and to abide by all requests, decisions and determinationsof the Committee made in accordance with the Plan.

 

2.                                       The Plan.                                              This Option is intended to conform in all respectswith the terms of the Plan as presently written.  Inconsistencies between this Option and thePlan will be resolved according to the terms of the Plan, a copy of which hasbeen supplied to you.

 

3.                                       Option Price.                           The exercise price for the Option shall be $                 per share.

 

4.                                       Exercise of the Option.          TheOption granted hereunder shall be exercised, in whole or in part, subject tothe time and performance based vesting requirements set forth in **Exhibit A** and **Sections 7** and **8** hereof, at any time during the term of the Option bydelivering to the Secretary of the Company on any business day (the “ExerciseDate”), written notice specifying the number of shares as to which the Optionis being exercised (the “Exercised Shares”) pursuant to the form on **Exhibit B**, accompanied by: (i) cash or checkpayable to the order of the Company for the aggregate Option Price of theExercised Shares; or (ii) in the discretion of the Committee, shares ofCommon Stock of the Company (the “Stock Payment”) with a Fair Market Valueequal to or less than the aggregate Option Price of the Exercised Shares, pluscash or check payable to the order of the Company for an amount equal to thatamount, if any, by which the aggregate Option Price for the Exercised Sharesexceeds the Fair Market Value of the Stock Payment.  If the Option granted hereunder is exercisedin part, the Optionee must purchase not less than 100 shares at any one time.

 

5.                                       Taxes.              The Company shall be entitled to require as acondition of delivery of the certificate representing the Exercised Shares thatthe Optionee remit an amount sufficient to satisfy all federal, state and othergovernment taxes or withholding requirements; *provided,further*, that the Company shall have the right to withhold such sumsfrom any compensation otherwise due to the Optionee.

 

 

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6.                                       Issuance of Stock.                                              Upon payment in full of the aggregate Option Price,the Company shall issue to the Optionee a certificate representing theExercised Shares, in the form of fully paid and non-assessable Common Stock ofthe Company.

 

7.                                       Termination of Employment.

 

(a)                                  Upon termination of employment of a Participant withthe Company or an Affiliate, this Option shall, to the extent not previouslyexercised, terminate and become null and void, provided that:

 

(1)                      if the Participant shall die while in the employ ofthe Company or an Affiliate or during either the three month or one yearperiod, whichever is applicable, specified in clause (2) below and at atime when such Participant was entitled to exercise any portion of this Optionas herein provided, the legal representative of such Participant, or suchperson who acquired this Option by bequest or inheritance or by reason of thedeath of the Participant, shall have the right to exercise this Option, to the extentnot previously exercised, in respect of any or all of such number of Sharesthat such Participant is entitled to purchase pursuant to this Option at thetime of such Participant’s death, at any time up to and including one yearafter the date of death; and

 

(2)                      if the employment of any Participant shall terminateby reason of the Participant’s Retirement, Disability or dismissal other thanfor Cause, and while such Participant is entitled to exercise this Option, asherein provided, such Participant shall have the right to exercise this Option,to the extent not theretofore exercised, in respect of any or all of suchnumber of shares that such Participant is entitled to purchase pursuant to thisOption at the time of such termination, at any time up to and including (i) threemonths after the date of such termination of employment in the case oftermination by reason of Retirement or dismissal other than for Cause and (ii) oneyear after the date of termination of employment in the case of termination byreason of Disability.

 

(b)                                 If a Participant voluntarily terminates hisemployment, or is discharge for Cause, any Option granted hereunder shallterminate.

 

(c)                                  If this Option shall be exercised by the legalrepresentative of a deceased or a disabled Participant, or by a person whoacquired this Option by bequest or inheritance or by reason of death of anyParticipant, written notice of such exercise shall be accompanied by acertified copy of letters testamentary or equivalent proof of the right of suchlegal representative or other person to exercise this Option.

 

8.                                       Acceleration of Vesting in Certain Circumstances.

 

(a)                                  For purposes hereof, a “change in control” shall bedeemed to occur if: (i) any “person” (as such term is used in Section 13(d) and14(d)(2) of the Securities Exchange Act of 1934, as amended), other thanCypress Merchant Banking Partners L.P., Cypress Offshore Partners L.P., BTInvestment Partners, Inc., and Scotsman Partners, L.P., or any of theiraffiliates or any combination there (collectively, the “Investor Group”), is orbecomes the “beneficial owner” (as defined in Rule 13d-3 under ExchangeAct), directly or indirectly, of all of the outstanding capital stock of theCompany; or (ii) a sale of all or substantially all of the assets of theCompany other than to an entity owned or controlled by the Investor Group isconsummated; or (iii) any merger, consolidation, issuance of securities orpurchase or sale of assets, the result of which would be the occurrence of anyevent described in clause (i) or (ii) above, is consummated.

 

(b)                                 Upon the occurrence of (i) a change in controlof the Company, or (ii) the effective date of the Company’s registrationstatement under the Securities Act of 1933, as amended (the “Securities Act”),registering Common Stock in connection with an initial public offering (each an“acceleration event”): (a) unvested options subject to the time-basedvesting requirements shall immediately vest and become exercisable and (b) unvestedoptions subject to performance based vesting requirements shall immediatelyvest and become exercisable in the event that the cumulative EBITDA target (setforth in **Exhibit A**) for the most recentlycompleted fiscal year and for the year to date period (on a straight linepro-rata basis) ending on the month end immediately proceeding the measurementdate have been achieved.

 

(c)                                  If, upon the occurrence of an acceleration event, atleast 90% but less than 100% of the cumulative EBITDA target for the mostrecently completed fiscal year has been met, the performance based optionsshall vest proportionately as set forth in **Exhibit A-1**.

 

 

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9.                                       Stockholders’ Agreement.     It is a condition to the effectiveness of thisOption and the obligation of the Company to issue any Shares hereunder that theParticipant shall have executed, on or prior to the date of the execution ofthis Agreement, the Amended and Restated Management Stockholders’ andOptionholders’ Agreement, dated as of                                 ,by and among the Company, the Stockholders and Permitted Transferees (each asdefined therein) as such agreement may be amended or restated (the “StockholdersAgreement”).  If the Participant has notexecuted the Stockholders Agreement on or before the date hereof, this Optionshall automatically and without any further notice terminate and be null andvoid.

 

10.                                 Term of Option.  Subject to the terms, conditionsand provisions of this Agreement and the Plan, this Option shall terminate tenyears from the date of grant on                          .

 

11.                                 Non-Transferability of Option.                              This Option may be exercised only by the Participantand may not be assigned or transferred except as expressly provided in thePlan.  Immediately upon any attempt toassign or transfer this Option, by operation of law or otherwise, in violationof this Agreement, this Option shall terminate and be null and void.

 

12.                                 No Rights of Stockholder.      The Participant shall not be deemed a stockholder ofthe Company for any purpose until the shares of the Company’s Common Stocksubject to this Option have been issued to the Participant upon the exercise ofthis Option.  The Participant shall haveno obligation to exercise this Option.

 

13.                                 Common Stock Acquired for Investment.                       The Participant agrees that the Company may requirethe Participant to certify (in such form as the Company may specify) prior toeach time or times the Exercised Shares are purchased that such ExercisedShares are being purchased by the Participant for investment and not with anyintention of distributing the same.  Thestock certificates for any shares of Common Stock issued by the Company uponexercise of this Option shall be stamped, if appropriate, with a legend restrictingtransferability of the Shares in accordance with this Agreement and the Plan,the Securities Act, and any applicable state securities laws.

 

14.                                 Notice of Disposition.                           In the event the Participant makes a disposition (asthat term is defined in Section 424(c) of the Code) of the ExercisedShares within two years from the date hereof or within one year from the dateof acquiring such Exercised Shares, the Participant  shall notify the Company of such dispositionwithin thirty (30) days thereof.

 

15.                                 The Company’s Rights.                  The existence of this Option shall not affect in anyway the right or power of the Company or its stockholders to make or authorizeany or all adjustments, recapitalizations, reorganizations or other changes inthe Company’s capital structure, or its business, or any merger orconsolidation of the Company, or any issue of bonds, debentures, preferred orother stocks with preference ahead of or convertible into, or otherwiseaffecting the Common Stock or rights thereof, or dissolution or liquidation ofthe Company, or any sale or transfer of all or any part of its assets orbusiness, or any other corporate act or proceeding, whether of a similarcharacter or otherwise.

 

16.                                 Recapitalization.         In the event of a change in the number of issuedshares of Common Stock of the Company resulting from a subdivision orconsolidation of shares or other capital adjustment, or the payment of a stockdividend or other increase or decrease in such shares, the Committee may, inits sole and absolute discretion, make such adjustments to this Option as itdeems appropriate.

 

17.                                 Miscellaneous.

 

(a)                                  The Participant acknowledges that the exercise ofthis Option is subject to the Certificate of Incorporation and the Bylaws ofthe Company, as both may be amended from time to time, and any applicablefederal or state laws, rules or regulations.

 

(b)                                 The Committee shall have the right, in its sole andabsolute discretion, to alter or amend this Agreement, from time to time, inany manner for the purpose of promoting the objectives of the Plan but only ifall agreements granting options to purchase shares of the Company’s CommonStock pursuant to the Plan which are in effect and not wholly exercised at thetime of such alteration or amendment shall also be similarly altered or amendedwith substantially the same effect.  Anysuch alteration or amendment of this Agreement by the Committee shall, uponadoption thereof without requirement for consent or other action with respectthereto by any such person.  The Companyshall give written notice to the Participant of any such alternation oramendment of this Agreement by the Committee as promptly as practical after theadoption thereof.  The foregoing shallnot restrict the ability of the Participant and the Company by mutual consentto alter or amend this Agreement in any manner which is consistent with thePlan and approved by the Committee.

 

 

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(c)                                  This Agreement shall be governed by and construed inaccordance with the laws of the State of Maryland, exclusive of its conflictsof law provisions.

 

(d)                                 The descriptive headings of the sections andparagraphs of this Agreement are inserted for convenience only and do notconstitute a part of this Agreement.

 

(e)                                  Any notice or communication required to be given pursuantto this Agreement shall be in writing and shall be sufficiently made or givenif hand-delivered or mailed by certified mail, addressed to the Participant atthe address contained in the records of the Company or to the Company at itsprincipal office.

 

(f)                                    This Agreement and the documents referred to hereincontain the complete agreement between the parties and supersede any priorunderstandings, agreements or representations by or between the parties,written or oral, which may have related to the subject matter hereof in anyway.

 

(g)                                 This Agreement and the documents referred to hereincontain the complete agreement between the parties and supersede any priorunderstandings, agreements or representations by or between the parties,written or oral, which may have related to the subject matter hereof in anyway.

 

(h)                                 This Agreement may be executed simultaneously in oneor more counterparts each of which shall be deemed to be an original and all ofwhich together shall constitute one and the same instrument.

 

(i)                                     To the extent that any capitalized term used in thisAgreement is not defined herein, it shall be given the meaning ascribed to suchterm in the Plan.

 

IN WITNESS WHEREOF, the parties have executed thisAgreement on                                           ,20          , effective, as of theday and year first above written.

 
|   | WITNESS: | SCOTSMAN HOLDINGS, INC.     |
|--------|----------|-----------------------------|
|   |     |
|   |     |
|   |     |                        | By: |   |   |
|   |     | Gerard E. Holthaus          |
|   |     | Chairman, President and CEO |
|   |     |
|   | OPTIONEE |
|   |     |
|   |     |
|   | By:      |                        |   |
|   |     | Participant                 |
|        |          |                             |  |  |  |

 

 

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**EXHIBIT A**

**SCOTSMAN HOLDINGS, INC.200__ EMPLOYEE STOCK OPTION**

 

VESTING OF INCENTIVE STOCK OPTIONS

 

Theaward of Incentive Stock Options under this Agreement vests and becomeexercisable as follows:

 

Performance-based Vesting

For 50% of the shares subject to the Option, asfollows:

 
| **Targets **** | ** **                                          | **EBITDA  Targets *** | ** ** | **Cumulative  EBITDA** |
|----------------|-----------------------------------------------------|-----------------------|------------|------------------------|
|           |                                                |                  |       |                   |
| 1.             | Options for Shares become exercisable on            |                  |       |                   |   |
|           | December 31, 200__ if the Company’s 200__ |                  |       |                   |   |
|           | EBITDA target is achieved.                          |                  |       |                   |   |
|           |                                                |                  |       |                   |   |
| 2.             | Options for Shares become exercisable on            |                  |       |                   |   |
|           | December 31, 200__ if the Company’s 200__ |                  |       |                   |   |
|           | EBITDA target is achieved.                          |                  |       |                   |   |
|           |                                                |                  |       |                   |   |
| 3.             | Options for Shares become exercisable on            |                  |       |                   |   |
|           | December 31, 200__ if the Company’s 200__ |                  |       |                   |   |
|           | EBITDA target is achieved.                          |                  |       |                   |   |
|           |                                                |                  |       |                   |   |
| 4.             | Options for Shares become exercisable on            |                  |       |                   |   |
|           | December 31, 200__ if the Company’s 200__ |                  |       |                   |   |
|           | EBITDA target is achieved.                          |                  |       |                   |   |
|           |                                                |                  |       |                   |   |
| 5.             | Options for Shares becomes exercisable on           |                  |       |                   |   |
|           | December 31, 200__ if the Company’s 200__ |                  |       |                   |   |
|           | EBITDA target is achieved.                          |                  |       |                   |   |

 

Time Based Vesting

 

For 50% of the Shares subject to the Option, asfollows:

 

10% shares on December 31, 200___

10% shares on December 31, 200___

10% shares on December 31, 200___

10% shares on December 31, 200___

10% shares on December 31, 200___

 

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*  Subject toannual Cap-X adjustments.

 

**Ifthe Cumulative EBITDA Targets as of the most recently completed fiscal year andfor the year to date period (on a straight line pro-rata basis) ending on themonth end immediately preceding the measurement date have been achieved, allunvested performance based Options shall immediately vest and becomeexercisable.  For purposes hereof, themeasurement date will be the earlier of the date on which audited financialstatements for the year ended December 31, 200___ become available or uponthe occurrence of a change in control or an initial public offering as definedin the Agreement.

 

 

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# **EXHIBIT A-1**

**SCOTSMAN HOLDINGS, INC.200__ EMPLOYEE STOCK OPTION PLAN**

 

PARTIAL VESTING OFINCENTIVE STOCK OPTIONS

 

If over 90% but less than 100% of the Cumulative EBITDA Targets as of themost recently completed fiscal and for the year to date period (on a straightline pro-rata basis) ending on the month end immediately preceding themeasurement date have been achieved, unvested performance based Options shallvest and become exercisable as set forth below.

 
| **Percentage  of Cumulative  EBITDA Targets Achieved** | ** ** | **Percent of Unvested Performance  Based Options  Vested & Exercisable** | ** ** |
|--------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
|                                                   |       |                                                                              |       |
| at  least 90                                           |       | 50                                                                                |       |
| 90.1 to  91                                            |       | 55                                                                                |       |
| 91.1 to  92                                            |       | 60                                                                                |       |
| 92.1 to  93                                            |       | 65                                                                                |       |
| 93.1 to  94                                            |       | 70                                                                                |       |
| 94.1 to  95                                            |       | 75                                                                                |       |
| 95.1 to  96                                            |       | 80                                                                                |       |
| 96.1 to  97                                            |       | 85                                                                                |       |
| 97.1 to  98                                            |       | 90                                                                                |       |
| 98.1 to  99                                            |       | 95                                                                                |       |
| at  least 99.1                                         |       | 100                                                                               |       |

 

 

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