Exhibit 3
WELLINGTON HALL, LIMITED
1997 STOCK OPTION AND RESTRICTED STOCK PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option
Agreement") is made and entered into as of February 10, 1997, by
and between Wellington Hall, Limited, a North Carolina
corporation (the "Company"), and Xxxxxx X. Xxxxxxx, a key
employee of the Company (the "Optionee"):
W I T N E S S E T H:
WHEREAS, the Company desires to provide the Optionee with an
incentive to remain in the employment of the Company and an
opportunity to purchase common stock of the Company, so that the
Optionee may acquire or increase a proprietary interest in the
Company's success, and
WHEREAS, the Company desires to grant the Optionee incentive
stock options under Article II of the Company's 1997 Stock Option
and Restricted Stock Plan (the "Plan"), and the Optionee desires
to accept such options in accordance with the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, and intending to be legally
bound hereby, the parties agree as follows:
1. Grant of Options; Exercise Price and Number of Shares;
Expiration Dates. The Company hereby grants to the Optionee the
following options to purchase shares of common stock of the
Company upon the terms and conditions set forth in this
Agreement. Each of the following options is intended to be an
"Incentive Stock Option" within the meaning specified in the Plan
and as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and is hereby designated as such
pursuant to Article II, Section 1(a) of the Plan. The grant of
the options has been duly authorized by the Committee that
administers the Plan, as established by the Board of Directors
of the Company pursuant to Article I, Section 3 of the Plan (the
"Committee").
(a) Series A Option. Subject to the terms and
conditions of this Agreement and the Plan, the Company
hereby grants to the Optionee an option (the "Series A
Option") to purchase all or any portion of One Hundred Fifty
Thousand (150,000) shares of the Company's Common Stock at
an exercise price of Fifty Cents ($0.50) per
Share (the "Series A Exercise Price"). The Optionee shall be
entitled to exercise the Series A Option beginning
September 1, 1998 up to and including February 9, 2004,
if the Commissioned Retail Sales in the Territory (as defined
below) from May 1, 1997 through April 30, 1998 equal or exceed
$2,500,000. For purposes of this Section 1, "Commissioned
Retail Sales in the Territory" means the combined amount of
shipments of retail sales of the Company and Wellington Hall
Caribbean Corp. ("WHCC") in the Territory for which the Company
is obligated to pay Optionee commissions pursuant to Paragraph
4(a) of that certain Employment and Stock Purchase Agreement
dated September 1, 1996 by and between the Company and
Optionee, with "Territory" meaning the area defined in
Schedule B to such agreement.
(b) Series B Option. Subject to the terms and
conditions of this Agreement and the Plan, the Company
hereby grants to the Optionee an option (the "Series B
Option") to purchase all or any portion of One Hundred Fifty
Thousand (150,000) shares of the Company's Common Stock at
an exercise price of Eighty Cents ($0.80) per Share (the
"Series B Exercise Price"). The Optionee shall be entitled
to exercise the Series B Option beginning September 1, 1999
up to and including February 9, 2004, if Commissioned Retail
Sales in the Territory from May 1, 1998 through April 30,
1999 equal or exceed $2,700,000.
(c) Series C Option. Subject to the terms and
conditions of this Agreement and the Plan, the Company
hereby grants to the Optionee an option (the "Series C
Option") to purchase all or any portion of One Hundred Fifty
Thousand (150,000) shares of the Company's Common Stock at
an exercise price of One Dollar and 30/100 ($1.30) per Share
(the "Series C Exercise Price"). The Optionee shall be
entitled to exercise the Series C Option beginning September
1, 2000 up to and including February 9, 2004, if
Commissioned Retail Sales in the Territory from May 1, 1999
through April 30, 2000 equal or exceed $3,000,000.
The Series A, Series B and Series C Options are hereinafter
collectively referred to as the "Option" and the Series A, Series
B and Series C Exercise Prices are hereinafter collectively
referred to as the "Exercise Price."
2. Transfer of Option. The Option may not be sold,
pledged, assigned or transferred in any manner other than by will
or by the laws of descent or distribution, unless otherwise
agreed by the Committee.
3. Adjustments. If the shares of Common Stock of the
Company are increased, decreased, changed into or exchanged for a
different number or kind of shares or securities through merger,
consolidation, combination, exchange of shares, other
reorganization, recapitalization, reclassification, stock
dividend, stock split or reverse stock split in which the
Company is the surviving entity, the aggregate number of Shares
subject to the Option and the Exercise Price shall be appropriately
and proportionately adjusted in the manner provided in the Plan.
4. Termination of Option. The Option hereby granted shall
terminate and be of no force or effect upon the happening of the
first to occur of the following events:
(a) expiration of three months after the date of
termination of the Optionee's employment with the Company
for any reason other than the death of the Optionee;
(b) expiration of twelve months after the death of the
Optionee while employed by the Company;
(c) occurrence of any event described in paragraph 9
hereof that causes a termination of the Option; or
(d) expiration of the Option as provided in paragraph
1 above.
Any Option that may be exercised for a period following
termination of the Optionee's employment may be exercised only to
the extent it was exercisable immediately before such termination
and in no event after the Option would expire by its terms
without regard to such termination.
5. Method of Exercise. The Option shall be exercised by
tender of payment of the Exercise Price and delivery to the
Company at its principal place of business of a written notice,
at least three business days prior to the proposed date of
exercise, which notice shall:
(a) state the election to exercise the Option, the
number of Shares with respect to which the Option is being
exercised, and the name, address, and social security number
of the person in whose name the stock certificate or
certificates for such Shares is to be registered;
(b) contain any such representations and agreements as
to Optionee's investment intent with respect to such Shares
as shall be reasonably required by the Committee pursuant
to paragraph 7; and
(c) be signed by the person entitled to exercise the
Option, and if the Option is being exercised by any person
or persons other than the Optionee, be accompanied by proof,
satisfactory to the Committee, of the right of such person
or persons to exercise the Option.
Payment of the Exercise Price may be made in cash or by
certified or official bank check. Payment may also be made by
surrendering shares of the Company's Common Stock (including any
Shares received upon a prior or simultaneous exercise of the
Option) at the then fair market value of such Shares, as
determined pursuant to Section 1(b) of Article II of the Plan.
Payment may also be made by combining cash or check and shares of
such stock.
After receipt of such notice in a form satisfactory to the
Committee and the acceptance of payment, the Company shall
deliver to the Optionee a certificate or certificates
representing the Shares purchased hereunder, provided, that if
any law or regulation requires the Company to take any action
with respect to the Shares specified in such notice before the
issuance thereof, the date of delivery of such Shares shall be
extended for the period necessary to take such action.
6. Rights of a Shareholder. The Optionee shall not be
deemed for any purpose to be a shareholder of the Company with
respect to any Shares covered by the Option unless the Option
shall have been exercised and the Exercise Price paid in the
manner provided herein. No adjustment will be made for dividends
or other rights where the record date is prior to the date of
exercise and payment. Upon the exercise of the Option as
provided herein and the issuance of the certificate or
certificates evidencing the Shares covered thereby, the Optionee
shall have all the rights of a shareholder of the Company,
including the right to receive all dividends or other
distributions paid or made with respect to such shares.
7. Compliance with Securities Laws. Shares issuable
pursuant to this Option are not presently registered under
applicable federal and state securities laws. The Company may in
the future, but shall have no obligation to, undertake such
registrations or may, in lieu thereof, issue Shares hereunder
only pursuant to applicable exemptions from such registrations.
Before issuing Shares to Optionee hereunder, the Committee may
require appropriate representations from Optionee and take such
other action as the Committee may deem necessary, including but
not limited to placing restrictive legends on certificates
evidencing such shares and place stop transfer instructions in
the Company's stock transfer records, or delivering such
instructions to the Company's transfer agent, in order to assure
compliance with any such exemptions.
8. Rule 144. The Optionee acknowledges that,
notwithstanding any future registration of the Option and the
shares of Common Stock issuable upon its exercise under the
Securities Act of 1933 or under the securities laws of any state,
if, at the time of exercise of the Option, he is deemed to be an
"affiliate" of the Company as defined in Rule 144 of the
Securities and Exchange Commission, any shares purchased
thereunder will nevertheless be subject to sale only in
compliance with Rule 144 (but without any holding period), and
that the Company shall take such action as it deems necessary or
appropriate to assure such
compliance, including placing restrictive legends on certificates
evidencing such shares and delivering stop transfer instructions
to the Company's transfer agent.
9. Reorganizations. If the Company shall be a party to
any merger or consolidation in which it is not the surviving
entity or pursuant to which the shareholders of the Company
exchange their common stock, or if the Company shall dissolve or
liquidate or sell all or substantially all of its assets, the
Option granted hereunder shall terminate on the effective date of
such merger, consolidation, dissolution, liquidation or sale;
provided, however, that prior to such effective date, the
Committee may, in its discretion, cause the Option to become
immediately exercisable, and may, to the extent the Option is
terminated as provided in this paragraph 9, authorize a payment
to the Optionee that approximates the economic benefit that he
would realize if the Option were exercised immediately before
such effective date, or authorize a payment in such other amount
as it deems appropriate to compensate the Optionee for the
termination of the unexercised portion of the Option, or arrange
for the granting of a substitute option to the Optionee.
This Agreement shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure,
or to merge or consolidate, or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
10. No Right to Continued Employment. This Agreement does
not confer upon the Optionee any right to continued employment by
the Company, nor shall it interfere in any way with the right of
the Company to terminate or alter the terms of that employment.
11. Construction. This Agreement shall be construed so as
to be consistent with the Plan and the provisions of the Plan
shall be deemed to be controlling in the event that any provision
hereof should be inconsistent therewith. The Optionee hereby
acknowledges receipt of a copy of the Plan from the Company and
agrees to be bound by all of the terms and provisions of the
Plan.
Whenever the word "Optionee" is used in any provision of
this Agreement under circumstances where the provision should
logically be construed to apply to (i) the estate, personal
representative, or beneficiary to whom this Option may be
transferred by will or by the laws of descent and distribution or
(ii) the guardian or legal representative of the Optionee acting
pursuant to a valid power of attorney or the decree of a court of
competent jurisdiction, then the term "Optionee" shall be
construed to include such estate, personal representative,
beneficiary, guardian or legal representative.
12. Severability. The provisions of this Agreement shall
be severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the
other provisions hereto.
13. Successor and Assigns. The terms of this Agreement
shall be binding upon and shall enure to the benefit of any
successors or assigns of the Company and of the Optionee.
14. Notices. Notices under this Agreement shall be in
writing and shall be deemed to have been duly given (i) when
personally delivered, (ii) when forwarded by Federal Express,
Airborne, or another private carrier which maintains records
showing delivery information, (iii) when sent via facsimile but
only if a written facsimile acknowledgment of receipt is received
by the sending party, or (iv) when placed in the United States
Mail and forwarded by registered or certified mail, return
receipt requested, postage prepaid, addressed to the party to
whom such notice is being given or such other address as
furnished to the Company from time to time for this purpose.
15. Entire Agreement; Modification. This Agreement is the
entire agreement and understanding of the parties hereto with
respect to the Option granted herein and supersedes any and all
prior and contemporaneous negotiations, understandings and
agreements with regard to the Option and the matters set forth
herein, whether oral or written. No representation, inducement,
agreement, promise or understanding altering, modifying, taking
from or adding to the terms and conditions hereof shall have any
force or effect unless the same is in writing and validly
executed by the parties hereto.
16. Shareholder Approval; Relinquishment of Other Rights.
Notwithstanding anything herein to the contrary, the Option
granted hereunder shall not be effective or exercisable unless
the shareholders of the Company shall have approved the Plan
within 12 months of its adoption by the Board of Directors. By
his execution of this Agreement, the Optionee relinquishes any
and all rights and interests of the Optionee with respect to any
stock options granted or deemed to be granted pursuant to that
Employment and Stock Purchase Agreement dated September 1, 1996,
by and between Optionee and the Company.
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of North
Carolina.
IN WITNESS WHEREOF, the Optionee has executed this Agreement
and the Company has caused this Agreement to be executed by its
duly authorized officer, effective as of the day and year first
above written.
WELLINGTON HALL, LIMITED
By: /s/ Xxxx X. Xxxxxxx Xx. /s/ Xxxxxx X. Xxxxxxx
Optionee
Title: President & CEO
