HARVEST RESTAURANT GROUP, INC.
------------------------------
INCENTIVE STOCK OPTION AGREEMENT
(Issued Under 1994 Stock Compensation Plan)
-------------------------------------------
INCENTIVE STOCK OPTION AGREEMENT (the "Agreement") made this the___ day of
_________ , 199_ (the "Date of Grant"), by and between HARVEST RESTAURANT GROUP,
INC., a Texas corporation (the "Company"), and the undersigned employee of the
Company or a subsidiary thereof (the "Employee").
W I T N E S E T H:
------------------
WHEREAS, the Company desires, by affording the Employee an opportunity to
purchase shares of its common stock, par value one cent ($.01) per share (the
"Common Stock"), to carry out the purposes of the Company's 1994 Stock
Compensation Plan, (the "Plan"), which has been duly approved and adopted by its
Board of Directors and Shareholders:
NOW, THEREFORE, in consideration of the mutual covenants and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party, the parties hereto have agreed, and do hereby agree,
as follows:
1. Grant of Incentive Option. The Company grants to the Employee the right
and option to purchase all or any part of an aggregate of shares of the Common
Stock (such number being subject to adjustment as provided in Section 15)
pursuant to the terms and conditions set forth herein (the "Incentive Option").
2. Purchase Price. The purchase price of the shares of the Common Stock
covered by the Incentive Option shall be $1.00 per share, said purchase price
being one hundred percent (100%) of the fair market value per share of such
shares on the Date of Grant of this Incentive Option, subject to adjustment as
provided in Section 15.
3. Term of Incentive Option. The term of the Incentive Option shall be for
a period of five (5) years from the date hereof, subject to earlier termination
as provided in Section 12.
4. Time of Exercise of Incentive Option. Except as otherwise stated herein,
the Incentive Option may be exercised, at any time during the period as
specified in attachment (A) to the Incentive Option and terminating five (5)
years after the Date of Grant, as to any part or all of the number of shares of
the common stock covered by the Incentive Option, subject to adjustment as
provided in Section 15; provided that, except as otherwise provided in Sections
5, 13 or 14, the Incentive Option may not be exercisable at any time by the
Employee unless the Employee shall have been in continuous employ of the Company
or a Subsidiary (as hereinafter defined) from the date hereof to the date of the
exercise of the Incentive Option. For purposes of this Agreement, the term
"Subsidiary" shall mean a corporation of which capital stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of its
outstanding capital stock entitled to vote generally in the election of
directors is owned in the aggregate by the Company directly or indirectly
through one or more Subsidiaries.
INCENTIVE STOCK OPTION AGREEMENT - Page 1
5. Acceleration and Exercise Upon Change of Control. Notwithstanding the
provisions of Section 4 hereof, the exercise period set forth in Section 4
hereof shall be accelerated upon the occurrence of a Change of Control (as
hereinafter defined) of the Company, or a threatened Change of Control of the
Company, so that the Incentive Option shall thereupon become exercisable
immediately in part or in its entirety by the Employee, as the Employee shall
elect, subject to the condition that no Incentive Option shall be exercisable
after the expiration of the term of the Incentive Option. For the purposes of
this Agreement, a "Change of Control" shall be deemed to have occurred if:
(a) Any "person", including a "group" as determined in accordance with
Section 13(d)(3) of the Securities Exchange Act of 1934 and the Rules and
Regulations promulgated thereunder, is or becomes, through one or a series
of related transactions or through one or more intermediaries, the
beneficial owner, directly or indirectly, of securities of the Company
representing 25 % or more of the combined voting power of the Company's
then outstanding securities, other than a person who is such a beneficial
owner on the effective date of the Plan and any affiliate of such person;
(b) As a result of, or in connection with, any tender offer or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were Directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors
of the Company or any successor to the Company;
(c) Following the Date of Grant, the Company is merged or consolidated
with another corporation and as a result of such merger or consolidation
less than 40% of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the former
shareholders of the Company, other than (i) any party to such merger or
consolidation, or (ii) any affiliates of any such party;
(d) A tender offer or exchange offer is made and consummated for the
ownership of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding voting securities;
or
(e) The Company transfers more than 50% of its assets, or the last of
a series of transfers result in the transfer of more than 50% of the assets
of the Company, to another corporation that is not a wholly-owned
corporation of the Company. For purposes of this subsection 5(e), the
determination of what constitutes more than 50% of the assets of the
Company shall be determined based on the sum of the values attributed to
(i) the Company's real properties as determined by an independent appraisal
thereof and (ii) the net book value of all other assets of the Company,
each taken as of the date of the Transaction involved.
In addition, upon a Change of Control, any Incentive Options previously granted
under the Plan to the Employee to the extent not already exercised may be
exercised in whole or in part either immediately or at any time during, the term
of the Incentive Option as the Employee shall elect.
INCENTIVE STOCK OPTION AGREEMENT - Page 2
6. Method of Exercising Incentive Option. Subject to the terms and
conditions of this Agreement and the Plan, the Incentive Option may be exercised
by written notice to the Company at its principal place of business. Such notice
shall state the election to exercise the Incentive Option, the number of full
shares in respect of which it is being exercised, shall be signed by the person
or persons so exercising the Incentive Option, and shall contain the warranty,
if any, required by Section 7(b) hereof. Such notice shall be accompanied by
payment of the fall purchase price of such shares and by this Agreement. The
Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the aforesaid notice and payment of such shares shall
be received, except as otherwise provided in Section 7(d) hereof. The
certificate or certificates for the shares as to which the Incentive Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising, the Incentive Option, or, if the Incentive Option shall
be exercised by the Employee and if the Employee shall so request in the notice
exercising the Incentive Option, shall be registered in the name of the Employee
and another person jointly with right of survivorship, and shall be delivered as
provided above to or upon the written order of the person or persons exercising
the Incentive Option. In the event the Incentive Option shall be exercised,
pursuant to Section 13 or Section 14 hereof, by any person or persons other than
the Employee, such notice shall be accompanied by appropriate proof of the right
of such person or persons to exercise the Incentive Option. All shares that
shall be purchased upon the exercise of the Incentive Option as provided herein
shall be fully paid and non-assessable, In the event the Incentive Option shall
not be exercised in full, the Secretary of the Company shall endorse or cause
to. be endorsed on this Agreement the number of shares which has been exercised
hereunder, the number of shares that remain exercisable hereunder, and return
this Agreement to the holder hereof.
7. Limitation on Exercise of Incentive Option and Compliance with
Securities Laws.
(a) Limitation on Exercise. The Incentive Option is subject to the
requirement that, if at any time the Board of Directors of the Company
shall determine, in its sole discretion, that the listing, registration, or
qualification of the shares of Common Stock subject to the Incentive Option
upon any securities exchange or under any state or Federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of the
Incentive Option or the issue or purchase of shares under the Incentive
Option, the Incentive Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board of Directors of the Company. The Company agrees that it will use its
best efforts to effect or obtain promptly any such listing, registration,
qualification, consent or approval. The Committee shall have the right to
impose such restrictions and limitations as it may deem advisable upon the
exercise of this Incentive Option in order to satisfy any such regulatory
requirements.
(b) Investment Representation. Without limiting the generality of the
provisions of Section 7(a) hereof, if and to the extent that the issuance
of the shares of Common Stock pursuant to the exercise of the Incentive
Option is deemed by the Board of Directors of the Company to be subject to
the Securities Act of 1933, as amended (the "Securities Act"), or any
applicable state securities or "blue sky" laws, unless the shares of Common
Stock to be issued upon the exercise of the Incentive Option shall have
been effectively registered under the Securities Act, the Company shall be
INCENTIVE STOCK OPTION AGREEMENT - Page 3
under no obligation to issue the shares of Common Stock covered by the
exercise of the Incentive Option unless and until the Company receives an
investment representation agreement in form acceptable to the Company and
its counsel, which investment representation agreement shall have been duly
executed by the Employee and which shall contain the following
representations and warranties of the Employee: (i) the Employee is
acquiring the shares of Common Stock covered by the exercise of the
Incentive Option for investment purposes only, for the Employee's own
account and not with a view toward resale or other distribution thereof,
(ii) the Employee is financially able to bear the economic risks of an
investment in the Company, (iii) the Employee has received no solicitation
whatever regarding investment in the Company, (iv) the Employee is
knowledgeable and experienced with respect to stock investments in general
and with respect to investments of a nature similar to an investment in the
Company, and by reason of such knowledge and experience is capable of
evaluating the merits and risks of, and making an informed business
decision with regard to, an investment in the Company, (v) the Employee,
prior to exercising the Incentive Option, has received all the information
that the Employee deemed necessary to make an informed investment decision
with respect to an investment in the Company, and (vi) the Employee
understands that the shares of Common Stock issued upon exercise of the
Incentive Option must be. held indefinitely unless such shares are
registered under the Securities Act or an exemption from such registration
is available.
(c) Restrictive Legend on Stock Certificate. The Employee,
acknowledges that, unless the shares of Common Stock issuable upon exercise
of the Incentive Option have been registered under the Securities Act, the
Company will place a legend on the certificate evidencing such Common Stock
restricting the transfer thereof, which legend shall be substantially as
follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AIMENDED, OR ANY
APPLICABLE STATE SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR THE PRIVATE
INVESTMENT OF THE HOLDER HEREOF AND MAY INOT BE OFFERED, SOLD OR
TRANSFERRED UNTIL EITHER (i) A REGISTRATION STATEMENT UNDER SUCH
SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE COMPANY SHALL HAVE
RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND ITS
COUNSEL THAT REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
OFFER, SALE OR TRANSFER.
(d) Delay in Issuance of Shares. The Company shall have no obligation
to issue a certificate to the Employ-,-, evidencing ownership of the shares
of Common Stock covered by the exercise of the Incentive Option until such
time as the Employee has complied with or satisfied all of the applicable
provisions of this Agreement and the Plan, and the Company may delay the
issuance of a certificate to the Employee evidencing such shares without
liability to the Employee until the Employee has complied with or satisfied
all of the applicable provisions of this Agreement and the Plan.
INCENTIVE STOCK OPTION AGREEMENT - Page 4
8. Medium and Time of Pa3mLent. The purchase price of the shares as to
which the Incentive Option shall be exercised shall be paid in full, at the time
of exercise, either (i) in cash to the Company, (ii) by tendering to the Company
shares of the Company's Common Stock having a fair market value (as of the date
of receipt of such shares by the Company) equal to the purchase price for the
number of shares of Common Stock purchased, or (iii) partly 'in cash and partly
in shares of the Company's Common Stock valued at fair market value as of the
date of receipt of such shares by the Company.
9. Rights as a Shareholder. The holder of the Incentive Option shall have
no rights as a shareholder of the Company with respect to the shares covered by
the Incentive Option until the due exercise of the Incentive Option and the date
of the issuance of one or more stock certificates to the holder for such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 15 hereof.
10. Non-transferability. The Incentive Option shall not be transferable
otherwise than by Will or the laws of descent and distribution, and the
Incentive Option may be exercised, during the lifetime of the Employee, only by
the Employee or by the Employee's court appointed guardian as set forth in
Section 14 hereof. More particularly (but without limiting, the generality of
the foregoing), the Incentive Option may not be assigned, transferred (except as
provided above), pledged, or hypothecated in any way, shall not be assignable by
operation of law and shall not be subject to execution attachment, or similar
process. Any attempted assignment, transfer, pledge, hypothecation, or other
disposition of the Incentive Option contrary to the provisions hereof, and the
levy of any execution, attachment, or similar process upon the Incentive Option,
shall be null and void and without effect and shall teammate the Incentive
Option.
11. Service to Company or Subsidiary. In consideration of the granting, of
the Incentive Option and regardless of whether or not the Incentive Option shall
be exercised, the Employee agrees to remain 'in the employ of the Company or a
Subsidiary for a period of at least one (1) year from the date hereof and,
during such employment, the Employee shall devote such time, energy and slag to
the service of the Company or a Subsidiary as may be required by the Board of
Directors thereof, subject to vacations, sick leaves and other approved absences
and the provisions of any written employment agreement between the Company or
Subsidiary and the Employee. Such employment, subject to the provisions of any
written employment agreement between the Company or Subsidiary and the Employee,
shall be at the pleasure of the Board of Directors of the Company or Subsidiary
and at such compensation as the Board of Directors of the Company or Subsidiary,
as appropriate, shall reasonably determine. Notwithstanding the preceding,
nothing, in this Agreement shall be construed as constituting a commitment,
guarantee, arrangement or understanding of any land or nature that the Company
or a Subsidiary will continue to employ or retain the Employee in any capacity,
nor shall this Agreement affect in any way the right of the Company or a
Subsidiary to terminate the employment, association, designation or official
capacity, if any, of the Employee at any time with or without cause.
12. Termination of Employment. The Incentive Option (and any other
Incentive Option or Incentive Options, held by the Employee under the Plan to
the extent not previously exercised) shall terminate after 90 days from
termination as an employee of the Company or a Subsidiary. (otherwise than by
reason of death, disability or change of company control as defined in section
INCENTIVE STOCK OPTION AGREEMENT Page 5
5). So long as the Employee shall continue to be an employee of the Company or
Subsidiary, the Incentive Option shall not be affected by any change of duties
or position.
13. Death of Employee. If the Employee shall die while employed by the
Company or Subsidiary, the Incentive Option may be exercised (to the extent that
the Employee shall have been entitled to do so at the date of the Employee's
death) by a legatee or legatees of the Employee under the Employee's duly
probated Last Will and Testament, or by the Employee's duly appointed personal
representative, at any time within ninety (90) days after the death of the
Employee, subject to the condition that no Incentive Option may be exercised
after ten (10) years from the Date of Grant.
14. Disability of Employee. If the Employee's employment by the Company or
a Subsidiary is terminated by reason of the Disability (as hereinafter defined)
of the Employee, the Incentive Option may be exercised (to the extent that the
Employee shall have been entitled to do so at the date the Employee's employment
position with the Company or a Subsidiary was terminated due to the Disability
of the Employee) by the Employee or the Employee's court appointed guardian at
any time within ninety (90) days after the Employee ceased to be an employee of
the Company or a Subsidiary, subject to the condition that no Incentive Option
may be exercised after ten (10) years from the Date of Grant. For purposes of
this Agreement, the term "Disability" shall mean the inability of the Employee
to fulfill the Employee's obligations to the Company or Subsidiary by reason of
any physical or mental impairment which can be expected to result in death or
which has endured or can be expected to endure for a continuous period of not
less than twelve (12) months as determined by a physician acceptable to the
Compensation Committee of the Board of Directors of the Company appointed and
designated to administer the Plan (the "Committee") in its sole discretion.
15. Adjustments upon Changes in Capitalization. The number of shares of
Common Stock covered by the Incentive Option, and the price per share thereof in
such Incentive Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock of the Company resulting
from a subdivision or consolidation of shares or the payment of a stock dividend
(but only on the Common Stock) or any other increase or decrease in the number
of such shares effected without receipt of consideration by the Company.
In the event the Company shall be the surviving corporation in any merger
or consolidation, the Incentive Option shall pertain to and apply to the
securities to which a holder of the number of shares of Common Stock subject to
the Incentive Option would have been entitled. A dissolution or liquidation of
the Company or a merger or consolidation in which the Company is not the
surviving corporation, shall cause the Incentive Option to terminate as of a
date to be fixed by the Committee (which date shall be as of or prior to the
effective date of any such dissolution or liquidation or merger or
consolidation); provided, that not less than thirty (30) days written notice of
the date so fixed as such termination date shall be given to the Employee, and
the Employee shall, in such event, have the right, during the said period of
thirty (30) days preceding such termination date, to exercise the Incentive
Option in whole or in part in the manner set forth in the Plan and above,
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments, if any, shall be appropriately made by the
Committee appointed and designated by the Board Of Directors of the Company, as
provided in the Plan, whose determination in that respect shall be final,
binding and conclusive. The Company shall give timely notice of any adjustments
made to the Employee.
INCENTIVE STOCK OPTION AGREEMENT - Page 6
Except as hereinabove expressly provided in this Section 15, the Employee
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation, and any issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to the Incentive Option.
Without limiting the generality of the foregoing, no adjustment shall be
made with respect to the number or price of shares subject to the Incentive
Option upon the occurrence of any of the following events:
(a) The grant or exercise of any other options which may be granted or
exercised under any qualified or nonqualified stock option plan or under
any other employee, benefit plan of the Company whether or not such options
were outstanding on the Date of Grant of the Incentive Option or thereafter
granted;
(b) The sale of any shares of Common Stock in the Company's initial or
any subsequent public offering,, including, without limitation, shares sold
upon the exercise of any over-allotment option granted to the underwriter
in connection with such offering;
(c) The issuance, sale or exercise of any warrants to purchase shares
of Common Stock whether or not such warrants were outstanding on the Date
of Grant of the Incentive Option or thereafter issued;
(d) The issuance or sale of rights, promissory notes or other
securities convertible into shares of Common Stock in accordance with the
terms of such securities ("Convertible Securities") whether or not such
Convertible Securities were outstanding on the Date of Grant of the
Incentive Option or were thereafter issued or sold;
(e) The issuance or sale of Common Stock upon conversion or exchange
of any Convertible Securities, whether or not any adjustment in the
purchase price was made or required to be made upon the issuance or sale of
such Convertible Securities and whether or not such Convertible Securities
were outstanding on the Date of Grant of the Incentive Option or were
thereafter issued or sold; or
Upon any amendment to or chance in the terms of any rights or warrants
to subscribe for or purchase, or options for the purchase of, Common Stock
or Convertible Securities or in the terms of any Convertible Securities,
including, but not limited to, any extension of any expiration date of any
INCENTIVE STOCK OPTION AGREEMENT - Page 7
such right, warrant or option, any change in any exercise or purchase price
provided for in any such right, warrant or option, any extension of any
date through which any Convertible Securities are convertible into or
exchangeable for Common Stock or any change in the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock.
16. No Obligation to Exercise. The granting of the Incentive Option hereof
shall impose no obligation upon the Employee to exercise such Incentive Option.
17. Withholding. Whenever the Employee shall recognize compensation income
as a result of the exercise of any Incentive Option granted hereunder, the
Employee shall remit in cash to the Company or Subsidiary the minimum amount of
federal income and employment tax withholding which the Company or Subsidiary is
required to remit to the Internal Revenue Service in accordance with the then
applicable provisions of the Internal Revenue Code of 1986, as amended. The full
amount of such withholding shall be paid by the Employee simultaneously with the
award or exercise of an Incentive Option.
18. Stock Appreciation Rights. In the event the Employee receives an
alternate stock appreciation right ("SAR") with respect to each share of Common
Stock covered by this Incentive Option permitting the Employee to be paid the
appreciation on the Incentive Option in lieu of exercising the Incentive Option,
the exercise of any such SAR shall cancel and terminate the right to purchase an
equal number of shares covered by this Incentive Option.
19. The Plan. Notwithstanding the terms and provisions hereof, this
Incentive Option is subject in all respects to the terms and conditions of the
Plan, reference to which Plan is hereby made for all put-poses. In the event of
any conflict between the terms of this Incentive Option and the terms of the
Plan, the terms of the Plan shall govern. By acceptance hereof, the Employee
acknowledges receipt of a copy of the Plan and recognizes and agrees that all
determinations, interpretations or other actions respecting the Plan ma be made
by the Committee, and that such determinations, interpretations or other actions
are final, conclusive and binding, upon all parties, including Employee.
20. Reservation of Stock. The Company shall at all times during, the term
of the Incentive Option reserve and keep available such number of shares of
Common Stock as will be sufficient to satisfy the requirements of this
Agreement, shall pay all original issue and transfer taxes with respect to the
issue and transfer of shares pursuant hereto and all other fees and expenses
necessarily incurred by the Company in connection therewith, and will from time
to time use its best efforts to comply with all laws and regulations which, in
the opinion of counsel for the Company, shall be applicable.
21. General. This Agreement may not be modified, altered, amended, or
terminated except by the written agreement of all of the par-ties. If a court of
competent jurisdiction deter-mines that any provision contained in this
Agreement is void, illegal or unenforceable, the other provisions shall remain
in full force and effect and the provision held to be void, illegal or
unenforceable shall be limited so that it shall remain in effect to the extent
permissible by law. The parties agree to perform all acts and execute all
instruments necessary or appropriate to carry out the terms of this Agreement.
This Agreement is made and is performable in Bexar County, Texas, and shall be
governed by the laws of the State of Texas. This Agreement and the Plan set
forth the entire understanding of the parties with respect to the purchase and
sale of the shares of the Common Stock pursuant to a stock option and supersedes
INCENTIVE STOCK OPTION AGREEMENT - Page 8
all prior representations, understandings and agreements, oral or written, made
between the parties effecting the stock of the Company to be issued pursuant to
the Plan and this Agreement (other than any Incentive Options previously issued
to the Employee pursuant to the Plan) and all such prior representations,
understandings and agreements are hereby terminated. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
CLUCKCORP INTERNATIONAL, INC.
By: ___________________________________
XXXXXXX X. XXXXXXXXX,
Chairman of the Board
EMPLOYEE:
___________________________________
INCENTIVE STOCK OPTION AGREEMENT - Page 9
