THE BOMBAY COMPANY, INC. NON-QUALIFIED OPTION AGREEMENT
THE
BOMBAY COMPANY, INC.
This
Non-Qualified Option Agreement (the “Agreement”)
is
made effective as of the 5th
day of
June, 2006, between THE BOMBAY COMPANY, INC., a Delaware corporation (the
“Company”),
and
XXXXX X. XXXXXXX, an employee of the Company or one of its subsidiaries
(“Employee”).
RECITALS
| A. |
The
Company and Employee are parties to that certain Employment Agreement,
dated June 5, 2006 (the “Employment
Agreement”),
whereby Employee may from time to time receive option grants to purchase
shares of the Company’s $1.00 par value common stock (the “Shares”).
Capitalized terms used in this Agreement but not defined herein shall
have
the meanings given to them under the Employment
Agreement.
|
| B. |
The
Company desires to afford Employee the opportunity to purchase Shares
in
accordance with the terms of this
Agreement.
|
| C. |
The
parties intend for this Agreement to comply with the provisions governing
nonqualified stock options under Internal Revenue Service Notice
2005-1
and the proposed Treasury Regulations issued on September 29, 2005
under
Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”)
in order to exempt this Agreement and the option granted hereunder
from
application of Section 409A of the
Code.
|
AGREEMENT
NOW
THEREFORE, in consideration of the mutual covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Grant
of Option.
The
Company hereby grants to Employee the right and option (the “Option”)
to
purchase an aggregate of 550,000 Shares (the “Option
Shares”),
such
Shares being subject to adjustment as provided in paragraph 8 hereof, and on
the
terms and conditions herein set forth. All of the Shares granted pursuant to
this Option, are granted as a non-qualified stock option (a “Non-Qualified
Option”).
2. Purchase
Price.
The
purchase price of the Option Shares shall be $2.21
per
Share, such purchase price being 100% of the fair market value of such Shares
on
June 5, 2006 (the “Date
of Grant”),
determined by the Board of Directors of the Company (the “Board”)
or an
authorized Committee of the Board (the “Committee”)
in
accordance with Section 409A of the Code and the regulations and guidance issued
thereunder.
3. Vesting;
Exercise of Option.
(a) Vesting
and Time of Exercise.
Unless
expired as provided in paragraph 5 below, and subject to the special provisions
of paragraphs 3(b) and 3(c) below, the Option Shares shall be vested and this
Option may be exercised as follows: (i) 100,000 Option Shares shall vest on,
and
may be exercised, in whole or in part, at any time after, the first anniversary
of the Date of Grant; (ii) an additional 175,000 Option Shares shall vest on,
and may be exercised, in whole or in part, at any time after, the second
anniversary of the Date of Grant; and (iii) the remaining 275,000 Option Shares
shall vest on, and may be exercised, in whole or in part, at any time after,
the
third anniversary of the Date of Grant.
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(b) Acceleration
upon Termination without Cause or Resignation Due to Company
Breach.
Notwithstanding
any provision of this Agreement to the contrary and unless expired as provided
in paragraph 5 below, if Employee is terminated by the Company without Cause
or
if Employee resigns upon Company Breach at any time after the first anniversary
of the Date of Grant, then a “pro rata portion” of the Option Shares that would
have vested and become exercisable had Employee remained employed through the
vesting date immediately following such termination shall immediately become
vested and exercisable. For purposes of this paragraph 3(b), a “pro rata
portion” shall be the number of Option Shares (rounded down to the next whole
Option Share) equal to (i) the number of full calendar months that Employee
has
served as the Company’s Chief Executive Officer pursuant to the Employment
Agreement since the vesting date immediately prior to such termination, divided
by (ii) 12. By way of example, if Employee resigns upon Company Breach six
(6)
months after the first anniversary of the Date of Grant, 50% of the Option
Shares that would have vested on the second anniversary of the Date of Grant
will become immediately vested and exercisable on the date of such termination
and the remaining 50% of the Option Shares that would have vested on the second
anniversary of the Date of Grant and all of the Option Shares that would have
vested on the third anniversary of the Date of Grant will expire on the date
of
such termination.
(c) Acceleration
upon Change of Control.
Notwithstanding any provision of this Agreement to the contrary and unless
expired as provided in paragraph 5 below, this Option shall become immediately
fully vested and exercisable as to all of the Option Shares covered hereby
upon
the occurrence of a Change of Control Event (as defined in paragraph 5(c)
below).
4. Manner
of Exercise; Payment of Purchase Price or Cashless Exercise.
(a) Subject
to the terms and conditions of this Agreement, this Option shall be exercised
by
written notice to the Company at its principal office. Such notice shall state
the election to exercise this Option and shall specify the total number of
Option Shares sought to be exercised pursuant to the notice. Such notice of
exercise shall be signed by Employee and shall be irrevocable when given.
(b) At
Employee’s election, this Option may be exercised either by (i) payment of the
purchase price for the Option Shares, as described in paragraph 4(b)(i) below,
or (ii) to the extent permitted by applicable law and with the consent of the
Company, means of a cashless exercise, as described in paragraph 4(b)(ii)
below.
(i) Payment
of Purchase Price.
If
Employee elects to exercise this Option by payment of the purchase price for
the
Option Shares, the notice of exercise shall be accompanied by the full payment
of the purchase price for the Option Shares in cash by certified check or bank
cashier's check or through satisfactory arrangements for payment by a broker
representing Employee in the sale of some or all of the Option Shares. Subject
to approval of the Committee, payment of the purchase price may be accomplished
by the surrender of stock certificates representing Shares that (A) have an
aggregate fair market value on the date of exercise equal to the purchase price
of the Option Shares and (B) have not been acquired from the Company within
six
(6) months prior to the date of the notice of exercise, or by a combination
of
cash and such Shares.
(ii) Cashless
Exercise.
If
Employee elects to exercise this Option by means of a cashless exercise and
such
cashless exercise is permitted by applicable law and approved in writing by
the
Committee, the number of Option Shares to be received by Employee shall equal
the excess, if any, of (A) the number of Option Shares that would be received
by
Employee upon such exercise had Employee paid the purchase price for the Option
Shares in cash over (B) a number of Option Shares, the aggregate fair market
value of which is equal to the aggregate purchase price that would have been
paid as determined pursuant to the immediately preceding clause
(A).
2
(c) Upon
receipt of the purchase price, and subject to the terms of paragraph 11, a
certificate representing the Option Shares exercised shall be registered in
the
name of the person or persons so exercising this Option. In the event this
Option shall be exercised pursuant to paragraph 4(e), by any person or persons
other than Employee, such notice shall be accompanied by appropriate proof
satisfactory to the Company of the right of such person or persons to exercise
this Option. All Shares issued as a result of an exercise of this Option as
provided herein shall be fully paid and non-assessable. If Employee fails to
pay
for any of the Option Shares specified in his notice of exercise or fails to
accept delivery thereof, then this Option, and the right to purchase such Option
Shares may be forfeited, at the election, and in the sole discretion, of the
Company.
(d) The
payment of withholding tax liability by Employee shall be a condition precedent
to the Company’s obligation to issue any certificates for Shares resulting from
an exercise of this Option. The Company shall have the right to deduct from
all
amounts hereunder paid in cash or other form, any Federal, state, local, or
other taxes required by law to be withheld in connection with this Option.
The
Company may, in its sole discretion, withhold any such taxes from any other
cash
remuneration otherwise paid by the Company to Employee. To the extent permitted
by applicable law, the withholding requirement may be satisfied, in whole or
in
part, at the election of Employee, by withholding from the Shares otherwise
issuable upon the exercise of the Option (or portion thereof) that number of
Shares having an aggregate fair market value on the date of exercise equal
to
the amount determined by the Company as the amount required to be withheld
for
tax purposes (or such greater amount of withholding as elected by Employee
in
writing). Employee is hereby advised to consult immediately with his own tax
advisor regarding the tax consequences of this Agreement, including, without
limitation, any possible tax consequences of this Agreement in connection with
Section 409A of the Code.
(e) Subject
to the terms and conditions set forth in paragraph 3 above and paragraph 5
below, during the lifetime of Employee, this Option may be exercised only by
Employee, or by Employee’s guardian or personal or legal representative. If
Employee terminates service with the Company due to his death prior to the
expiration of this Option in accordance with paragraph 5, and Employee has
not
exercised this Option as to the maximum number of vested Option Shares as of
his
date of death, then the following persons may exercise the vested and
exercisable portion of the Option on behalf of Employee at any time prior to
the
earliest of the dates specified in paragraph 5 hereof: the personal
representative of his estate, or the person who acquired the right to exercise
the Option by bequest or inheritance or by reason of the death of Employee;
provided that the Option shall remain subject to the other terms of this
Agreement and applicable laws, rules, and regulations.
3
5. Expiration
of Option.
Other
than as stated below in this paragraph 5, this Option, if vested and not
exercised, shall expire and become null and void upon the expiration of ninety
(90) days after Employee ceases to be employed by the Company or any of its
subsidiaries. Subject to the provisions of paragraph 3 above, all unvested
portions of this Option shall expire on the date of the termination of
Employee’s employment for any reason.
(a) Without
Cause or Due to Company Breach.
If
Employee’s employment is terminated by the Company without Cause or by Employee
upon Company Breach, this Option shall continue to be exercisable until the
earlier to occur of (i) the date that is six (6) months following the date
of
such termination and (ii) the end of the applicable period provided in paragraph
5(d) below.
(b) Death
or Disability.
In the
event of the termination of Employee’s employment by the Company on account of
death or “disability” (as defined in the Employment Agreement), this Option
shall continue to be exercisable until the earlier to occur of (i) the date
that
is twelve (12) months following the termination of Employee’s employment on
account of his death or disability, and (ii) the end of the applicable period
provided in paragraph 5(d) below.
(c) Change
of Control.
If a
Change of Control occurs and within one (1) year of the Change of Control (as
defined in the Employment Agreement), Employee’s employment is terminated other
than for Cause or by Employee’s resignation without Company Breach
(collectively, a “Change
of Control Event”),
then
this Option shall continue to be exercisable until the earlier to occur of
(i)
the one (1) year anniversary of the Change of Control Event, and (ii) the end
of
the applicable period provided in paragraph 5(d) below.
(d) Termination
of Option.
Notwithstanding the above, this Option shall, without exception, become null
and
void once a period of seven (7) years shall have lapsed since the Date of Grant.
Only those portions of this Option vested on or before the date of termination
of Employee’s employment may be exercised.
4
6. Option
Non-transferable.
Unless
permitted by law and regulation and approved in writing by the Committee, this
Option and any right related thereto shall not be transferable by Employee
otherwise than by will or by the laws of descent and distribution.
7. No
Fractional Shares.
The
Option may be exercised only with respect to full shares, and no fractional
share of stock shall be issued.
8. Adjustments
of Shares Subject to Option.
If any
Shares shall at any time be changed or exchanged by reason of reorganization,
merger, consolidation, recapitalization, reclassification, stock split,
combination of shares or a dividend payable in stock, then the aggregate number
of Option Shares subject to this Agreement and the purchase price of such Option
Shares shall be automatically adjusted in a manner which complies with Section
409A of the Code such that Employee’s proportionate interest shall be maintained
as before the occurrence of such event. The determination of any such adjustment
by the Committee shall be final, binding and conclusive.
9. No
Contract.
This
Agreement does not constitute a contract for employment and shall not affect
the
right of the Company to terminate Employee’s employment for any reason
whatsoever.
10. Rights
as Shareholder.
This
Agreement shall not entitle Employee or any permitted transferee to any rights
of a shareholder of the Company or to any notice of proceedings of the Company
with respect to any Option Shares issuable upon exercise of this Option unless
and until this Option has been exercised for such Shares.
11. Restriction
on Issuance of Shares.
Notwithstanding any of the provisions hereof, Employee hereby agrees that he
will not exercise the Option granted hereby, and that the Company will not
be
obligated to issue any shares to Employee hereunder, if the exercise thereof
or
the issuance of such shares shall constitute a violation by Employee or the
Company of any provision of any law or regulation of any governmental authority.
The Company shall not be required to issue or deliver any certificates for
Shares purchased upon the exercise of this Option prior to the obtaining of
any
approval from any governmental agency which the Company shall, in its sole
discretion, determine to be legally required. The Company shall file an
appropriate registration statement, and shall use commercially reasonable
efforts to register, with the Securities and Exchange Commission, all Option
Shares prior to the date any of the Option Shares vest in accordance with
paragraph 3, in connection with Employee’s exercise and resale of such Option
Shares.
5
12. Section
409A.
The
Company shall take no action in respect of this Option which would cause it
to
result in an accelerated or additional tax under Section 409A of the
Code.
13. Lapse
of Option.
The
Agreement shall be null and void in the event Employee shall fail to sign and
return a counterpart hereof to the Company within thirty (30) days following
its
delivery to Employee.
14. Binding
Effect.
This
Agreement shall be binding upon the heirs, executors, administrators, and
successors of the parties hereto.
15. Governing
Instrument and Law.
This
Agreement and any Shares issued hereunder shall be subject to the laws of the
State of Texas. Moreover, in the event of any conflict between the terms of
this
Agreement and the terms of the Employment Agreement, except with respect to
the
provisions of paragraph 5 above, the terms of the Employment Agreement shall
control. With respect to the provisions of paragraph 5 above, in the event
of
any conflict between paragraph 5 and the terms of the Employment Agreement,
paragraph 5 shall control.
16. Modification.
No
change or modification of this Agreement shall be valid or binding upon the
parties unless the change or modification is in writing and signed by the
parties.
17. Notice.
All
notices called for under this Agreement shall be in writing and shall be deemed
given upon receipt if delivered personally or by facsimile transmission and
followed promptly by mail, or mailed by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice;
provided that notices of a change of address shall be effective only upon
receipt thereof):
If
to
Employee:
Xxxxx
X.
Xxxxxxx
0000
Xxxxx Xxxxxx X, Xxxx 000
Xxxxxxx,
Xxxxxxx X0X0X0
Telephone:
000-000-0000
With
a
copy to:
Xxxx,
Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxx, Esq.
Facsimile:
212-757-3990
If
to the
Company:
The
Bombay Company, Inc.
000
Xxxxxx Xxxxxx
Xxxx
Xxxxx, Xxxxx 00000-0000
Attn:
General Counsel
Facsimile:
000-000-0000
Any
notice delivered to the party hereto to whom it is addressed shall be deemed
to
have been given and received on the day it was received; provided, however,
that
if such day is not a business day then the notice shall be deemed to have been
given and received on the business day next following such day. Any notice
sent
by facsimile transmission shall be deemed to have been given and received on
the
next business day following the day of transmission.
Remainder
of page intentionally left blank;
Signature
page follows
6
IN
WITNESS WHEREOF, the parties hereto have signed this Agreement effective as
of
the date first above written.
THE
BOMBAY COMPANY, INC.
By:
/s/XXXXXXX
X. XXXXXXXXXXXX
Xxxxxxx
X. Xxxxxxxxxxxx,
Senior Vice President, Secretary and General Counsel
Accepted
and Agreed:
/s/XXXXX
X. XXXXXXX
Date: June 5, 2006
Xxxxx
X.
Xxxxxxx
