Exhibit 10.4
X.X. XXXXX ARTS & CRAFTS, INC.
FORM OF 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");
provided, however, the Option granted hereby shall not be exercisable unless the
Company has issued shares of its common stock to the public in an IPO ("as
defined in the Plan") in 2002;
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").
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.
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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.
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The purchase price of the Shares covered by the Option shall be
$________ per Share, 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.
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Subject to the terms and conditions set forth in this Agreement and the
Plan, the Option granted hereby shall be exercisable as follows:
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On the first anniversary of the date of this up to 1/3 of the Shares
Agreement
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On the second anniversary of the date of this an additional 1/3 of the Shares
Agreement
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On the third anniversary of the date of this an additional 1/3 of the Shares
Agreement
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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 of the Option shares, unless this option has
otherwise expired or been terminated pursuant to its terms hereof.
4. TERM OF OPTION
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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
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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 vesting.
(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:
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.
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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.
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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.
6. PARTIAL EXERCISE.
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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.
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7. NON-ASSIGNABILITY.
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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.
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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.
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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.
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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.
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.
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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.
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12. NOTICES.
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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: _________________________________
_________________________________
_________________________________
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.
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This Agreement shall be construed and enforced in accordance with the
law of the State of Pennsylvania.
14. BENEFIT OF AGREEMENT.
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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.
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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 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.
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The terms and provisions of this Agreement may be modified or amended
only by written agreement executed by all parties hereto.
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17. WAIVERS AND CONSENTS.
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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.
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: _________________________________________
Xxxx X. Xxxxxx, Chief Executive Officer
PARTICIPANT
_________________________________________
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EXHIBIT A
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NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
To: X.X. XXXXX ARTS & CRAFTS, INC.
Ladies and Gentlemen:
I hereby exercise my Incentive Stock Option to purchase _____ shares
(the "Shares") of the commons 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 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) ______________________
______________________
_____________________________________ ________________________ _________
Participant Name (please print) Participant (signature) Date
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