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OPTION NO. __
OPTIONEE: Xxxxxxx Xxxxxx
DATE OF GRANT: October , 1998
OPTION PRICE: $100.00
COVERED SHARES: 3,000
COLORADO PRIME HOLDINGS, INC.
1997 INCENTIVE STOCK OPTION PLAN
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INCENTIVE STOCK OPTION AGREEMENT
1. Definitions. In this Agreement, except where the context otherwise
indicates, the following definitions apply:
1.1. "Affiliate" means parent or subsidiary corporations of
the Company, as defined in Sections 424(e) and (f) of the Code (but substituting
"the Company" for "employer corporation").
1.2. "Agreement" means this Incentive Stock Option
Agreement.
1.3. "Board" means the Board of Directors of the Company.
1.4. A "Change of Control" means the occurrence of any of
the following events after the Date of Grant: (i) any person or group of persons
(as defined in Section 13(d) and 14(d) of the Exchange Act) together with its
affiliates, excluding employee benefit plans of the Company, other than Xxxxxx,
becomes, directly or indirectly, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of securities of the Company representing 51% or
more of the combined voting power of the Company's then outstanding securities;
(ii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation or entity regardless of which entity is the
survivor, other than a merger or consolidation which would result in the voting
securities of the
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Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or being converted into voting securities of the surviving
entity) at least 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; (iii) an IPO Event; or (iv) the stockholders of the Company
approve a plan of complete liquidation or winding-up of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
1.5. "Closing Date" means May 9, 1997.
1.6. "Code" means the Internal Revenue Code of 1986, as
amended.
1.7. "Committee" means the committee charged, pursuant to the
provisions of the Plan, with the administration of the Plan.
1.8. "Common Stock" means the common stock, par value $0.01
per share, of the Company.
1.9. "Company" means Colorado Prime Holdings, Inc.
1.10. "Covered Shares" means the number of Shares subject to
the Option set forth as the "Covered Shares" on page 1 of this Agreement.
1.11. "Date of Exercise" means the date on which the Company
receives notice pursuant to Section 4.1 of the exercise, in whole or in part, of
the Option.
1.12. "Date of Expiration" means the date on which the Option
shall expire, which shall be the earliest of the following times:
(a) the date the Optionee's Employment is terminated
by the Company or any Affiliate for Good Cause;
(b) ninety (90) days after the termination of the
Optionee's Employment by reason of resignation, retirement, death or Disability;
(c) ninety (90) days after the date the Optionee's
Employment is terminated by the Company or any Affiliate other than for Good
Cause; or
(d) ten (10) years after the Date of Xxxxx.
1.13. "Date of Grant" means the date set forth as the "Date
of Grant" on page 1 of this Agreement.
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1.14. "Disability" means (i) incapacity due to physical or
mental illness or injury where the Optionee shall have been absent from his full
time duties at the Company for four (4) consecutive months; or (ii) the
Optionee's health should become impaired to an extent that makes the continued
performance of his duties at the Company hazardous to his physical or mental
health or his life, provided that the Optionee shall have furnished the Company
with a written statement from a qualified doctor to such effect and provided
further, that, at the Company's request made within thirty (30) days of the date
of such written statement, the Optionee shall submit to an examination by a
doctor selected by the Company who is reasonably acceptable to the Optionee or
the Optionee's doctor and such doctor shall have concurred in the conclusion of
the Optionee's doctor.
1.15. "Employment" means the Optionee's employment with the
Company and its Affiliates, including service as a director.
1.16. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.17. "Fair Market Value" means the fair market value of a
Share as determined by the Committee pursuant to a reasonable method adopted in
good faith for such purpose.
1.18. "Good Cause" means a termination based on an
Optionee's (i) willful misconduct or gross negligence in the performance or
intentional nonperformance (continuing for ten (10) days after receipt of
written notice of need to cure) of any of the Optionee's material duties and
responsibilities for the Company; (2) willful dishonesty, fraud, alcohol or
illegal drug abuse, or misconduct with respect to the business or affairs of the
Company, which materially and adversely affects the operations, prospects or
reputation of the Company; or (3) conviction of a felony or other crime
involving moral turpitude.
1.19. "Internal Rate of Return" means the interest rate
(compounded annually) which, when used to calculate the net present value of all
Cash Inflows and all Cash Outflows (each as defined below), causes such net
amount to equal zero. "Cash Inflows" as used herein shall include all cash
payments received by Xxxxxx in relation to its investment in the Company on or
prior to the date of determination. "Cash Outflows" as used herein shall include
the sum of all cash payments and investments made by Xxxxxx to and in the
Company and its affiliates. For purposes of the net present value calculation,
the dates of each payment and each investment specified above will be deemed to
have occurred as of the end of the fiscal month of such payment. If the Optionee
and Xxxxxx (collectively, the "Valuating Parties") are unable to reach agreement
on the
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Internal Rate of Return, each of the Valuating Parties shall, within five (5)
days after either invokes this procedure, (i) select one person with experience
and expertise in making internal rate of return or similar calculations to
determine the Internal Rate of Return and (ii) provide written notice of the
selection to the other Valuating Party. Within fifteen (15) days after their
selection, the two persons selected by the Valuating Parties shall select a
third person with such experience and expertise. Upon selection of the third
person, the three selected persons shall have five (5) days in which to deliver
a joint written determination of the Internal Rate of Return to each of the
Valuating Parties. If the three selected persons are unable to agree as to the
calculation of the Internal Rate of Return, then the determination of the third
person jointly selected shall govern. The determination made in accordance with
the foregoing shall be conclusive, final and binding on the Valuating Parties
and shall be enforceable in any court having jurisdiction over a proceeding
brought to seek such enforcement. The cost of the Internal Rate of Return
determination shall be borne by the Company.
1.20. "IPO Event" means the consummation of an underwritten
public offering, pursuant to an effective registration statement under the
Securities Act, that is underwritten by one or more nationally-recognized
investment banking firms and results in the Company receiving not less than
$25,000,000 in aggregate cash proceeds from such offering.
1.21. "Option" means the incentive stock option granted to
the Optionee in Section 2 of this Agreement.
1.22. "Option Price" means the dollar amount per Share set
forth as the "Option Price" on page 1 of this Agreement.
1.23. "Optionee" means the person identified as the
"Optionee" on page 1 of this Agreement.
1.24. "Plan" means the Colorado Prime Holdings, Inc. 1997
Incentive Stock Option Plan.
1.25. "Projections" means the following fiscal year
operating income projections: Fiscal Year 1998 = $21,815,000; Fiscal Year 1999 =
$25,495,000; Fiscal Year 2000 = $29,542,000; Fiscal Year 2001 = $34,280,000;
Fiscal Year 2002 = $40,223,000. Operating income shall be calculated pursuant to
the Company's audited financial results and in conformity with the methodology
utilized in the Xxxxxxx, Xxxxx & Co. Confidential Memorandum dated December
1996.
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1.26. "Securities Act" means the Securities Act of 1933, as
amended.
1.27. "Share" means a share of Common Stock.
1.28. "Xxxxxx" means Xxxxxx Equity Investors III, L.P.
2. Grant of Option. Pursuant to the Plan and subject to the terms
of this Agreement, the Company hereby grants to the Optionee the Option to
purchase from the Company that number of Shares equal to the Covered Shares,
exercisable at the Option Price.
3. Terms of the Option.
3.1. Type of Option. The Option is intended to be an
incentive stock option within the meaning of Section 422 of the Code; provided,
however, that to the extent that, during any calendar year, the Option becomes
exercisable for the first time with respect Shares having an aggregate fair
market value in excess of the limit imposed by Section 422(d) of the Code, (a)
the Option shall be treated as a nonstatutory stock option and not as an
incentive stock option to the extent required by Section 422(d) of the Code, and
(b) upon any exercise of the Option, the Optionee shall be required to designate
the extent to which, if any, the exercise of the Option is with respect that
portion of the Option that is a nonstatutory stock option pursuant to the
preceding clause (a). If, as of the same date, the Optionee exercises the Option
with respect to a portion of the Option that is an incentive stock option and
with respect to a portion of the Option that is a nonstatutory stock option, the
Company shall issue separate certificates to the Optionee representing (i) those
Shares that were acquired pursuant to the exercise of an incentive stock option
(which Shares shall be identified on the Company's stock transfer records as
such), and (ii) those Shares that were acquired pursuant to the exercise of a
nonstatutory stock option.
3.2. Exercise Period. During the period commencing on the
Date of Grant and terminating on the Date of Expiration, the Option may be
exercised with respect to all or a portion of the Covered Shares (in full
shares), to the extent that the Option has vested and has not been previously
exercised with respect to such Covered Shares.
3.3. Vesting Schedule.
(a) Two-fifteenths of the Options shall vest as of
the date of this Agreement.
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(b) On each of the second, third, fourth and fifth
anniversaries of the Closing Date, the Option shall vest as to one-fifteenth of
the Covered Shares, rounded up to the nearest whole number of Shares (or, if
less, the remainder of the Covered Shares with respect to which the Option has
not yet vested).
(c) With respect to each of the Company's four fiscal
years commencing with the fiscal year of the Company ending September 25, 1998,
the Option shall vest as to one-fifteenth of the Covered Shares, rounded up to
the nearest whole number of Shares (or, if less, the remainder of the Covered
Shares with respect to which the Option has not yet vested) in the event that
the Company has achieved or exceeded the Projections for that fiscal year. The
achievement of the Projections shall be based on the Company's audited financial
results and the Option as to a particular fiscal year shall vest as of the
declaration by the Committee of the achievement of such Projections.
In the event that as of any such fiscal year, the Company
shall not have achieved the Projections for such year, the following provisions
shall be applicable. In the event that for any such fiscal year the Company
shall have failed to achieve the Projections by less than $500,000, the Option
shall vest as to one-thirtieth of the Covered Shares, rounded up to the nearest
whole number of Shares. In the event that for any such fiscal year the Company
shall have failed to achieve the Projections by $500,000 or more, the Option set
forth in this Section 3.3(c) for such year shall not vest; provided, however,
that in either case in the event that as of any subsequent fiscal year within
such four (4) fiscal year period, the Company shall have achieved or exceeded
the Projections for such year and for the prior year(s) on a cumulative basis,
the Option shall vest for such year and for the theretofore unvested portion
thereof for such prior year(s).
(d) In addition to Sections 3.3(b) and (c), the
Option shall vest as to 33.333% of the Covered Shares in the event that Xxxxxx
shall have achieved an Internal Rate of Return on its investment in the Company
in an amount exceeding 40%.
(e) Notwithstanding the provisions of Sections 3.3(b)
and (c), (i) the portions of the Option set forth in said Sections 3.3(b) & (c)
shall vest in full upon a Change of Control and (ii) no part of the Option shall
vest after the date of termination for any reason of the Optionee's Employment.
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4. Exercise.
4.1. Notice. The Option shall be exercised, in whole or in
part, by the delivery to the Company of written notice of such exercise, in such
form as the Committee may from time to time prescribe, accompanied by (i) full
payment of the Option Price with respect to that portion of the Option being
exercised and (ii) any amounts required to be withheld pursuant to applicable
tax laws in connection with such exercise. Options may be exercised only with
respect to whole numbers of Shares. Until the Committee notifies the Optionee to
the contrary, the form attached to this Agreement as Exhibit A shall be used to
exercise the Option.
4.2. Payment of the Option Price. Upon exercise of the
Option, the Optionee shall pay the Option Price and any applicable withholding
tax amounts in cash. With the prior written approval of the Committee, which
approval shall be in the Committee's sole discretion, the Optionee may also pay
the Option Price, in whole or in part, by delivering duly endorsed certificates
representing, or duly executed stock transfer instruments in respect of, a whole
number of Shares having an aggregate value on the Date of Exercise (determined
based on the Fair Market Value) not more than the portion of the Option Price
being paid by delivery of such Shares, or in a combination of cash and Shares.
Notwithstanding the preceding sentence, no Shares may be used to pay any portion
of the Option Price unless those Shares were issued to the Optionee at least six
months prior to the Date of Exercise.
5. Restrictions on Transfer.
5.1. Options. Except by will or the laws of descent and
distribution, the Option may not be sold, transferred, assigned, pledged or
otherwise disposed of or encumbered by the Optionee, and any attempt to do so
shall be null and void. The Option may be exercised during the Optionee's
lifetime only by the Optionee or, in the event of the Optionee's legal
disability, by the Optionee's legal representative. The terms of the Option
shall be binding upon any successor or permitted assignee of the Optionee.
5.2. Shareholders Agreement. The Optionee understands and
agrees that, upon his or her exercise of the Option and receipt of Shares, he or
she will become a party to the Shareholders Agreement dated as of May 9, 1997,
by and among the Company, Xxxxxx Equity Investors III, L.P. and certain
shareholders of the Company (the "Shareholders Agreement"). The Optionee hereby
agrees to be bound as a "Shareholder" to all the terms and conditions and to be
subject to the benefits of the Shareholders Agreement as a "Manager," including
the transfer restrictions of the Shareholders Agreement and the rights and
obligations of the Managers with respect to certain events relating to the
disposition of the Shares
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upon the Optionee's termination or resignation of employment with the Company or
its Affiliates. The Optionee acknowledges that a copy of the Shareholders
Agreement has been made available to the Optionee for inspection.
6. Capital Adjustments. In the event of any change in the
outstanding Common Stock by reason of any stock dividend, split-up (or reverse
stock split), reclassification, reincorporation, liquidation or similar change
in corporate structure, the Committee shall, in its discretion, provide for a
substitution for or adjustment in (i) the number and class of Covered Shares and
(ii) the Option Price.
7. Investment Intent; Legends.
7.1. Representations. The Optionee agrees that, upon the
issuance of any Shares upon the exercise of the Option, the Optionee will, upon
the request of the Company, represent and warrant in writing that the Optionee
(i) has received and reviewed a copy of the Plan; (ii) is capable of evaluating
the merits and risks of exercising the Option and acquiring the Shares and able
to bear the economic risks of such investment; (iii) has made such
investigations as he or she deems necessary and appropriate of the business and
financial prospects of the Company; and (iv) is acquiring the Shares for
investment only and not with a view to resale or other distribution thereof. The
Optionee acknowledges that the Company has made available to the Optionee the
opportunity to obtain information to evaluate the merits and risks associated
with this Agreement and the transactions contemplated hereby. The Optionee
further acknowledges that the investment contemplated by the Option involves a
high degree of risk, including risks associated with the Company's business
operations and prospects, the lack of a public market for the Shares, and the
limitations on the transferability of the Option and the Shares.
7.2. Legends. The Optionee agrees that the certificates
evidencing the Shares issued upon exercise of the Option may include any legend
which the Committee deems appropriate to reflect any transfer or other
restrictions contained in the Plan, this Agreement or the Shareholders Agreement
or to comply with applicable laws.
8. Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to any Covered Shares until and unless a certificate or
certificates representing such shares are issued to the Optionee pursuant to
this Agreement. Except as provided in Section 6, no adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates.
9. Employment. Neither the granting of the Option evidenced by this
Agreement nor any term or provision of this Agreement shall constitute or be
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evidence of any understanding, express or implied, on the part of the Company or
any of its Affiliates to employ the Optionee (or have the Optionee serve as a
director) for any period.
10. Subject to the Plan. The Option evidenced by this Agreement and
the exercise thereof are subject to the terms and conditions of the Plan, which
are incorporated herein by reference and made a part hereof, but the terms of
the Plan shall not be considered an enlargement of any benefits under this
Agreement. In addition, the Option is subject to any rules and regulations
promulgated by the Committee pursuant to the Plan.
11. Notice. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally, by facsimile or sent by overnight express or by registered or
certified mail, postage prepaid, addressed as follows:
If to the Company to:
Colorado Prime Holdings, Inc.
0 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
Attention: Chairman of the Board of Directors
Facsimile: 000-000-0000
If to the Optionee, to the address set forth beneath the Optionee's signature on
the signature page hereof.
All deliveries of notice shall be deemed effective when received by
the person entitled to such receipt or when delivery has been attempted but
refused by such person. Any party may change the person or address to which such
deliveries shall be made with respect to such party by delivering notice thereof
to the other party hereto in accordance with this Section 11.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
signed on its behalf effective as of the Date of Xxxxx.
ATTEST: COLORADO PRIME HOLDINGS, INC.
By:
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Accepted and agreed to as of the Date of Xxxxx.
Optionee:
Address:
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EXERCISE OF OPTION
Board of Directors
Colorado Prime Holdings, Inc.
0 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
The undersigned, the Optionee under the Incentive Stock Option
Agreement identified as Option No. ______ (the "Agreement"), granted pursuant to
the Colorado Prime Holdings, Inc. 1997 Incentive Stock Option Plan (the "Plan"),
hereby irrevocably elects to exercise the option granted in such Agreement (the
"Option") to purchase [whole numbers only] shares of Common Stock, par
value $0.01 per share, (the "Shares") of Colorado Prime Holdings, Inc. (the
"Company"), and herewith makes payment of $ in cash.
The Optionee hereby represents and warrants as follows:
1. The Optionee has received and reviewed a copy of the Plan;
2. The Optionee is capable of evaluating the merits and risks of
exercising the Option and acquiring the Shares and able to bear the economic
risks of such investment;
3. The Optionee has made such investigations as he or she deems
necessary and appropriate of the business and financial prospects of the
Company; and
4. The Optionee is acquiring the Shares for investment only and not
with a view to resale or other distribution thereof.
The Optionee acknowledges that the Company has made available to
the Optionee the opportunity to obtain information to evaluate the merits and
risks associated with the Agreement and the transactions contemplated thereby.
The Optionee further acknowledges that the investment contemplated by the Option
involves a high degree of risk, including risks associated with the Company's
business operations and prospects, the lack of a public market for the Shares,
and the limitations on the transferability of the Option and the Shares.
The Optionee understands and agrees that, upon his or her exercise
of the Option and receipt of Shares, he or she becomes a party to the
Shareholders Agreement dated as of May 9, 1997, by and among the Company, Xxxxxx
Equity Investors III, L.P. and certain shareholders of the Company (the
"Shareholders Agreement"). The Optionee hereby agrees to be bound as a
"Shareholder" to all the terms and conditions, including the transfer
restrictions, of the Shareholders Agreement, a copy of which has been made
available to the Optionee for inspection.
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Dated:
(Signature of Optionee)
Date Received by
Colorado Prime Holdings, Inc.:
Received by:
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