NATURAL WONDERS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Natural Wonders, Inc. (the "Company") has granted to the individual named
below an option to purchase certain shares of common stock of the Company, in
the manner and subject to the provisions of this Option Agreement.
1. DEFINITIONS:
(a) "Optionee" shall mean Xxxxx X. Xxxxxx.
(b) "Date of Option Grant" shall mean September 29, 1998.
(c) "Number of Option Shares" shall mean 250,000 shares of common
stock of the Company as adjusted from time to time pursuant to paragraph 9
below.
(d) "Exercise Price" shall mean $3.625 per share as adjusted from
time to time pursuant to paragraph 9 below.
(e) "Vesting Schedule" shall mean the following schedule under which
the amounts of the Option Shares listed below (as adjusted from time to time)
shall vest based on the happening of the Vesting Events listed below:
NUMBER OF SHARES VESTING EVENT
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30%-75,000 The closing price of the shares of common stock of the
Company on the NASDAQ NMS system or other exchange on
which shares of common stock of the Company may be
traded at any time during the term of this Agreement
shall equal or exceed $8.0625 for thirty (30)
consecutive trading days.
25%-62,500 The closing price of the shares of common stock of the
Company on the NASDAQ NMS system or other exchange on
which shares of common stock of the Company may be
traded at any time during the term of this Agreement
shall equal or exceed $13.0625 for thirty (30)
consecutive trading days.
20%-50,000 The closing price of the shares of common stock of the
Company on the NASDAQ NMS system or other exchange on
which shares of common stock of the Company may be
traded at any time during the term of this Agreement
shall equal or exceed $18.0625 for thirty (30)
consecutive trading days.
15%-37,500 The closing price of the shares of common stock of the
Company on the NASDAQ NMS system or other exchange on
which shares
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of common stock of the Company may be traded at any
time during the term of this Agreement shall equal or
exceed $23.0625 for thirty (30) consecutive trading
days.
10%-25,000 The closing price of the shares of common stock of the
Company on the NASDAQ NMS system or other exchange on
which shares of common stock of the Company may be
traded at any time during the term of this Agreement
shall equal or exceed $28.0625 for thirty (30)
consecutive trading days.
(f) "Option Term Date" shall mean the date ten (10) years after the
Date of Option Grant.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Company" shall mean Natural Wonders, Inc., a Delaware
corporation, and any successor corporation thereto.
(i) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(j) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(k) "Plan" shall mean the Amended and Restated Natural Wonders, Inc.
1993 Omnibus Stock Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in Section 422 of the Code. As such, the Option does not qualify for any
special tax benefits . The Optionee should consult with the Optionee's own tax
advisors regarding the tax effects of this Option.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a Participating
Company shall have the authority to act on behalf
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of the Company with respect to any matter, right, obligation, or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. Except as provided in paragraph 4(f) below,
the Option shall be exercisable as set forth in the Vesting Schedule. The terms
of the Vesting Schedule notwithstanding, all remaining unvested amounts of the
Option Shares shall vest on the seventh (7th) anniversary of the Date of Option
Grant unless the Option has been earlier terminated in accordance with paragraph
6 below. In addition to the foregoing, in the event that the adoption of the
Plan or any amendment of the Plan is subject to the approval of the Company's
shareholders in order for the Plan to comply with the requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Option shall not be exercisable prior to such shareholder approval if
the Optionee is subject to Section 16(b) of the Exchange Act, unless the Board,
in its sole discretion, approves the exercise of the Option prior to such
shareholder approval.
(b) METHOD OF EXERCISE. The Option shall be exercisable by written
notice to the Company which shall state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. Such written notice shall be signed by the Optionee and shall
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by full payment of the
exercise price for the number of shares being purchased.
(c) FORM OF PAYMENT OF OPTION PRICE. Such payment shall be made
(i) in cash, by check, or cash equivalent, (ii) by tender to the Company of
shares of the Company's common stock owned by the Optionee having a value not
less than the option price, which either have been owned by the Optionee for
more than six (6) months or were not acquired, directly or indirectly, from the
Company, (iii) by Immediate Sales Proceeds, as defined below, or (iv) by any
combination of the foregoing. Notwithstanding the foregoing, the Option may not
be exercised by tender to the Company of shares of the Company's common stock to
the extent such tender of stock would constitute a violation of the provisions
of any law, regulation and/or agreement restricting the redemption of the
Company's common stock. "Immediate Sales Proceeds" shall mean the assignment in
form acceptable to the Company of the proceeds of a sale of some or all of the
shares acquired upon the exercise of the Option pursuant to a program and/or
procedure approved by the Company. The Company reserves, at any and all times,
the right, in the Company's sole and absolute discretion, to decline to approve
any such program and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee shall
make adequate
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provision for foreign, federal and state tax withholding obligations of the
Company, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or in part, of any shares acquired on
exercise of the Option, or (iii) the operation of any law or regulation
providing for the imputation of interest.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. In
addition, no Option may be exercised unless (i) a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE
EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE
OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason except death or
disability within the meaning
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of section 422(c) of the Code, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee ceased to be an
employee, may be exercised by the Optionee within three (3) months after the
date on which the Optionee's employment terminates, but in any event no later
than the Option Term Date. If the Optionee's employment with the Company is
terminated because of the death of the Optionee or disability of the Optionee
within the meaning of section 422(c) of the Code, the Option may be exercised by
the Optionee (or the Optionee's legal representative) at any time prior to the
expiration of twelve (12) months from the date the Optionee's employment
terminated, but in any event no later than the Option Term Date. The Optionee's
employment shall be deemed to have terminated on account of death if the
Optionee dies within three (3) months after the Optionee's termination of
employment. Except as otherwise provided in this paragraph 7(a), the Option
shall terminate and may not be exercised after the Optionee ceases to be an
employee of the Participating Company Group.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option is prevented by the provisions of
paragraph 4(f) above, the Option shall remain exercisable until three (3)
months after the date the Optionee is notified by the Company that the Option
is exercisable, but in any event no later than the Option Term Date. The
Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
(d) OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above would subject the Optionee to suit under Section 16(b) of the
Exchange Act, the Option shall remain exercisable until the earliest to occur of
(i) the tenth (10th) day following the date on which the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of employment, or (iii) the Option Term Date.
The Company makes no representation as to the tax consequences of any delayed
exercise. The Optionee should consult with the Optionee's own tax advisors as
to the tax consequences to the Optionee of any such delayed exercise.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of one hundred and eighty two (182) days or
less. In the event of a leave in excess of one hundred and eighty two (182)
days, the Optionee's employment shall be deemed to terminate on the one hundred
and eighty third (183rd) day of the leave unless the Optionee's right to
reemployment with the Participating Company Group remains guaranteed by statute
or contract.
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8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. For purposes hereof, the
"Control Company" shall mean the Participating Company whose stock is subject to
the Option. An "Ownership Change" shall be deemed to have occurred in the event
any of the following occurs with respect to the Control Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Control Company of all or substantially all of the stock of the Control
Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer (including, without limitation,
pursuant to a liquidation or dissolution) of all or substantially all of the
Control Company's assets (other than a sale, exchange, or transfer to one (1) or
more corporations where the shareholders of the Control Company before such
sale, exchange, or transfer retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the corporation(s) to which
the assets were transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Control Company before such Ownership Change do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Control Company.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "Acquiring Corporation"), shall assume the Company's rights and
obligations under this Option Agreement or substitute an option for the
Acquiring Corporation's stock for the Option. In the event the Acquiring
Corporation elects not to assume the Company's rights and obligations under this
Option Agreement or substitute for the Option in connection with a Transfer of
Control involving an Ownership Change described in (b) above, the Board shall
provide that any unexercised portion of the Option shall be fully exercisable as
of a date prior to the Transfer of Control, as the Board so determines. The
Option shall terminate effective as of the date of the Transfer of Control to
the extent that the Option is neither assumed by the Acquiring Corporation nor
exercised as of the date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
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10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired pursuant to
the Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At any time during the one-year or
two-year periods set forth above, the Company may place a legend or legends on
any certificate or certificates representing shares acquired pursuant to the
Option requesting the transfer agent for the Company's stock to notify the
Company of any such transfers. The obligation of the Optionee to notify the
Company of any such transfer shall continue notwithstanding that a legend has
been placed on the certificate or certificates pursuant to the preceding
sentence.
12. LEGENDS. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option
Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to
effectuate the provisions of this paragraph.
13. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
14. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
15. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than
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those as set forth or provided for herein. To the extent contemplated herein,
the provisions of this Option Agreement shall survive any exercise of the Option
and shall remain in full force and effect.
16. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
NATURAL WONDERS, INC.
By: /s/ Pearson X. Xxxxxx III
--------------------------------
Title: Chairman
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The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement.
Date: 9/29/98 /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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