FORM DIRECTOR STOCK OPTION AGREEMENT OPTION AGREEMENT
Exhibit (d)(iii)
FORM DIRECTOR STOCK OPTION AGREEMENT
OPTION AGREEMENT
THIS OPTION AGREEMENT (“Agreement”) made effective as of (Date), between Lakes Entertainment,
Inc., a Minnesota corporation (the “Company”), and (Name) (“Director”).
BACKGROUND
| A. | Director is serving as a member of the Board of Directors of the Company. | ||
| B. | The Company desires to reward Director for his service to the Company. | ||
| C. | The Company has adopted the Lakes Entertainment, Inc. 2007 Stock Option and Compensation Plan (the “Plan”) and the Committee appointed pursuant to the Plan or its delegate granted a Non-Qualified Stock Option to Director on (Insert Date of Grant) , subject to the execution of this Agreement. Capitalized terms not defined in this Agreement have the meaning assigned to them in the Plan. |
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. Grant of Option. The Company has irrevocably granted to Director a Non-Qualified
Stock Option under the Plan to purchase all or any part of an aggregate of (Number of Share) Shares
(such number being subject to adjustment as provided in this Agreement and the Plan), subject to
the terms and conditions set forth in this Agreement. The terms and conditions of the Plan, a copy
of which has been delivered to Director, are hereby incorporated into and made a part of this
Agreement by reference as if set forth in full. In the event of any conflicts or inconsistencies
between the provisions of the Plan and this Agreement, the provisions of the Plan will govern and
control.
2. Purchase Price. The purchase price of the Shares covered by the Option shall be
$(Amount) per Share.
3. Exercise and Vesting of Option. Subject to the provisions of Section 9 of this
Agreement and Section 9 of the Plan, the Option shall be exercisable only to the extent that all,
or any portion of the Option, has vested. The Option shall vest in ( ) equal installments of
(Amount) Shares each. The first installment of the Option will vest on the first anniversary of
the date the Option was granted and the remaining installments of the Option will vest on each
of the next subsequent anniversaries of such date (each such anniversary is referred to as a
“Vesting Date”) so long as Director continues to serve as a director of the Company until the
Option is fully vested.
In the event that Director ceases to be a director of the Company for any reason or no reason,
with or without cause, prior to any Vesting Date, that part of the Option scheduled to vest on or
after such Vesting Date shall not vest and all of Director’s rights to and under such non-vested
part of the Option shall terminate as of the date Director ceases to be a director of the Company
(“Director Termination Date”).
4. Term of Option. Except as otherwise provided in this Agreement, any vested part of
the Option shall be exercisable for ten (10) years from the date the Option was granted by the
Committee or its delegate; provided, however, that in the event that Director ceases to be a
director of the Company, for any reason or no reason, with or without cause, Director or his legal
representative shall have three (3) years from the Director Termination Date to exercise any part
of the Option vested as of the Director Termination Date. Upon the expiration of such three (3)
year period, or, if earlier, upon the expiration date of the Option as set forth above in this
Section 4, the Option shall terminate and become null and void.
5. Manner of Exercise. Subject to the terms and conditions of this Agreement and the
Plan, the Option may be exercised, in whole or in part, by giving written notice to the Secretary
of the Company at its principal office, specifying the number of Shares to be purchased and
accompanied by the full purchase price for such Shares. The purchase price shall be payable in
United States dollars and may be paid by cash; uncertified or certified check; bank draft; by
delivery of shares of the Company’s common stock in payment of all or any part of the purchase
price, which shares shall be valued for this purpose at Fair Market Value on the date all or any
part of the Option is exercised; by instructing the Company to withhold from the Shares issuable
upon exercise of the Option, Shares in payment of all or any part of the purchase price, which
Shares shall be valued for this purpose at their then Fair Market Value or in such other manner as
may be authorized from time to time by the Committee. The Company has no obligation to deliver
Shares or cash upon exercise of all or any part of the Option until qualified for delivery under
such laws and regulations as may be deemed by the Company applicable to such exercise.
6. Rights of Option Holder. Director, as a holder of the Option, shall not have any
of the rights of a shareholder with respect to the Shares covered by the Option except to the
extent that one or more certificates for such Shares shall be delivered to Director upon the due
exercise of all or any part of the Option.
7. Non-Transferability. The Option shall not be transferable otherwise than by will
or the laws of descent and distribution, and the Option may be exercised, during the lifetime of
Director, only by Director. More particularly (but without limiting the generality of the
foregoing), the 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 Option contrary to the provisions hereof, and the levy
of any execution, attachment, or similar process upon the Option shall be null and void and without
effect.
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8. Adjustment. In the event that any dividend or other distribution (whether in the
form of cash, Shares, other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or
exchange of Shares or other securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is required to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Option, then the Committee
shall, in such manner as it may deem equitable, adjust any or all of: (a) the number and type of
Shares (or other securities or other property) that thereafter may be made the subject of the
Option; and (b) the purchase or exercise price of the Option.
9. Immediate Acceleration of the Option. Unless otherwise determined by the Board and
a majority of the Continuing Directors, the Option will become immediately exercisable in full if a
Change in Control occurs. In the event the Company is a party to a merger, exchange or
reorganization, the Option will be subject to the terms and conditions of the agreement of merger,
exchange or reorganization, which may include, without limitation, accelerating the vesting or
exercise date of the Option in exchange for the immediate distribution of a cash payment equal to
the difference between the Fair Market Value on the date of the Change in Control and the exercise
price of the Option multiplied by the number of Shares subject to the Option.
10. Additional Condition. Notwithstanding anything in this Agreement to the contrary:
(a) the Company may, if it shall determine it necessary or desirable for any reason, at the time of
the issuance of any Shares pursuant to the Option require Director, as a condition to the receipt
of Shares issued pursuant to the Option, to deliver to the Company a written representation of
present intention to acquire the Shares issued pursuant to the Option for Director’s own account
for investment and not for distribution: and (b) if at any time the Company further determines, in
its sole discretion, that the listing, registration or qualification (or any updating of any such
document) of the Shares issuable pursuant to the Option is necessary on any securities exchange or
under any federal or state securities or blue sky law, or that the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in connection with the
issuance of Shares pursuant to such listing, registration, qualification, laws, consents or
approvals, or the removal of any restrictions imposed on such Shares, such Shares shall not be
issued or such restrictions shall not be removed, as the case may be, 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 Company.
11. Withholding.
(a) The Company shall have the right to withhold from any Shares, payments or distributions
made under this Agreement, or to collect as a condition of issuing Shares or making a payment or
distribution, any taxes required by law to be withheld. At any time when Director is required to
pay to the Company an amount required to be withheld under applicable federal, state, local or
foreign payroll, withholding, income or other tax laws in connection with a distribution of Shares
or upon exercise of the Option, Director may satisfy this obligation in whole or in part by
electing (the “Election”) to have the Company withhold from the Shares, payment or distribution
Shares having a value up to the amount required to be withheld. The value of the Shares to be
withheld shall be based on the Fair Market Value on the date that the amount of tax to be withheld
shall be determined (“Tax Date”).
(b) Each Election must be made prior to the Tax Date. The Company may, in its sole
discretion, disapprove of any Election or may suspend or terminate the right to make Elections. An
Election is irrevocable.
(c) An Election must comply with all of the requirements of the Securities Exchange Act of
1934, as amended.
12. General. The Company shall at all times during the term of the Option reserve and
keep available such number of Shares as will be sufficient to satisfy the requirements of this
Agreement.
13. No Third Party Beneficiaries. Nothing in this Agreement expressed or implied is
intended or shall be construed as conferring upon or giving to any Person, firm or corporation,
other than the parties to this Agreement, any rights or benefits under or by reason of this
Agreement.
14. Cooperation of Parties. Each party to this Agreement agrees to execute such
further papers, agreements, assignments or documents of title as may be necessary or desirable to
effect the purposes of this Agreement and carry out its provisions.
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15. Entire Agreement. This Agreement embodies the entire agreement made between the
parties to this Agreement with respect to the matters covered in this Agreement and shall not be
modified except by writing signed by the party to be charged.
16. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which shall constitute but one and the same
agreement.
17. Governing Law. This Agreement, in its interpretation and effect, shall be
governed by the laws of the State of Minnesota applicable to contracts executed and to be performed
in the State of Minnesota.
In WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written
above.
| LAKES ENTERTAINMENT, INC. | ||||||
| By: | ||||||
| Its: | ||||||
| DIRECTOR | ||||||
| (NAME) | ||||||
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