EXHIBIT 99.2
VACU-DRY COMPANY
FORM OF STOCK OPTION AGREEMENT
PURSUANT TO
1996 STOCK OPTION PLAN, AS AMENDED
1. Grant of Option. Vacu-dry Company., a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1996 Stock Option Plan, as
amended (the "Plan") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code.
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 6 of the Plan as follows:
(a) Right to Exercise.
i) This Option may not be exercised for a fraction of a share.
ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(a)(iii).
iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(b) Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
Price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the Exercise Price.
No shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his investment representations in such form
as the Company may reasonably request.
4. Method of Payment. Payment of the Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check; or
(c) in the discretion of the Board:
i) by delivery of other previously outstanding Common Stock of
the Company,
ii) by an approved deferred payment schedule or other
arrangement, which arrangement shall be contained in writing in the Option
Agreement, in which event an interest rate will be stated which is not less than
the rate then specified which will prevent any imputation of higher interest
under Section 483 of the Code,
iii) by retention by the Company of some of the Stock as to which
the Option is then being exercised, in which case the Optionee's notice of
exercise shall include a statement (A) directing the Company to retain so many
shares that would otherwise have been delivered by the Company upon exercise of
this Option as equals the number of shares that would have been surrendered to
the Company if the purchase price had been paid with previously outstanding
stock of the Company, and (B) confirming the aggregate number of shares as to
which this Option is being thus exercised and therefore surrendered, or
iv) in any other form of legal consideration acceptable to the
Committee at the time of grant or exercise.
5. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of Optionee's
consulting relationship or status as an Employee, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's status as an Employee as a
result of total and permanent disability (as defined in Section 22(e)(3) of the
Code), Optionee may, but only within twelve (12) months from the date of
termination of employment (but in no event later than the date of expiration of
the term of this Option as set forth in Section 10 below), exercise the Option
to the extent otherwise so entitled at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. Notwithstanding the provisions of Section 6 above, in
the event of the death of Optionee, the Option may be exercised at any time
within twelve (12) months following the date of death (but in no event later
than the date of expiration of the term of this Option as set forth in Section
10 below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
11. Tax Consequences. Set forth below is a brief summary as of the date of
this Option of some of the federal and California tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will be
no regular federal income tax liability or California income tax liability upon
the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(b) Exercise of Non-Qualified Stock Option ("NSO"). If this Option
does not qualify as an ISO, there may be a regular federal income tax liability
and a California income tax liability upon the exercise of the Option. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are held
for at least one year after exercise, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal and California
income tax purposes. In the case of an ISO, if Shares transferred pursuant to
the Option are held for at least one year after exercise and are disposed of at
least two years after the Date of Grant, any gain realized on disposition of the
Shares will also be treated as long-term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within
such one-year period or within two years after the Date of Grant, any gain
realized on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price.
(d) Notice of Disqualifying Disposition of ISO Shares. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (i) the date two years after the Date of Grant, or (ii) the date one
year after transfer of such Shares to the Optionee upon exercise of the ISO, the
Optionee shall immediately notify the Company in writing of such disposition.
Optionee agrees that Optionee may be subject to income tax withholding by the
Company on the compensation income recognized by the Optionee from the early
disposition by payment in cash or out of the current earnings paid to the
Optionee.
12. Repurchase on Termination.
(a) Definitions. Except as otherwise defined in this Agreement, for
purposes of this Section 12:
i) "Affiliate" shall mean another company controlling, controlled
by or under common control with the Company.
ii) "Repurchase Date" shall mean the date on which the Company
exercises a Repurchase Option.
iii) "Repurchase Option" shall mean the Company's right in
accordance with Section 12 of this Agreement to repurchase Shares bought under
this Agreement.
iv) "Termination Date" shall mean the date on which Optionee's
employment or consulting service contract with the Company is terminated.
(b) Repurchase Rights. If the Optionee's employment or consulting
service contract with the Company or a subsidiary of the Company is terminated
for any reason other than death or total disability, the Shares issued or
issuable to Optionee under this Agreement, may, at the sole option and
discretion of the Company, be repurchased, either in whole or in part, by the
Company within 90 days after the Termination Date in accordance with this
Agreement.
(c) Repurchase Price. The repurchase price per Share repurchased in
accordance with this Section 12 shall be the original per Share purchase price
set forth in the accompanying Notice of Stock Option Grant. Such repurchase
price shall be paid in cash in a lump sum on the Repurchase Date. The Company's
right to repurchase any and all vested Shares under the Option, whether
exercised or not, at such original per share purchase price, lapses at the rate
of 20% per year (from the date the Option is granted) of the total number of
Shares granted. To the extent the right to repurchase any Shares issued or
issuable under this Agreement at the original per Share purchase price has
lapsed, the repurchase price shall be the fair market value of the Shares on the
Termination Date. Thus, for example, if the Company grants an Option for 400
shares vesting over 4 years from the date of grant, and after one year 100
shares have vested, the Company's repurchase right is as follows: (i) 20% of the
400 total shares granted will be repurchasable at their fair market value on the
Termination Date, and (ii) the remaining 80% may be repurchased at the original
per share purchase price.
(d) Death or Disability. There shall be no Repurchase Right upon the
Optionee's death or total disability.
(e) Repurchase Right as to Other Shares. The Repurchase Right of the
Company shall apply as well to all shares or other securities issued in
connection with any stock split, reverse stock split, stock dividend,
recapitalization, reclassification, spin-off, split-off, merger, consolidation
or reorganization ("Other Shares") but such right shall expire on the earliest
to occur of the following: (i) the date on which shares of the same class of
stock as such Other Shares first become publicly traded; or (ii) the occurrence
of any event or transaction upon which the Option terminates.
VACU-DRY COMPANY,
a California corporation
By:___________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 1996 STOCK OPTION PLAN
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
HIS EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this option subject to all of the
terms and provisions thereof. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.
Dated:_______________ _________________________
[Optionee Signature]
