TRUE RELIGION APPAREL, INC. STOCK ISSUANCE AGREEMENT
EXHIBIT 99.3
TRUE RELIGION APPAREL, INC.
THIS
STOCK ISSUANCE AGREEMENT is made as of
. 20 (the “Issuance Date”), by and
between True Religion Apparel, Inc., a Delaware corporation, and ,
a Participant.
All capitalized terms in this Agreement shall have the meaning assigned to them in this
Agreement or in the attached Appendix.
1. PURCHASE. Participant hereby purchases ___shares of Common Stock (the “Purchased
Shares”) pursuant to the provisions of the Stock Issuance Program at the purchase price of $ per
share (the “Purchase Price”).
2. PAYMENT. Concurrently with the delivery of this Agreement to the Corporation, Participant
shall pay the Purchase Price for the Purchased Shares in cash or check payable to the Corporation
and shall deliver a duly-executed blank Assignment Separate from Certificate with respect to the
Purchased Shares.
3. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises the Repurchase Right,
Participant (or any successor in interest) shall have all the rights of a stockholder (including
voting, dividend and liquidation rights) with respect to the Purchased Shares, subject, however, to
the transfer restrictions of this Agreement.
4. ESCROW. The Corporation shall have the right to hold the Purchased Shares in escrow until
those shares have vested in accordance with the Vesting Schedule.
5. COMPLIANCE WITH LAW. Under no circumstances shall shares of Common Stock or other assets
be issued or delivered to Participant pursuant to the provisions of this Agreement unless, in the
opinion of counsel for the Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable listing requirements
of the Nasdaq National Market or any stock exchange on which the Common Stock is at the time listed
for trading and all other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
6. RESTRICTION ON TRANSFER. Except for any Permitted Transfer, Participant shall not
transfer, assign, encumber or otherwise dispose of any of the Purchased Shares which are subject to
the Repurchase Right.
7. RESTRICTIVE LEGEND. The stock certificate for the Purchased Shares shall be endorsed with
the following restrictive legend:
“The shares represented by this certificate are unvested and subject to certain
repurchase rights granted to the Corporation and accordingly may not be sold,
assigned, transferred, encumbered, or in any manner disposed of except in conformity
with the terms of a written agreement dated [Issuance Date to be
inserted on legend] between the Corporation and the registered holder of the shares
(or the predecessor in interest to the shares). A copy of such agreement is
maintained at the Corporation’s principal corporate offices.”
8. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation) to whom the Purchased
Shares are transferred by means of a Permitted Transfer must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Corporation that such person is bound by
the provisions of this Agreement and that the transferred shares are subject to the Repurchase
Right to the same extent such shares would be so subject if retained by Participant.
9. GRANT. The Corporation is hereby granted the right (the “Repurchase Right”), exercisable
at any time during the ninety (90)-day period following the date Participant ceases for any reason
to remain in Service, to repurchase at the Purchase Price all or any portion of the Purchased
Shares in which Participant is not, at the time of his or her cessation of Service, vested in
accordance with the Vesting Schedule or the special vesting acceleration provisions of Paragraph 13
of this Agreement (such shares to be hereinafter referred to as the “Unvested Shares”).
10. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be exercisable by written
notice delivered to each Owner of the Unvested Shares prior to the expiration of the ninety
(90)-day exercise period. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to be not more than
thirty (30) days after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Corporation on or before the close of business on the
date specified for the repurchase. Concurrently with the receipt of such stock certificates, the
Corporation shall pay to Owner, in cash or cash equivalent (including the cancellation of any
purchase-money indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares to be repurchased from Owner.
11. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall terminate with respect to
any Unvested Shares for which it is not timely exercised under Paragraph 10. In addition, the
Repurchase Right shall terminate and cease to be exercisable with respect to any and all Purchased
Shares in which Participant vests in accordance with the following Vesting Schedule:
(a) Upon Participant’s completion of one (1) year of Service measured from the Issuance Date,
Participant shall acquire a vested interest in, and the Repurchase Right shall lapse with respect
to, twenty-five percent (25%) of the Purchased Shares.
(b) Participant shall acquire a vested interest in, and the Repurchase Right shall lapse with
respect to, the remaining Purchased Shares in a series of thirty six (36) successive equal monthly
installments upon Participant’s completion of each additional month of Service over the thirty-six
(36)-month period measured from the initial vesting date under subparagraph (a) above.
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12. RECAPITALIZATION. Any new, substituted or additional securities or other property
(including cash paid other than as a regular cash dividend) which is by reason of any
Recapitalization distributed with respect to the Purchased Shares shall be immediately subject to
the Repurchase Right and any escrow requirements hereunder, but only to the extent the Purchased
Shares are at the time covered by such right or escrow requirements. Appropriate adjustments to
reflect such distribution shall be made to the number and/or class of securities subject to this
Agreement and to the price per share to be paid upon the exercise of the Repurchase Right in order
to reflect the effect of any such Recapitalization upon the Corporation’s capital structure;
provided, however, that the aggregate purchase price shall remain the same.
13. CHANGE IN CONTROL.
(a) Immediately prior to the consummation of any Change in Control, the Repurchase Right shall
automatically lapse in its entirety and the Purchased Shares shall vest in full, except to the
extent the Repurchase Right is to continue in full force and effect pursuant to the terms of the
Change in Control transaction.
(b) To the extent the Repurchase Right remains in force and effect following a Change in
Control, such right shall be assigned to any successor corporation (or parent thereof) in the
Change in Control transaction and shall apply to the new capital stock or other property (including
any cash payments) received in exchange for the Purchased Shares in consummation of the Change in
Control, but only to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon exercise of the
Repurchase Right to reflect the effect of the Change in Control upon the Corporation’s capital
structure; provided, however, that the aggregate purchase price shall remain the same. The new
capital stock or other property (including cash payments) issued or distributed with respect to the
Purchased Shares in consummation of the Change in Control shall immediately be deposited in escrow
with the Corporation (or the successor entity) and shall not be released from escrow until
Participant vests in such securities or other property in accordance with the same Vesting Schedule
in effect for the Purchased Shares.
(c) The Repurchase Right may also be subject to termination in whole or in part on an
accelerated basis, and the Purchased Shares subject to immediate vesting, in accordance with the
terms of any special Addendum attached to this Agreement.
14. SECTION 83(b) ELECTION. Under Code Section 83, the excess of the fair market value of the
Purchased Shares on the date any forfeiture restrictions applicable to such shares lapse over the
Purchase Price paid for such shares will be reportable as ordinary income on the lapse date. For
this purpose, the term “forfeiture restrictions” includes the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase Right. Participant may elect under Code
Section 83(b) to be taxed at the time the Purchased Shares are acquired, rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions. Such election must be
filed with the Internal Revenue Service within thirty (30) days after the date of this Agreement.
Even if the fair market value of the Purchased Shares on the date of this Agreement equals the
Purchase Price paid (and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. PARTICIPANT SHOULD CONSULT
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WITH HIS OR HER TAX ADVISOR TO DETERMINE THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE
SECTION 83(b) ELECTION. THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT I HERETO.
PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY
PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE RESTRICTIONS LAPSE.
15. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT’S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION’S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN
IF PARTICIPANT REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER
BEHALF.
16. ASSIGNMENT. The Corporation may assign the Repurchase Right to any person or entity
selected by the Board, including (without limitation) one or more stockholders of the Corporation.
17. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in the Plan shall confer
upon Participant any right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Participant) or of Participant, which rights are hereby expressly reserved
by each, to terminate Participant’s Service at any time for any reason, with or without cause.
18. NOTICES. Any notice required to be given under this Agreement shall be in writing and
shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, registered or
certified, postage prepaid and properly addressed to the party entitled to such notice at the
address last provided by the Optionee to the Company or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph to all other parties to this
Agreement.
19. NO WAIVER. The failure of the Corporation in any instance to exercise the Repurchase
Right shall not constitute a waiver of any other repurchase rights that may subsequently arise
under the provisions of this Agreement or any other agreement between the Corporation and
Participant. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver
of any other or subsequent breach or condition, whether of like or different nature.
20. CANCELLATION OF SHARES. If the Corporation shall make available, at the time and place
and in the amount and form provided in this Agreement, the consideration for the Purchased Shares
to be repurchased in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such consideration in accordance
with this Agreement). Such shares shall be deemed purchased in accordance with the applicable
provisions hereof, and the Corporation shall be deemed the owner and holder of such shares, whether
or not the certificates therefor have been delivered as required by this Agreement.
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21. PARTICIPANT UNDERTAKING. Participant hereby agrees to take whatever additional action and
execute whatever additional documents the Corporation may deem necessary or advisable in order to
carry out or effect one or more of the obligations or restrictions imposed on either Participant or
the Purchased Shares pursuant to the provisions of this Agreement.
22. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire contract between the
parties hereto with regard to the subject matter hereof. This Agreement is made pursuant to the
provisions of the Plan and shall in all respects be construed in conformity with the terms of the
Plan. Participant hereby acknowledges receipt of a copy of the Plan.
23. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California without resort to that State’s conflict-of-laws rules.
24. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the same instrument.
25. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to the benefit of,
and be binding upon, the Corporation and its successors and assigns and upon Participant,
Participant’s assigns and the legal representatives, heirs and legatees of Participant’s estate,
whether or not any such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
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IN WITNESS WHEREOF, True Religion Apparel, Inc. and Participant have caused this Agreement to
be executed as of the Issuance Date.
| , | 20___ | |||||
Date |
||||||
| PARTICIPANT | ||||||
| Address: | ||||||
| Print name in exact manner it is to appear on the stock certificate: | ||||||
| Address to which certificate is to be sent, if different from address above: | ||||||
| Social Security Number: | ||||||
| Employee Number | ||||||
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
B. BOARD shall mean the Corporation’s Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the Corporation effected
through any of the following transactions:
(i) a stockholder-approved merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities
are transferred to a person or persons not related to the persons holding those securities
immediately prior to such transaction. For the purpose of this subsection, the persons are
“related” if one of them owns, directly or indirectly, at least fifty percent (50%) of the voting
capital stock of the other or a third person owns, directly or indirectly, at least fifty percent
(50%) of the voting capital stock of each of them;
(ii) a sale, transfer or other disposition of all or substantially all of the Corporation’s
assets to one or more persons that are not related, as defined in subsection 1 above, to the
Company immediately prior to the sale or transfer; or
(iii) the acquisition, directly or indirectly by any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership (within the meaning of Rule
13d-3 of the 0000 Xxx) of securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation’s stockholders which the Board recommends such stockholders
accept, other than a group of two or more persons not acting in concert for the purpose of
acquiring, holding or disposing of such stock. The acquisition of additional stock by any person
who immediately prior to such acquisition already is the beneficial owner of more than fifty
percent (50%) of the capital stock of the Company entitled to vote in the election of directors is
not a Change of Control.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation’s common stock.
F. CORPORATION shall mean True Religion Apparel, Inc., a Delaware corporation.
G. ISSUANCE DATE shall mean the effective date of the issuance of shares of Common Stock to
Participant pursuant to this Agreement.
H. OWNER shall mean Participant and all subsequent holders of the Purchased Shares who derive
their chain of ownership through a Permitted Transfer from Participant.
I. PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.
J. PARTICIPANT shall mean the person to whom the Purchased Shares are issued under the Stock
Issuance Program.
K. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Purchased Shares, provided
and only if Participant obtains the Corporation’s prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to Participant’s will or the laws of
intestate succession following Participant’s death or (iii) a transfer to the Corporation in pledge
as security for any purchase-money indebtedness incurred by Participant in connection with the
acquisition of the Purchased Shares.
L. PLAN shall mean the True Religion Apparel, Inc. 2005 Stock Incentive Plan.
M. PLAN ADMINISTRATOR shall mean either the Board or a committee of Board acting in its
administrative capacity under the Plan.
N. PURCHASE PRICE shall have the meaning assigned to such term in Paragraph 1.
O. PURCHASED SHARES shall have the meaning assigned to such term in Paragraph 1.
P. RECAPITALIZATION shall mean any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common Stock as a class
without the Corporation’s receipt of consideration.
Q. REPURCHASE RIGHT shall mean the right granted to the Corporation in accordance with Article
C.
R. SERVICE shall mean Participant’s performance of services for the Corporation (or any Parent
or Subsidiary) in the capacity of an employee, subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of performance, a non-employee
member of the board of directors or a consultant or independent advisor.
S. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program under the Plan.
T. SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other than the last
corporation) in the unbroken chain owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
U. VESTING SCHEDULE shall mean the vesting schedule specified in Paragraph 11, subject to the
special vesting acceleration provisions of Paragraph 13.
V. UNVESTED SHARES shall have the meaning assigned to such term in Paragraph 9.
EXHIBIT I
SECTION 83(B) ELECTION
This statement is made under Section 83(b) of the Internal Revenue Code of 1986, as amended,
pursuant to Treasury Regulations Section 1.83-2.
| (1) | The taxpayer who performed the services is: | |||||
| Name: | ||||||
| Address: | ||||||
| Social Security No.: | ||||||
(2)
|
The property with respect to which the election is made is ___shares of the common stock of True Religion Apparel, Inc. | |
(3)
|
The property was transferred on ___, 20___. | |
(4)
|
The taxable year for which the election is made is the calendar year 20___. | |
(5)
|
The property is subject to a repurchase right pursuant to which the issuer has the right to acquire the property at the original purchase price if for any reason taxpayer’s service with the issuer is terminated. The issuer’s repurchase right lapses in a series of installments over the period ending on ___, 20___. | |
(6)
|
The fair market value of such property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $ per share. | |
(7)
|
The amount paid for such property is $ per share. | |
(8)
|
A copy of this statement was furnished to True Religion Apparel, Inc., for whom taxpayer rendered the services underlying the transfer of such property. | |
(9)
|
This statement is executed on ___, 20___. |
Signature of Spouse (if any)
|
Signature of Taxpayer |
Within 30 days after the date of purchase, this election must be filed with the Internal
Revenue Service Center where the Purchaser files his or her federal income tax returns. The filing
should be made by registered or certified mail, return receipt requested. The Purchaser must (a)
file a copy of the completed form with his or her federal tax return for the current tax year and
(b) deliver an additional copy to the Company.
