STOCK OPTION PLAN AND AGREEMENT
STOCK OPTION AGREEMENT dated as of February 2, 1998 (this
"Agreement"), by and between DANSKIN, INC., a Delaware corporation (the
"Company"), and XXXXXXXXX XXXXXX (the "Optionee").
WHEREAS, the Optionee is currently employed pursuant to that certain
employment agreement dated as of the date hereof (the "Employment Agreement");
and
WHEREAS, the Compensation Committee (the "Committee") of the Board
of Directors of the Company (the "Board") has determined that it is in the best
interest of the Company and its stockholders to grant to the Optionee the
Options (as defined below) to purchase shares of common stock, par value $.01
per share, of the Company (the "Common Stock") as provided for herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
1. Option Grant. On the date hereof and subject to the provisions
of Section 9 hereof, the Company grants to the Optionee six options (each such
option being referred to herein individually as "Option 1" through "Option 6",
or as an "Option," and collectively as the "Options"), each Option representing
the right to purchase 425,000 shares of Common Stock, upon the terms and
conditions set forth herein. The Options are not intended to qualify as an
incentive stock option within the meaning of section 422 of the Internal Revenue
Code of 1986, as amended.
2. Option Price. The purchase price of the shares of Common Stock
covered by each Option shall be $.65 per share without commission or other
charge.
3. Exercisability. Each Option shall become fully exercisable on
the date which is thirty (30) days prior to the Expiration Date (as defined
below); provided, that the right to exercise such Option is subject to
acceleration as provided herein.
(a) Prior to the sixth anniversary of the date hereof, each
Option will be subject to acceleration of exercisability pursuant to which such
Option shall become immediately exercisable with respect to 212,500 shares of
Common Stock subject to such Option upon the satisfaction during any fiscal year
of the EBT Target (as defined below) with respect to such Option (and each
Option as to which 212,500 shares have become immediately exercisable is
referred to herein as a "Partially Accelerated Option") and the remaining
212,500 shares of Common Stock subject to such Option shall accelerate as to
exercisability upon the satisfaction of the EBT Target with respect to such
Option during either of the two fiscal years immediately following the fiscal
year in which the EBT Target with respect to such Option was first met. The EBT
Target with respect to an Option shall be deemed satisfied if Actual EBT (as
defined herein) for a fiscal year is equal to or greater than the EBT Target.
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(b) "Actual EBT" shall be determined by the Committee and
shall be calculated as earnings before federal income taxes of the Company as
reflected in its audited financial statements for the prior fiscal year, as
reviewed by the Company's auditors and reported in the Company's Annual Report
on Form 10-K (the "Form 10-K") divided by the number of shares of Common Stock
outstanding on a fully diluted basis as of the last day of such fiscal year.
Except and to the extent that equity capital raised by the Company after the
date hereof ("New Capital") is used for the operation of the business (whether
by way of capital investment or working capital) or to fund acquisitions, any
income attributable to, or shares of stock issued in consideration of such New
Capital shall be excluded from the calculation of Actual EBT. (For example, any
interest income attributable to New Capital and used in treasury investments not
related to the operation of the business, and any interest reductions resulting
from the application of New Capital and used to reduce outstanding indebtedness
shall be excluded from the calculation of Actual EBT, and shares issued in
consideration of such New Capital shall likewise be excluded.) To the extent
income from New Capital is excluded from the calculation of Actual EBT during
any part of a fiscal year, and included during any other part of such fiscal
year, the Committee shall make such adjustment to the number of shares to be
utilized in determining Actual EBT as the Committee deems equitable. In the
event that the EBT Target for a specific Option is met, the date upon which the
exercisability of such Option shall become accelerated (with respect to the
first 212,500 shares or the remaining 212,500 shares, as the case may be) shall
be April 15 of the year following the fiscal year in which the EBT Target was
met, or such later date which is fifteen days from the date the Form 10-K for
such year is filed.
(c) The EBT Target for each Option is as set forth below
(the "EBT Target"):
OPTION EBT TARGET
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Option 1 $.06 pre-tax earnings per share (and a minimum of $5 million of
pre-tax earnings)
Option 2 $.10 pre-tax earnings per share (and a minimum of $8 million of
pre-tax earnings)
Option 3 $.13 pre-tax earnings per share (and a minimum of $11 million of
pre-tax earnings)
Option 4 $.17 pre-tax earnings per share (and a minimum of $14 million of
pre-tax earnings)
Option 5 $.20 pre-tax earnings per share (and a minimum of $17 million of
pre-tax earnings)
Option 6 $.24 pre-tax earnings per share (and a minimum of $20 million of
pre-tax earnings)
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The EBT Targets are based on 83,323,228 shares (representing
the number of shares of Common Stock outstanding on a fully diluted basis taking
into account shares of Common Stock issuable upon the exercise or conversion of
outstanding warrants, options (including the Options) and Series D Preferred
Stock of the Company, and such measure of outstanding shares being referred to
herein as "Fully Diluted Shares") of Common Stock outstanding as of the date
hereof. In the event of any decrease in the number of Fully Diluted Shares by
consolidation, combination, reclassification or similar transaction or in the
event of any increase in the number of Fully Diluted Shares by stock dividend,
stock split, recapitalization, or similar transaction, the Committee shall cause
there to be made such equitable adjustments to the per share measures of each
EBT Target as necessary so that the Executive shall be in the same economic
position with respect to the exercise of the Option subsequent to such as event
as she would have been prior to such event; provided, that adjustments deemed de
minimis by the Committee shall not be made, but shall be carried forward and
taken into account and included in determining any subsequent adjustment. Any
such adjustment made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons.
(d) If any "person" (as such term is defined within the
meaning of Rule 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")), other than any person who as of the date hereof beneficially owns
(as defined in Rule 13(d)(3) of the 0000 Xxx) directly or indirectly 5% or more
of the Company's outstanding Common Stock or as of the date hereof is on, or has
designated a member of, the Board of Directors of the Company or has directly or
indirectly made an investment in Danskin Investors, LLC of at least $2,000,000,
becomes a beneficial owner directly or indirectly of securities of the Company
representing in excess of fifty percent (50%) of the Company's then outstanding
securities having the right to vote for the election of directors, then each
Partially Accelerated Option shall become accelerated as to exercise with
respect to all shares of Common Stock subject to such Option, and if all Options
have not become accelerated as to exercise by virtue of the foregoing, then the
Option with the next highest EBT Target that had not at such time become
accelerated as to exercise shall become immediately exercisable with respect to
all shares of Common Stock subject to such Option.
(e) If, at any time within six years of the date hereof, the
Company consummates the sale of all or substantially all of the assets of the
Company or all or substantially all of the outstanding Common Stock, at a per
share price as determined by the Committee, in its discretion, of $2.25 to $2.49
per share of Common Stock (subject to such equitable adjustment as determined by
the Committee in the event of any decrease in the number of shares of Common
Stock by consolidation, combination, reclassification or similar transaction, or
in the event of any increase in the number of shares of Common Stock by stock
dividend, stock split, recapitalization or similar transaction), then each
Partially Accelerated Option shall become immediately exercisable with respect
to all shares of Common Stock subject to such Option, and if all Options have
not become accelerated as to exercise by virtue of the foregoing, then each of
the two Options with the next highest EBT Targets that had not at such time
become accelerated as to exercise shall become immediately exercisable with
respect to all shares of Common Stock subject to each such Option. If, at any
time within six years of the date hereof, the Company consummates the sale of
all or
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substantially all of the assets of the Company or all or substantially all of
the outstanding Common Stock, at a per share price as determined by the
Committee, in its discretion, of $2.50 per share of Common Stock or more
(subject to adjustment as set forth above in this Section 3(e)), then each
Option shall become immediately exercisable with respect to all shares of Common
Stock subject to each such Option. Any determination by the Committee as to the
per share consideration applicable to a transaction referred to in this Section
3(e) shall be final and binding upon the Optionee, the Company and all other
interested persons.
(f) Each Option shall terminate upon the termination of
Executive's employment except as otherwise provided in this Section 3(f). Upon
the termination of the Optionee's employment with the Company by Optionee
pursuant to Section 7.5 of the Employment Agreement, or the termination of the
Optionee's employment by the Company for any reason other than Cause (as defined
in the Employment Agreement) or if the Company does not renew the term of
Optionee's employment for any successive one year period pursuant to Section 2
of the Employment Agreement, then each Option which is exercisable in whole or
part on the date of such termination (the "Termination Date") shall remain
exercisable for a period of thirty (30) days from the Termination Date with
respect to that portion of such Option which is exercisable on the Termination
Date. Upon the termination of the Optionee's employment due to death or
Disability (as defined in the Employment Agreement), each Option which is
exercisable in whole or part on the date of such termination (such date also
being referred to herein as the "Termination Date") shall remain exercisable for
a period of three (3) months from the Termination Date with respect to that
portion of such Option which is exercisable on the Termination Date. Each Option
which is not exercisable on the Termination Date, or the portion of any Option
which is not exercisable on the Termination Date, shall terminate and expire on
the Termination Date.
4. Option Term. Unless terminated earlier in accordance with Section
3(f) hereof, each Option shall be exercisable by the Optionee only until January
31, 2008 (the "Expiration Date"). In the event that any Option or any portion
thereof remains unexercised on the Expiration Date, such Option or any such
unexercised portion thereof shall be forfeited to the Company and shall no
longer be exercisable by the Optionee.
5. Payment for Shares. Each Option may be exercised in whole or in part
at any time and from time to time up to the amount permitted pursuant to Section
3 of this Agreement by providing the Company with a duly executed notice, in a
form as may be designated by the Company from time to time. Payment for the
shares of Common Stock deliverable upon exercise of an Option shall be made by
delivery of a check to the order of the Company in U.S. dollars in the amount of
the aggregate price for such shares plus all amounts which, under federal, state
or local tax law, the Company is required to withhold upon exercise of the
Option or portion thereof, or on such other payment terms as shall be mutually
agreeable to the Company and the Optionee at such time.
6. Adjustments in Option. If the outstanding shares of the stock
subject to an Option are changed into or exchanged for a different number or
kind of shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification,
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stock split up, stock dividend or combination of shares (an "Adjustment Event"),
then the Committee shall make an appropriate and equitable adjustment in the
number and kind of shares or other securities as to which the portion of such
Option that is then unexercised shall be exercisable, to the end that after such
event, the Optionee shall be entitled to acquire, upon exercise of the
unexercised portion of such Option, such shares or other securities as the
Optionee would have received with respect to such portion if the Optionee had
exercised such portion immediately prior to such Adjustment Event. Such
adjustment in an Option shall be made without change in the total price
applicable to the unexercised portion of the Option. Any such adjustment made by
the Committee shall be final and binding upon the Optionee, the Company and all
other interested persons.
7. Transfer or Sale of Shares; Registration Form S-8. Within a
reasonable period of time after the date of this Agreement, the Company shall
file one or more registration statements covering the appropriate number of
shares of Common Stock on a registration statement on Form S-8 to be issued or
granted to the Optionee, as the case may be, which registration statement shall
be effective upon the filing thereof. The Company shall use reasonable efforts
to keep such Form S-8 current and effective until the Optionee has exercised the
Options. Shares of Common Stock issued upon the exercise of the Options may be
transferred or sold by the Optionee only as set forth in this Section 7. Such
shares may be transferred or sold (i) at any time subsequent to the termination
of the employment of the Optionee by the Company, (ii) at any time subsequent to
the fifth anniversary of the date hereof, or (iii) pursuant to a plan of merger
of the Company and another entity or an agreement for the sale of all or
substantially all of the outstanding Common Stock of the Company. In addition,
the Optionee may transfer or sell (on a non-cumulative basis) up to 250,000 of
such shares per year.
8. Pennaco Sale or Disposition. In the event the Company makes a
distribution to shareholders of the proceeds of a sale or other distribution of
Pennaco (or shares in the case of a spinoff of Pennaco) prior to the exercise of
the Options, the Company shall reserve the proceeds which would have been paid
to Executive upon such distribution had the Executive previously exercised the
Options, and upon exercise of each Option shall pay to the Executive the
proceeds or other property of the Pennaco sale which would have been paid to
Executive had she held the Common Stock issuable on exercise of the Option at
the time of the Pennaco sale. Any determination made by the Committee as to the
amount of the proceeds applicable hereunder shall be final and binding upon the
Optionee, the Company and all other interested persons.
9. Shareholder Approval. The exercise of the Options hereunder is
subject to the approval and adoption of this Agreement by a vote of shareholders
representing not less than a majority of the shares of Common Stock and Series D
Preferred Stock (voting on an as converted basis) then outstanding and entitled
to vote.
10. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the Company and the Optionee with respect to the matters
contained herein.
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(b) Binding Effects; Benefits. This Agreement shall inure to the
benefit of and shall be binding upon the Company and the Optionee and their
respective heirs, legal representatives, successors and assigns. Nothing in this
Agreement, expressed or implied, is intended to or shall confer on any person
other than the Company and the Optionee, or their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities.
(c) Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument in writing signed by the Company and Optionee.
The Company and the Optionee may, by an instrument in writing, waive compliance
by the other party with any term or provision of this Agreement on the part of
such other party hereto to be performed or complied with. The waiver by any such
party of a breach of any term or provision of this Agreement shall not be
construed as a waiver of any subsequent breach.
(d) Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not be
deemed to be a part of this Agreement or to affect the meaning or interpretation
of this Agreement.
(e) Further Assurances. The Company and the Optionee shall do and
perform all such further acts and things and execute and deliver all such other
certificates, instruments and/or documents (including without limitation, such
proxies and/or powers of attorney as may be necessary or appropriate) as either
party hereto may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Agreement.
(f) Separability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable any other term or provision of this Agreement
or affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
(g) Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of any Option. With respect
to any fraction of a share called for upon any exercise of an Option, the
Company shall pay to the Optionee an amount in cash equal to such fraction
multiplied by the current market price (as determined as of the date of
exercise, and with reference to the applicable trading market) of a share of the
Common Stock as of the date of such exercise.
(h) Options Not Transferable. The Options shall not be
transferable by sale, alienation, anticipation, pledge, encumbrance, assignment,
or by any other means other than by will or the laws of descent and
distribution.
(i) No Rights of the Holder. The Optionee shall not, solely by
virtue of this Agreement, be entitled to any rights of a stockholder of the
Company, either at law or in equity.
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(j) No Right To Continue as an Employee. Nothing contained in this
Agreement shall confer or be implied to confer upon the Optionee any right to
continue her employment with the Company.
(k) Governing Law. This Agreement shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts made and performed in Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed as of the date and year first above written.
DANSKIN, INC.
By:
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Name:
Title:
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Xxxxxxxxx Xxxxxx
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