NON-QUALIFIED STOCK OPTION AGREEMENT
EXHIBIT
10.2
EXECUTION
COPY
EXHIBIT
A
AGREEMENT
made as of June 29, 2010, by and between Frederick’s of Hollywood Group Inc., a
New York corporation (the “Company”), and Xxxxxx X. Xxxxx (the
“Employee”).
WHEREAS,
effective on June 29, 2010 (the “Grant Date”), pursuant to the terms and
conditions of the Company’s 2010 Long Term Incentive Equity Plan (the “Plan”),
the Board of Directors and the Compensation Committee of the Board of Directors
of the Company (the “Committee”) authorized the grant to the Employee of an
option (the “Option”) to purchase an aggregate of 600,000 shares of the
authorized but unissued Common Stock of the Company, $.01 par value (the “Common
Stock”), conditioned upon the Employee’s acceptance thereof upon the terms and
conditions set forth in this Agreement and subject to the terms of the Plan;
and
WHEREAS,
the Employee desires to acquire the Option on the terms and conditions set forth
in this Agreement.
IT IS
AGREED:
1.
Grant of Stock
Option. The Company hereby grants the Employee the Option to
purchase all or any part of an aggregate of 600,000 shares of Common Stock (the
“Option Shares”) on the terms and conditions set forth herein and subject to the
provisions of the Plan. The grant of the Option is subject to and
conditioned upon approval by the Company’s shareholders of the Plan
(“Shareholder Approval”). If Shareholder Approval is not obtained, this
Option shall be deemed null and void.
2.
Non-qualified Stock
Option. The Option represented hereby is not intended to be an
Option which qualifies as an “Incentive Stock Option” under Section 422 of the
Internal Revenue Code of 1986, as amended.
3.
Exercise Price.
The exercise price of the Option shall be $0.78 per share, subject to adjustment
as hereinafter provided.
4.
Vesting and Exercisability.
Subject to the terms and conditions of the Plan, and provided that the Employee has remained continuously
employed by the Company as of each vesting date except as otherwise provided herein, this Option shall vest and become exercisable in
three (3) annual
installments as follows: (i) 150,000 Option Shares on January 2,
2012, (ii) 200,000 Option Shares on January
2, 2013 and (iii) 250,000 Option Shares on January 2,
2014. After a portion of the Option becomes exercisable, it shall
remain exercisable except as otherwise provided herein, until the close of
business on the day immediately preceding the tenth anniversary of the Grant
Date (the “Exercise Period”).
5.
Effect of Termination of
Employment.
5.1
Termination Due to
Death. If Employee’s employment by the Company terminates by reason
of death, the portion of the Option, if any, that was exercisable as of the date
of death may thereafter be exercised by the
Employee’s designated beneficiary (or, if no beneficiary is designated, by
the legal representative of the estate or by the legatee of the Employee
under the will of the Employee) for a
period of one (1) year from the date of such death or until the expiration of
the Exercise Period, whichever period is shorter. The portion of the
Option, if any, which was not exercisable as of the date of death shall
immediately expire upon death.
5.2
Termination Due to
Disability. If Employee’s employment by the Company terminates by
reason of “Disability” (as such term is defined in the Employment Agreement,
dated as of June 29, 2010, between the Company and Employee, or any successor
agreement (“Employment Agreement”)), the portion of the Option, if any, that was
exercisable as of the date of termination of employment may thereafter be
exercised by Employee for a period of one (1) year from the date of termination
of employment or until the expiration of the Exercise Period, whichever period
is shorter. The portion of the Option, if any, which was not exercisable
as of the date of such termination of employment shall immediately expire on the
date of such termination of employment.
2
5.3
Termination for
Cause. If Employee’s employment by the Company is terminated for
“Cause” (as such term is defined in the Employment Agreement), (i) this Option,
whether or not exercisable, shall immediately expire and (ii) the Company may
require the Employee to pay to the Company the economic value of any Option
Shares purchased hereunder by the Employee within the six (6) month period prior
to the date of such termination of employment. For this purpose, the term “economic value” means
the difference between the Fair Market Value of the Option Shares on the date of
such termination of employment (or the sales price of such shares if the Option
Shares were sold during such six (6) month period) and the Exercise Price of
such shares. In such event, the Employee hereby agrees to remit to the
Company, in cash, by no later than thirty (30)
days after the date of termination or the date established under the Employment
Agreement for curing any conduct amounting to Cause has expired,
whichever is later, an amount equal to the economic value as defined above.
5.4
Termination by the Company
Without Cause or by Employee for Good Reason. If Employee’s
employment is terminated by the Company without “Cause” (as such term is defined
in the Employment Agreement) or by Employee for “Good Reason” (as such term is
defined in the Employment Agreement), then the portion of the Option which is
exercisable on the date of termination of employment and any additional portion
of the Option which would have otherwise vested on or prior to January 2, 2014
if employment had continued through that date shall continue to vest as
scheduled and shall continue to be exercisable thereafter, absent the death of
Employee (in which case the Option shall be exercisable by the Employee’s
personal representative or heirs, as the case may be, within one year after the
date of death of the Employee), until the expiration of the Exercise
Period.
5.5
Other
Termination. If Employee’s employment is terminated for any reason
other than (i) death, (ii) Disability, (iii) for Cause, (iv) without Cause
by the Company or (v) by the Employee for Good Reason (a) prior to January 2,
2014, then the portion of the Option, if any, that was exercisable as of the
date of termination of employment may thereafter be exercised by the Employee
for a period of ninety (90) days from the date of termination of employment, and any remaining unvested portion of the Option shall
expire on the date of termination or (b) on or after January 2, 2014,
then the portion of the Option that was exercisable as of the date of
termination of employment may thereafter be exercised by the Employee until the
expiration of the Exercise Period, and any remaining unvested portion of the
Option shall expire on the date of termination.
3
6.
Withholding
Tax. Not later than the date as of which an amount first becomes
includible in the gross income of the Employee for Federal income tax purposes
with respect to the Option, the Employee shall pay to the Company, or make
arrangements satisfactory to the Committee regarding the payment of, any
Federal, state and local taxes of any kind required by law to be withheld or
paid with respect to such amount (“Withholding Tax”). The obligations of
the Company under the Plan and pursuant to this Agreement shall be conditional
upon such payment or arrangements with the Company and the Company shall, to the
extent permitted by law, have the right to deduct any Withholding Taxes from any
payment of any kind otherwise due to the Employee from the Company.
7.
Adjustments.
7.1
In the event of a stock split, stock dividend,
combination of shares, or any other similar change in the Common Stock of the
Company as a whole, the Board of Directors of the Company shall make equitable,
proportionate adjustments in the number and kind of shares covered by the Option
and in the option price hereunder.
7.2
In the event of any reclassification or
reorganization of the outstanding shares of Common Stock other than a change
covered by Section 7.1 or that solely affects the par value of such shares of
Common Stock, or in the case of any merger or consolidation of the Company with
or into another corporation (other than a consolidation or merger in which the
Company is the continuing corporation and that does not result in any
reclassification or reorganization of the outstanding shares of Common Stock),
the Employee shall have the right thereafter (until the expiration of the right
of exercise of this Option) to receive upon the exercise hereof after such
event, for the same aggregate Exercise Price payable hereunder immediately prior
to such reclassification, reorganization, merger or consolidation, the amount
and kind of consideration receivable by a holder of the number of shares of
Common Stock of the Company obtainable upon exercise of this Option immediately
prior to such event. The provisions of this Section 7.2 shall similarly
apply to successive reclassifications, reorganizations, mergers or
consolidations, sales or other transfers.
8.
Method of
Exercise.
8.1
Notice to the
Company. The Option shall be exercised in whole or in part by
written notice in substantially the form attached hereto as Exhibit A directed
to the Company at its principal place of business accompanied by full payment as
hereinafter provided of the exercise price for the number of Option Shares
specified in the notice and of the Withholding Taxes, if any.
4
8.2
Delivery of Option
Shares. The Company shall deliver a certificate for the Option
Shares to the Employee as soon as practicable after payment
therefor.
8.3
Payment of Purchase
Price. The Employee shall make cash payments by certified or bank
check, in each case payable to the order of the Company; the Company shall not
be required to deliver certificates for Option Shares until the Company has
confirmed the receipt of good and available funds in payment of the purchase
price thereof and of the Withholding Taxes, if any.
9.
Nonassignability.
The Option shall not be assignable or transferable except by will or by the laws
of descent and distribution in the event of the death of the Employee. No
transfer of the Option by the Employee by will or by the laws of descent and
distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and a copy of the will and such
other evidence as the Company may deem necessary to establish the validity of
the transfer and the acceptance by the transferee or transferees of the terms
and conditions of the Option.
10.
Company
Representations. The Company hereby represents and warrants to the
Employee that:
(i)
the Company, by appropriate and all required action,
is duly authorized to enter into this Agreement and consummate all of the
transactions contemplated hereunder; and
(ii)
the Option Shares, when issued and delivered by the
Company to the Employee in accordance with the terms and conditions hereof, will
be duly and validly issued and fully paid and non-assessable.
11.
Employee
Representations. The Employee hereby represents and warrants to the
Company that:
(i)
he is acquiring the Option and shall acquire the
Option Shares for his own account and not with a view towards the distribution
thereof;
(ii)
he has received a copy of all reports and documents
required to be filed by the Company with the Commission pursuant to the Exchange
Act within the last 24 months and all reports issued by the Company to its
stockholders;
5
(iii)
he understands that he must bear the economic risk of
the investment in the Option Shares, which cannot be sold by him unless they are
registered under the Securities Act of 1933 (the “1933 Act”) or an exemption
therefrom is available thereunder and that the Company is under no obligation to
register the Option Shares for sale under the 1933 Act;
(iv)
he has had both the opportunity to ask questions and
receive answers from the officers and directors of the Company and all persons
acting on its behalf concerning the terms and conditions of the offer made
hereunder and to obtain any additional information to the extent the Company
possesses or may possess such information or can acquire it without unreasonable
effort or expense necessary to verify the accuracy of the information obtained
pursuant to clause (ii) above;
(v)
he is aware that the Company shall place stop
transfer orders with its transfer agent against the transfer of the Option
Shares in the absence of registration under the 1933 Act or an exemption
therefrom as provided herein; and
(vi)
in the absence of an effective registration statement
under the 1933 Act, the certificates evidencing the Option Shares shall bear the
following legend:
“The
shares represented by this certificate have been acquired for investment and
have not been registered under the Securities Act of 1933. The shares may
not be sold or transferred in the absence of such registration or an exemption
therefrom under said Act.”
12.
Restriction on Transfer of
Option Shares. Anything in this Agreement to the contrary
notwithstanding, the Employee hereby agrees that he shall not sell, transfer by
any means or otherwise dispose of the Option Shares acquired by the Employee
without registration under the 1933 Act, or in the event that they are not so
registered, unless (i) an exemption from the 1933 Act registration requirements
is available thereunder, and (ii) the Employee has furnished the Company with
notice of such proposed transfer and the Company’s legal counsel, in its
reasonable opinion, shall deem such proposed transfer to be so
exempt.
6
13.
Miscellaneous.
13.1
Notices. All
notices, requests, deliveries, payments, demands and other communications which
are required or permitted to be given under this Agreement shall be in writing
and shall be either delivered personally or sent by registered or certified
mail, or by private courier, return receipt requested, postage prepaid to the
parties at their respective addresses set forth herein, or to such other address
as either shall have specified by notice in writing to the other. Notice
shall be deemed duly given hereunder when delivered or mailed as provided
herein.
13.2
Plan Paramount; Conflicts
with Plan. This Agreement and the Option shall, in all respects, be
subject to the terms and conditions of the Plan, whether or not stated
herein. In the event of a conflict between the provisions of the Plan and
the provisions of this Agreement, the provisions of the Plan shall in all
respects be controlling.
13.3
Shareholder
Rights. The Employee shall not have any of the rights of a
shareholder with respect to the Option Shares until such shares have been issued
after the due exercise of the Option.
13.4
Waiver. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any other or subsequent
breach.
13.5
Entire
Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof. This Agreement may
not be amended except by writing executed by the Employee and the
Company.
13.6
Binding Effect;
Successors. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and, to the extent not prohibited herein, their
respective heirs, successors, assigns and representatives. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto and as provided above, their respective heirs, successors,
assigns and representatives any rights, remedies, obligations or
liabilities.
13.7
Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without regard to choice of law provisions.
13.8
Headings. The
headings contained herein are for the sole purpose of convenience of reference,
and shall not in any way limit or affect the meaning or interpretation of any of
the terms or provisions of this Agreement.
7
13.9
Section 409A.
The Option granted hereunder is intended to be exempt from the provisions of
Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A
”). To the extent that the Options or any payments or benefits provided
hereunder are considered deferred compensation subject to Section 409A, the
Company intends for this Agreement and the Option to comply with the standards
for nonqualified deferred compensation established by Section 409A (the “409A
Standards”). Notwithstanding anything herein to the contrary, to the
extent that any terms of this Agreement or the Option would subject the Employee
to gross income inclusion, interest or an additional tax pursuant to Section
409A, those terms are to that extent superseded by the 409A Standards. The
Company reserves the right to amend the Option granted hereunder to cause such
Option to comply with or be exempt from Section 409A.
8
IN
WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day and
year first above written.
|
EMPLOYEE:
|
FREDERICK’S
OF HOLLYWOOD GROUP INC.
|
||
|
/s/ Xxxxxx X. Xxxxx
|
By:
|
/s/ Xxxxx XxXx
|
|
|
Name:
Xxxxxx X. Xxxxx
|
Name:
|
Xxxxx
XxXx
|
|
|
Title
|
President
|
||
|
Address:
|
|||
9
EXHIBIT
A
FORM
OF NOTICE OF EXERCISE OF OPTION
____________________
DATE
Frederick’s
of Hollywood Group Inc.
0000
Xxxxxxxx
00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention:
The Board of Directors
Re:
Purchase of Option
Shares
Gentlemen:
In
accordance with my Stock Option Agreement dated as of June 29, 2010
(“Agreement”) with Frederick’s of Hollywood Group Inc. (the “Company”), I hereby
irrevocably elect to exercise the right to purchase _________ shares of the
Company’s common stock, par value $.01 per share (“Common Stock”), which are
being purchased for investment and not for resale.
As
payment for my shares, enclosed is a certified or bank check payable to
Frederick’s of Hollywood Group Inc. in the sum of $________.
I hereby
represent, warrant to, and agree with, the Company that
(i)
I acquired the Option and shall acquire the
Option Shares for my own account and not with a view towards the distribution
thereof;
(ii)
I have received a copy of all reports and
documents required to be filed by the Company with the Commission pursuant to
the Exchange Act within the last 24 months and all reports issued by the Company
to its stockholders;
(iii)
I understand that I must bear the economic
risk of the investment in the Option Shares, which cannot be sold by me unless
they are registered under the Securities Act of 1933 (the “1933 Act”) or an
exemption therefrom is available thereunder and that the Company is under no
obligation to register the Option Shares for sale under the 1933
Act;
(iv)
I have had both the opportunity to ask
questions and receive answers from the officers and directors of the Company and
all persons acting on its behalf concerning the terms and conditions of the
offer made hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (ii) above;
(v)
I am aware that the Company shall place stop
transfer orders with its transfer agent against the transfer of the Option
Shares in the absence of registration under the 1933 Act or an exemption
therefrom as provided herein;
10
(vi)
my rights with respect to the Option Shares
shall, in all respects, be subject to the terms and conditions of this Company’s
2010 Long Term Incentive Equity Plan and this Agreement; and
(vii)
in the absence of an effective registration
statement under the 1933 Act, the certificates evidencing the Option Shares
shall bear the following legend:
“The
shares represented by this certificate have been acquired for investment and
have not been registered under the Securities Act of 1933. The shares may
not be sold or transferred in the absence of such registration or an exemption
therefrom under said Act.”
Kindly
forward to me my certificate at your earliest convenience.
Very
truly yours,
|
|
|
||
|
(Signature)
|
(Address)
|
||
|
|
|
||
|
(Print
Name)
|
(Address)
|
||
|
|
|||
|
(Social
Security Number)
|
11
