FORM OF STOCK OPTION AGREEMENT
For the Purchase of Certain Shares of Common Stock,
$.01 par value per share
of
Finlay Enterprises, Inc.
Among
THE 1989 XXXXXX X. XXX NOMINEE TRUST,
XXXXXX X. XXX
and
"OPTIONEE"
THE OPTION REPRESENTED BY THIS AGREEMENT HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. IT MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
OPTION AGREEMENT
Agreement dated as of May 26, 1993 by and among the 1989 Xxxxxx X. Xxx
Nominee Trust (the "Trust"), Xxxxxx X. Xxx ("Xxx") and ___________ of
___________("Optionee").
WHEREAS, the Trust purchased 162,892 shares of the Common Stock, $.01
par value per share (the "Xxx Shares") of Finlay Enterprises, Inc., a Delaware
corporation (the "Company"), pursuant to a Stock Purchase Agreement dated as of
May 26, 1993;
WHEREAS, Xxx is the sole beneficiary of the Trust; and
WHEREAS, the Trust has agreed, subject to the terms and conditions of
this Agreement, to grant Optionee an option to purchase ___________ Xxx Shares
and Optionee has agreed to accept such option.
ACCORDINGLY, in consideration of one dollar ($1.00) and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the Trust, the parties hereto agree as follows:
1. Grant of Option. The Trust hereby grants Optionee an Option
(the "Option") to purchase an aggregate of ___________ Xxx Shares.
2. Exercise Price. The exercise price for the Xxx Shares (the
"Exercise Price") covered by the Option shall be $4.88 per share, which Exercise
Price shall be equitably adjusted in the event of any stock split, combination,
reclassification or other similar event.
3. Time and Manner of Exercise.
(a) Subject to the provisions of this Section 3, termination as set
forth in Section 5 hereof and the mandatory exercise and co-sale provisions set
forth in Section 12 hereof, the Option shall be exercisable as follows:
(i) during the first twelve (12) months from the date hereof, the
Option may be exercised as to twenty-five percent (25%) of the
Xxx Shares covered thereby;
(ii) after twelve (12) months from the date hereof, the Option may be
exercised as to fifty percent (50%) of the Xxx Shares covered
thereby;
(iii)after twenty-four (24) months from the date hereof, the Option
may be exercised as to seventy-five percent (75%) of the Xxx
Shares covered thereby; and
(iv) after thirty-six (36) months from the date hereof, the Option may
be exercised as to all of the Xxx Shares covered thereby.
(b) In the event that the Trust requests the holder of the Option to
exercise the Option pursuant to Section 12 hereof, the Option shall accelerate
and vest effective as of the date of the notice of such request and the Option
shall thereupon become immediately exercisable to the extent required in
connection with such request.
(c) If there is either (i) a sale of all of the issued and outstanding
capital stock of the Company or of all or substantially all the assets of the
Company or (ii) an underwritten offering of securities of the Company to the
public pursuant to a registration statement (other than on Form X-0, Xxxx X-0 or
some other special or limited purpose form) filed under the Securities Act of
1933, as amended (the "Securities Act"), the Option shall accelerate and vest
and become fully exercisable as of the effective date of the events specified in
the preceding clauses (i) or (ii).
(d) To the extent that the right to exercise the Option has accrued and
is in effect, the Option may be exercised in full at one time or in part from
time to time by Optionee at any time during which Xxx or the Trust retains
ownership of the Xxx Shares by giving written notice of such exercise to the
Trust in the form of Exhibit A hereto stating the number of Xxx Shares with
respect to which the Option is being exercised, accompanied by payment in full,
in cash or by certified check, of the Exercise Price for all of the Xxx Shares
covered by the Option; provided, however, that such exercise shall only be
permitted at any one time as to Xxx Shares having an aggregate fair market value
of more than $50,000 at the time of exercise or as to all of the remaining Xxx
Shares as to which the Option is then exercisable if the aggregate fair market
value of said Shares is less than $50,000 at time of exercise. Upon receipt of
such notice of exercise and payment in full of the Exercise Price, the Trust
shall, within ten (10) days, instruct the Company and its transfer agent, if
any, to transfer to Optionee the number of Xxx Shares specified in the notice of
exercise, and shall execute and deliver to the Company and its transfer agent,
if any, certificates, stock powers, and other instruments of assignment as may
be reasonably required in order to reflect and confirm the transfer and
assignment of such Xxx Shares to Optionee.
4. Withholding Tax. If, in connection with the grant or exercise of the
Option hereunder, either Xxx or the Trust should determine in their sole
discretion that any federal or state withholding tax must be paid, Optionee
agrees on behalf of himself and his legal successors, upon the written request
of either Xxx or the Trust, to pay any such withholding tax in full in the
amount determined by Xxx or the Trust, as the case may be, in cash or certified
check, to the Xxxxxx X. Xxx Company for payment to the appropriate taxing
authority. Such withholding payment shall be paid within three (3) business days
from the receipt of the notice that such a withholding tax payment is due.
5. Term of Option. This Option shall terminate ___________ years
from the date hereof, subject to earlier termination as hereinafter set forth in
this Section 5:
(a) In the event that Optionee ceases to ___________ the
Xxxxxx X. Xxx Company or one of its controlled affiliates, the Option may be
exercised prior to the expiration of the ___________ year term of the Option as
to the Xxx Shares that are fully vested on the date of such termination but the
Option shall terminate as to all Xxx Shares that have not vested as of the date
of such termination.
(b) In the event of the death of Optionee, the Option may be
exercised prior to the expiration of the ___________ year term of the Option as
to the Xxx Shares that are fully vested on the date of death, by the estate of
Optionee or by any person or persons who acquire the right to exercise the
Option by bequest or inheritance or by reason of the death of Optionee, but the
Option shall terminate as to all Xxx Shares that have not vested as of the date
of death.
6. Reservation of Shares. The Trust shall at all times during the term
of the Option reserve and keep available such number of Xxx Shares as will be
sufficient to satisfy the requirements of the Option; provided that the Trust
may pledge the Xxx Shares to a financial institution. Until the Option has been
duly exercised in accordance with the terms hereof, the Trust shall continue to
have all rights as the holder of the Xxx Shares held by it, and Optionee shall
not have any of the rights of a stockholder in respect of the Xxx Shares until a
certificate or certificates therefor shall be delivered to him upon due exercise
of the Option.
7. Representations and Covenants of the Trust and Xxx. The Trust
warrants and represents that it is the sole owner of the Xxx Shares held by it.
The Trust further warrants and represents that the Xxx Shares are now, and at
all times during the term of the Option shall be, free of all encumbrances,
except for those imposed by (i) a pledge of the Xxx Shares, (ii) Section 12
hereof, (iii) the Stockholders' Agreement, as defined in Section 10 below, or
(iv) certain stock option agreements entered into by Xxx with Xxxxxx X. Xxx
Company employees or consultants concerning the Xxx Shares in a form similar to
this Agreement; provided, however, that the representations and warranties
contained in this Section 7 shall not apply to any Xxx Shares transferred to
Xxxxxx X. Xxx Company employees or consultants. Xxx covenants and agrees to
cause the Trust to recognize and honor the rights of the holder of the Option
hereunder and to comply with the terms hereof in the same manner as Xxx with
respect to the Xxx Shares held by the Trust.
8. Non-Transferability. The right of Optionee to exercise the Option
shall not be assignable or transferable by him except that any pledge to a
recognized financial institution or any sale, assignment, gift or other
disposition of the Option by Optionee for the benefit of the spouse or children
of Optionee and any transfer of the Option between Optionee and trustees of a
trust for the benefit of Optionee, his spouse or children shall be permitted. If
any such pledge, sale, assignment, gift or other disposition is made, the Option
shall in all respects and at all times be subject to all of the terms,
conditions and provisions of this Agreement, including, without limitation, the
mandatory exercise and co-sale provisions set forth in Section 12 hereof.
No sale, transfer, assignment, mortgage, pledge, bequest, gift, or
transfer by descent, by virtue of any execution or order of court or by
operation of law, or any other disposition, of the Option in violation of, or
contrary to, any of the terms, conditions or provisions hereof, shall be valid,
but every purchaser, assignee, transferee, mortgagee, pledgee, legatee, donee
and holder of the Option otherwise than in accordance with this Agreement shall
in all respects and at all times be subject to all of the terms, conditions and
provisions of this Agreement.
Except as hereinabove provided, the Option shall be null and void and
without effect upon any attempted assignment or transfer including without
limitation, any purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition, attachment, trustee process or
similar process, whether legal or equitable, upon the Option.
9. Delivery of Investment Representation. Notwithstanding any other
provision hereof, the Trust shall be under no obligation to cause or direct the
transfer of the Xxx Shares with respect to which the Option has been exercised,
and the Company shall be under no obligation to make any transfer of such
Shares, unless and until Optionee shall give a written representation to the
Trust, to the Company, or to both of them, substantially in the form attached
hereto as Exhibit A, that Optionee is acquiring the Xxx Shares transferred to
him upon exercise of the Option for investment and not with a view to, or for
sale in connection with, the distribution of any such Xxx Shares in violation of
applicable federal or state securities laws, and that he will make no transfer
of the same except in compliance with the Securities Act and the rules and
regulations promulgated thereunder as then in force, and the Company may place
an "investment legend" upon any certificate for the Xxx Shares transferred to
Optionee by reason of such exercise.
10. Execution of Shareholders' Agreement. Optionee acknowledges that, in
connection with his prior or future purchase of shares of the Common Stock, $.01
par value per share, of the Company, he has previously executed and delivered to
the Company a counterpart signature page to the Stockholders' Agreement, dated
as of May 26, 1993, as amended through the date hereof (the "Stockholders'
Agreement"), by and among the Company and the Purchasers named therein. Optionee
further agrees that all Xxx Shares acquired by him upon exercise of the Option
will be subject to the terms and conditions of the Stockholders' Agreement.
11. Adjustments Upon Changes in Capitalization. In the event that
the Xxx Shares are changed into or exchanged for a different number or kind of
shares or other securities of the Company or of another corporation by reason of
any reorganization, merger, consolidation, recapitalization, reclassification,
stock split, combination of shares or dividend payable in capital stock,
appropriate adjustments shall be made in the number and kind of shares as to
which this Option shall be exercisable, to the end that the proportionate
interest of Optionee in the Xxx Shares shall remain as before the occurrence of
such event; such adjustment in the Option shall be made without change in the
total price applicable to the unexercised portion of the Option and with a
corresponding adjustment in the Exercise Price per share.
12. Exit Right/Mandatory Exercise and Co-Sale.
(a) In the event that the Trust should propose to sell, exchange or
otherwise dispose of the Xxx Shares held by it at any time during the term of
the Option or subsequent to its exercise by Optionee, the Trust shall give
Optionee reasonable notice of such sale and a reasonable opportunity to exercise
the Option, if it has not yet been exercised, and to participate in any such
sale. Optionee shall have the right to join in such sale at the same price per
share, on the same terms, to the same extent (in terms of the percentage of
Common Stock held) and to the same buyer; provided, however, that the rights and
obligations of clause (a) of this Section 12 shall not apply to a transfer of
Xxx Shares to Xxxxxx X. Xxx Company employees or consultants or a person who has
acquired the rights of any such employee or consultant by reason of the death of
any such employee or consultant.
(b) In the event that (i) a pledgee of Xxx Shares forecloses upon Xxx
Shares that have been pledged to such pledgee and such pledgee does not
recognize the rights of the holder of the Option hereunder or (ii) the Trust
does not recognize the rights of the holder of the Option upon the due exercise
thereof, then Xxx shall be personally obligated to pay and shall pay to such
holder an amount equal to the net fair market value of the Xxx Shares covered by
the Option; provided, however, that any such payment shall be subject to the
withholding tax provisions set forth in Section 4 hereof. For purposes of this
clause (b) of this Section 12, "net fair market value" shall be deemed to be the
difference between the exercise price per share of the Xxx Shares covered by the
Option and the price per share paid, or deemed to have been paid, by the pledgee
with respect to the Xxx Shares upon foreclosure.
(c) Upon the Trust's written request set forth in the Trust's notice of
sale, Optionee shall be obligated to exercise the Option and join in any sale
(including without limitation the sale of Xxx Shares to a pledgee upon
foreclosure) at the same price, on the same terms, to the same extent (in terms
of the percentage of Common Stock held) and to the same buyer; provided further
that, except with respect to the sale of Xxx Shares to a pledgee, Optionee shall
not have any obligation hereunder if and to the extent the sale is not at arm's
length.
(d) If the holder of the Option does not exercise the Option and
participate in a sale as provided in clause (c) of this Section 12, then the
Option shall automatically terminate as of the date of any such sale with
respect to the number of Xxx Shares that could have been included in such sale
by the holder of the Option and the Optionee shall have no further rights,
obligations or liabilities with respect to the Option or to Xxx Shares that
could have been included in such sale upon exercise of the Option.
13. Withdrawal of Xxx Shares from Trust. Xxx covenants and agrees that
if any of the Xxx Shares are transferred, distributed or released to Xxx by the
Trust, such Xxx Shares shall remain subject to the terms and conditions of this
Agreement and Xxx shall promptly execute and deliver any documents or
instruments necessary to grant to the Optionee the rights afforded by this
Agreement.
14. Notices. All notices required hereunder or given pursuant
hereto shall be effective when delivered by hand or mailed by certified mail
addressed as follows:
If to the Trust to: Xxxxxx X. Xxx Nominee Trust
State Street Bank & Trust
Company of Connecticut, N.A.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxx
If to Xxx to: Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxx
With copies in each case to: Xxxxxxx X. Xxxxxx
Xxxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
If to Optionee to: Optionee
c/o Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
unless and until notice of another or different address shall be given as
provided herein.
15. Modification. This Agreement constitutes the entire Agreement
between the parties hereto with regard to the subject matter hereof, superseding
all prior understandings and agreements, whether written or oral. This Agreement
may not be amended or revised except by a writing signed by the parties.
16. Governing Law. This Agreement shall be construed under and
governed by the laws of the Commonwealth of Massachusetts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK ]
IN WITNESS WHEREOF, the parties hereto have set their hands under seal
as of the date first above written.
State Street Bank & Trust Company of
Connecticut, N.A., not personally but as
Trustee for the 1989 Xxxxxx X. Xxx Nominee
Trust
Title:
Xxxxxx X. Xxx
Optionee:
Exhibit A
[Date]
The 1989 Xxxxxx X. Xxx Nominee Trust
State Street Bank & Trust Company of Connecticut, N.A.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxx
Finlay Enterprises, Inc.
c/o Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
P
ATTN: President
Re: Notice of Option Exercise
Gentlemen:
Reference is made to the Stock Option Agreement dated as of May 26,
1993, by and among the 1989 Xxxxxx X. Xxx Nominee Trust (the "Trust"), Xxxxxx X.
Xxx ("Xxx") and [ Name of Optionee ] ("Optionee"). The Option Agreement pertains
to the Trust's grant to Optionee of an option to acquire from the Trust shares
of the Common Stock, par value $.01 per share, (the "Shares") of Finlay
Enterprises, Inc. (the "Company") at the Exercise Price of $4.88 per share with
respect to the Xxx Shares. Capitalized terms used as defined terms herein,
unless otherwise defined, shall have the same meaning assigned to them in the
Option Agreement.
Pursuant to Section 3(d) and Section 13 of the Option Agreement,
Optionee hereby gives notice to Xxx and the Trust of optionee's exercise of the
Option with respect to Xxx Shares. Xxx and the Trust hereby acknowledge receipt
of such written notice from Optionee pursuant to Section 3(d) of the Option
Agreement. Concurrently with his delivery of this notice of option exercise,
Optionee has hereby delivered to the Xxxxxx X. Xxx Company (i) the aggregate
Exercise Price of $ and (ii) the required Federal and state withholding taxes in
the amounts of $ and $ respectively, with respect to the Xxx Shares.
In connection with the foregoing option exercise, the undersigned hereby
represents and warrants that he is purchasing said Shares with his own funds for
his own account for investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of applicable Federal or state
securities laws and that he will make no transfer of the same except in
compliance with the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder as then in force (the "Securities Act"). The
undersigned understands that you are relying upon such representation and
warranty in allowing the issuance and sale of said Shares to the undersigned
without registering the same under the Securities Act. In view of the
undersigned's representation and warranty, he agrees that there may be affixed
to the certificate for the Shares to be issued to the undersigned and to all
certificates issued hereafter representing such Shares (until in the opinion of
counsel, which opinion must be satisfactory to your counsel, it is no longer
necessary or required) a legend as follows:
TRANSFER RESTRICTED
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS, INCLUDING RESTRICTION ON TRANSFER, OF A STOCKHOLDERS"
AGREEMENT DATED AS OF MAY 26, 1993, AS AMENDED FROM TIME TO TIME, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
THE SALE, TRANSFER OR OTHER DISTRIBUTION OF THE SHARES REPRESENTED BY
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE STATE
SECURITIES LAWS, AND SUCH SALE, TRANSFER OR DISTRIBUTION MAY NOT BE MADE
UNLESS REGISTERED UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES
LAWS OR AN EXEMPTION THEREFROM IS AVAILABLE.
The undersigned acknowledges that he has been informed by you that:
1. As the Shares to be acquired by the undersigned are unregistered,
they must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available;
2. Routine sales of these securities made in reliance upon Rule 144
under the Securities Act can be made only in limited amounts in accordance with
the terms and conditions of that Rule and, in the case of sales to which that
Rule is not applicable, compliance with Regulation A or some other disclosure
exemption under the Securities Act will be required;
3. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the time
the undersigned may desire to make a routine trading transaction pursuant to the
Rule, the Company may not be able to comply with such requirement; and
4. The Company is under no obligation to register the Shares or to
comply with Regulation A or any other exemption under the Securities Act or to
supply information necessary to permit routine sales under Rule 144.
[Remainder of Page Intentionally Left Blank]
SIGNATURE PAGE TO
NOTICE OF OPTION EXERCISE
Sincerely,
[Employee]
Xxx Shares Remaining Under Option:
