Exhibit 10.1
X.X. XXXXX ARTS & CRAFTS, INC.
FORM OF INCENTIVE STOCK OPTION / NON-QUALIFIED OPTION AGREEMENT
AGREEMENT made the _______________, between X.X. XXXXX ARTS & CRAFTS, INC.
(the "Company"), a Pennsylvania corporation having a principal place of business
in Berlin, New Jersey and _________________ (the "Participant").
WHEREAS, the Company desires to grant to the Participant an Option to
purchase shares of its common stock, no par value (the "Shares") under and for
the purposes of the 2002 Stock Option Plan of the Company (the "Plan");
WHEREAS, the Company and the Participant understand and agree that any
terms used and not defined herein have the same meanings as in the Plan;
WHEREAS, the Company and the Participant each intend that the Option
granted herein shall be [an Incentive Stock Option ("ISO")] [a Non-Qualified
Stock Option].
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
1. GRANT OF OPTION.
The Company hereby irrevocably grants to the Participant the right and
option to purchase all or any part of an aggregate of _______________ Shares,
which Option must be exercised based upon the earliest date granted and on the
terms and conditions and subject to all the limitations set forth herein and in
the Plan, which is incorporated herein by reference. The Participant
acknowledges receipt of a copy of the Plan.
2. PURCHASE PRICE.
The purchase price of the Shares covered by the Option shall be $______ per
Share, the closing price per share on the exchange or market on which the Shares
are traded on the grant date hereof, subject to adjustment as provided in the
Plan in the event of a stock split, reverse stock split or other events
affecting the holders of Shares. Payment shall be made in accordance with
Paragraph 7 of the Plan.
3. EXERCISE OF OPTION.
Subject to the terms and conditions set forth in this Agreement and the
Plan, the Option granted hereby shall be exercisable as follows:
[On the first anniversary of the date of this Agreement All of the Shares]
[On the first anniversary of the date of this Agreement up to 1/2 of the Shares
On the second anniversary of the date of this Agreement an additional 1/2 of the Shares]
[On the first anniversary of the date of this Agreement up to 1/3 of the Shares
On the second anniversary of the date of this Agreement an additional 1/3 of the Shares
On the third anniversary of the date of this Agreement an additional 1/3 of the Shares]
Should the Company (i) merge or consolidate with another corporation under
circumstances where the Company is not the surviving corporation, (ii) sell all
or substantially all of its assets, (iii) liquidate or dissolve, or (iv)
register the transfer of eighty percent (80%) or more of its outstanding Common
stock to persons who were not owners (or considered to be owners pursuant to
Section 318 of the Code) of common stock immediately prior to such transfer, and
the Participant continues his/her employment with the Company, or its successor,
for a period of not less than twelve (12) months from the date of the merger,
sale or transfer then 100% of such Option not yet vested shall vest at the end
of such 12-month term, and the holder of this Option shall have the right to
exercise any and all of the Option shares, unless this Option has otherwise
expired or been terminated pursuant to its terms or the terms hereof.
At any time after the Company is involved in a merger, consolidation, sale
or transfer as described above, and
a) the Participant shall fail to be vested with power and authority
analogous to the Participant's title and/ or office prior to the
merger, consolidation, sale or transfer, or
b) the Participant shall lose any significant duties or responsibilities
attending such office, or
c) if there shall occur a reduction in the Participant's base
compensation, or
d) the Participant's employment with the Company, or its successor, is
terminated without cause;
then 100% of such option not yet vested shall immediately vest and the holder of
this Option shall have the right, immediately prior to the effectiveness of such
event, to exercise any and all
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of the Option shares, unless this option has otherwise expired or been
terminated pursuant to its terms hereof.
4. TERM OF OPTION
The Option shall terminate ten (10) years from the date of this Agreement,
but shall be subject to earlier termination as provided herein or in the Plan.
(a) If the Participant retires and qualifies for Normal Retirement
(which means obtaining age 65 or later with at least five (5) years of
continuous service) and ceases to be an employee, director or consultant of
the Company or of an Affiliate may exercise any option granted to him or
her to the extent that the right to purchase shares has vested on the date
of such termination of service at any time within five (5) years of
termination of service.
(b) A participant who retires and qualifies for a Special Service
Retirement (which means obtaining age 65 or later with at least ten (10)
years of continuous service or age 60 with at least fifteen (15) years of
continuous service) and ceases to be an employee or director of the Company
or an Affiliate and who has been granted an Option which has vested on the
date of termination of service may exercise said Option anytime within five
(5) years of termination of service and those Options which have been
granted and not vested will continue to vest over the remaining unvested
term and upon full vesting will be exercisable by the Participant at any
time over five (5) years from the date of termination of service.
(c) If the Participant does not qualify for Normal Retirement or
Special Service Retirement and ceases to be an employee, director or
consultant of the Company or of an Affiliate, the option may be exercised
within ninety (90) days after the date the Participant ceases to be an
employee, director or consultant of the Company or an Affiliate, but may
not be exercised thereafter.
(d) Notwithstanding anything stated herein no grant of a prior Option
shall exceed beyond ten (10) years from the date of the Option Agreement
original grant.
In the event the Participant's employment, directorship or consultancy is
terminated for "cause" (as defined in the Plan), the Participant's right to
exercise any unexercised portion of this Option shall cease forthwith, and this
Option shall thereupon terminate. Notwithstanding anything herein to the
contrary, if subsequent to the Participant's termination as an employee,
director or consultant but prior to the exercise of the Option, the Board of
Directors of the Company determines that, either prior or subsequent to the
Participant's termination, the Participant engaged in conduct which would
constitute "cause", then the Participant shall forthwith cease to have any right
to exercise the Option.
In the event of Disability of the Participant, as determined in accordance
with the Plan, the Option shall be exercisable any time within five (5) years
after the date that the Participant became Disabled. In such event, the Option
shall be exercisable:
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a) to the extent that the right to purchase the Shares hereunder has
vested on the date the Participant becomes Disabled and is in effect
as of the date of Disability; and
b) in the event rights to exercise the Option accrue periodically and the
Participant becomes Disabled prior to the end of the particular year
the Option shall be prorated to the day of disability. The proration
shall be based upon the number of days of the accrual period during
which the participant was not Disabled.
In the event of the death of the Participant while an employee, consultant
or director of the Company or of an Affiliate, the Option shall be exercisable:
x) to the extent vested but not exercised as of the date of death, and
y) in the event rights to exercise the Option accrue periodically, to the
extent of a pro rata portion of any additional rights to exercise the
Option as would have vested had the Participant not died during that
year may be exercised by the Participant's Survivors. The proration
shall be based upon the number of days during the accrual period prior
to the Participant's death. The Option under (x) and (y) herein must
be exercised, if at all, within five (5) years after the date of death
of the Participant or, if earlier, within the originally prescribed
term of the Option.
5. METHOD OF EXERCISING OPTION.
Subject to the terms and conditions of this Agreement, the method to
exercise an Option shall be by written notice to the Company, at the principal
executive office of the Company. Such notice shall state the election to
exercise the Option and the number of Shares in respect of which it is being
exercised, shall be signed by the person or persons so exercising the Option,
and shall be in substantially the form attached hereto as Exhibit A. Payment of
the full purchase price for such Shares shall be made in accordance with
Paragraph 7 of the Plan, and the company shall deliver a certificate or
certificates representing such Shares as soon as practicable after the notice
shall be received, provided, however, that the Company may delay issuance of
such Shares until completion of any action or obtaining of any consent, which
the Company deems necessary under any applicable law (including, without
limitation, state securities or "blue sky" laws). The certificate or
certificates for the Shares as to which the Option shall have been so exercising
the Option (or, if the Option shall be exercised by the Participant and if the
Participant shall so request in the notice exercising the Option, shall be
registered in the name of the Participant 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 Option. In the event the Option
shall be exercised, pursuant to Section 4 hereof, by any person or persons other
than the Participant, such notice shall be accompanied by appropriate proof of
the right of such person or persons to exercise the Option. All Shares that
shall be purchased upon the exercise of the Option as provided herein shall be
fully paid and non-assessable. [If a Participant exercises an ISO granted while
earlier granted ISO's are unexercised the Participant will forfeit all tax
benefits of the ISO and will have ordinary income.]
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6. PARTIAL EXERCISE.
Exercise of this Option to the extent above stated may be made in part at
any time and from time-to-time within the above limits, except that no
fractional share shall be issued pursuant to this Option and the exercise of
this Option requires the prior exercise of any unexercised outstanding Options
first.
7. NON-ASSIGNABILITY.
The Option shall not be transferable by the Participant otherwise than by
will or by the laws of descent and distribution and shall be exercisable, during
the Participant's lifetime, only by the Participant. Except as provided in the
preceding sentence, the Option shall not be assigned, pledged or hypothecated in
any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of the Option or of any rights
granted hereunder contrary to the provisions of this Section 7, or the levy of
any attachment or similar process upon the Option or such rights, shall be null
and void.
8. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.
The Participant shall have no rights as a stockholder with respect to
Shares subject to this Agreement until a stock certificate therefore has been
issued to the Participant and is fully paid for. Except as is expressly provided
in the Plan with respect to certain changes in the capitalization of the
company, no adjustment shall be made for dividends or similar rights for which
the record date is prior to the date such stock certificate is issued.
9. CAPITAL CHANGES AND BUSINESS SUCCESSIONS.
The Plan contains provisions covering the treatment of Options in a number
of contingencies such as stock splits and mergers. Provisions in the Plan for
adjustment with respect to stock subject to Options and the related provisions
with respect to successors to the business of the Company are hereby made
applicable hereunder and are incorporated herein by reference.
10. TAXES AND WITHHOLDING.
The Participant acknowledges that upon exercise of the Option the
Participant will be deemed to have taxable income measured by the difference
between the then fair market value of the Shares received upon exercise and the
price paid for such Shares pursuant to this Agreement (the "Taxable Income").
The Participant acknowledges that any income or other taxes due from him or her
with respect to this Option or the Shares issuable pursuant to this Option shall
be the Participant's responsibility.
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If the Company in its discretion determines that it is obligated to
withhold income taxes with respect to the exercise of the Option, the
Participant hereby agrees that the Company may withhold from the Participant
remuneration, if any, the appropriate amount of federal, state and local
withholding attributable to such amount that is considered compensation
includible in such person's gross income.
11. NO OBLIGATION TO EMPLOY.
The Company is not by the Plan or this Option or any other agreement
obligated to continue the Participant as an employee, consultant or director of
the Company.
12. NOTICES.
Any notices required or permitted by the terms of this Agreement or the
Plan shall be given by recognized courier service, facsimile, registered or
certified mail, return receipt requested, addressed as follows:
To the Company: X.X. XXXXX ARTS & CRAFTS, INC.
130 X.X. Xxxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
To the Participant:
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or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
13. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with the law
of the State of Pennsylvania.
14. BENEFIT OF AGREEMENT.
Subject to the provisions of the Plan and the other provisions thereof,
this Agreement shall be for the benefit of and shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
15. ENTIRE AGREEMENT.
This Agreement, together with the Plan, embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement not expressly set forth in this
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Agreement shall affect or be used to interpret, change or restrict, the express
terms and provisions of this Agreement, provided, however, in any event, this
Agreement shall be subject to and governed by the Plan.
16. MODIFICATIONS AND AMENDMENTS.
The terms and provisions of this Agreement may be modified or amended only
by written agreement executed by all parties hereto.
17. WAIVERS AND CONSENTS.
The terms and provisions of this Agreement may be waived, or consent for
the departure therefrom granted, only by written document executed by the party
entitled to the benefits of such terms or provisions. No such waiver or consent
shall be deemed to be or shall constitute a waiver or consent with respect to
any other terms or provisions of this Agreement, whether or not similar. Each
such waiver or consent shall be effective only in the specific instance and for
the purpose for which it was given, and shall not constitute a continuing waiver
or consent.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
a duly authorized officer, and the Participant has hereunto set his or her hand
and seal, all as of the day and year first above written.
X.X. XXXXX ARTS & CRAFTS, INC.
By:
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PARTICIPANT
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EXHIBIT A
NOTICE OF EXERCISE OF
[INCENTIVE STOCK OPTION] [NON-QUALIFIED STOCK OPTION]
To: X.X. XXXXX ARTS & CRAFTS, INC.
Ladies and Gentlemen:
I hereby exercise my [Incentive Stock Option] [Non-Qualified Stock Option]
to purchase _____ shares (the "Shares") of the common stock, no par value, of
X.X. XXXXX ARTS & CRAFTS, INC. (the "Company"), at the exercise price of
$________ per share, pursuant to and subject to the terms of that certain
[Incentive Stock Option] [Non-Qualified Stock Option] Agreement between the
undersigned and the Company dated ____ day of ___________, _______.
I understand that the nature of the investment I am making and the
financial risks thereof. I am aware that it is my responsibility to have
consulted with competent tax and legal advisors about the relevant national,
state and local income tax and securities laws affecting the exercise of the
Option and the purchase and subsequent sale of the Shares.
I am paying the option exercise price for the Shares as follows:
___________________________________________________________________________
___________________________________________________________________________
If I am subject to Section 16 of the Securities Exchange Act of 1934, I
understand that at least six (6) months must elapse from the date of grant of
the Option to the date of disposition of the Shares.
Please issue the stock certificate for the Shares (check one):
______ to me
______ to me and ____________ as joint tenants with right of survivorship
and mail the certificate to me at the following address: _______________________
(Please print) _______________________
_______________________
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Participant Name (please print) Participant (signature) Date
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