EXHIBIT 4.5
PARAGON TRADE BRANDS, INC.
STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement"), effective as of
__________, is made by and between Paragon Trade Brands Inc., a Delaware
corporation (the "Company"), and (the "Optionee").
WHEREAS, the Company has adopted the Company's Stock Option
Plan (the "Plan"), pursuant to which options may be granted to purchase shares
of the Company's Common Stock;
WHEREAS, the Company desires to grant to the Optionee a
Nonqualified Stock Option to purchase the number of shares of the Company's
Common Stock provided for herein;
NOW, THEREFORE, in consideration of the recitals and the
mutual agreements herein contained, the parties hereto agree as follows:
1. GRANT OF OPTION.
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(a) The Company hereby grants to the Optionee an Option
to purchase shares of Common Stock (such shares, the "Option Shares") on the
terms and conditions set forth in this Agreement and as otherwise provided in
the Plan, of which ten percent (10%) shall be "Service-Based Options" and the
remaining ninety percent (90%) shall be "Performance-Based Options. The Options
shall expire ten (10) years from the Grant Date (the "Expiration Date"), unless
earlier terminated pursuant to the terms and conditions of this Section 5. This
Option is not intended to be treated as an Incentive Stock Option.
(b) INCORPORATION BY REFERENCE, ETC. The provisions of
the Plan are hereby incorporated herein by reference. Except as otherwise
expressly set forth herein, this Agreement shall be construed in accordance with
the provisions of the Plan and any capitalized terms not otherwise defined in
this Agreement shall have the definitions set forth in the Plan. The Committee
shall have final authority to interpret and construe the Plan and this Agreement
and to make any and all determinations under them, and its decision shall be
binding and conclusive upon the Optionee and his legal representative in respect
of any questions arising under the Plan or this Agreement.
2. TERMS AND CONDITIONS.
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(a) PURCHASE PRICE. The price at which the Optionee shall
be entitled to purchase shares of Common Stock upon the exercise of all or any
portion of this Option shall be $___ per share.
(b) EXPIRATION DATE. The Option shall expire on the tenth
anniversary of the date of this Agreement.
(c) EXERCISABILITY AND VESTING OF OPTION. An Option shall
be exercisable under the terms of this Agreement to the extent that the Option
has vested pursuant to the provisions of this Section 2(c).
(i) SERVICE-BASED OPTIONS. Subject to the terms
and conditions set forth in this Agreement and subject to Optionee's
continued employment with the Company, twenty percent (20%) of the
Service-Based Options shall vest on each of the first five (5)
anniversaries of Optionee's date of hire as recorded in the personnel
records of the Company.
(ii) PERFORMANCE-BASED OPTIONS. Subject to the
terms and conditions set forth in this Section 5, one hundred percent
(100%) of the Performance-Based Options shall vest seven (7) years
after the Grant Date if Optionee is employed by the Company as of such
date. Notwithstanding the foregoing, Optionee shall acquire a vested
right to exercise twenty percent (20%) of the Performance-Based Options
at the end of each of the fiscal years of the Company listed on the
table below ending on or after the Grant Date if the actual cash flow
of the Company in respect of such fiscal year equals or exceeds the
Target Cash Flow of the Company for such fiscal year:
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FISCAL YEAR TARGET CASH FLOW
(IN MILLIONS)
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2001 $22.3
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2002 36.8
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2003 50.3
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2004 55.0
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2005 60.0
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Any Performance-Based Options not having vested in pursuant to
the previous paragraph for a particular fiscal year shall become
vested, if at all, as determined by the Board in its sole discretion.
Notwithstanding the foregoing, the Board, in its sole
discretion, may provide an opportunity for the Optionee to vest in any
Performance-Based Options which have not vested pursuant to the
previous paragraph by setting new performance goals with respect to a
subsequent period or may otherwise vest such Performance-Based Options
in its discretion.
For purposes of this Agreement, "Cash Flow" shall mean EBITDA
less capital expenditures, less increases in working capital, plus
interest and dividends received from joint ventures, less increased
investments in joint ventures. In addition the Target Cash Flows shall
be equitably adjusted by the Board in order to reflect the impact of
any acquisition, disposition, other similar transaction or
extraordinary event.
(iii) VESTING IN CONNECTION WITH SALE. Except as
may otherwise be provided herein, this Option shall become fully vested
upon the sale by Wellspring Capital Management or any of its affiliates
(collectively, "Wellspring") of substantially all Company shares held
by Wellspring.
(d) METHOD OF EXERCISE. This Option may be exercised only
by written notice in the form attached hereto (or a successor form provided by
the Committee) delivered in person or by mail in accordance with Section 3(a)
hereof and accompanied by payment therefor and an executed copy of the Stock
Purchase Agreement attached hereto. The purchase price of the shares of Common
Stock shall be paid to the Company (i) by certified check, (ii) if shares of
Common stock registered under the Securities Act of 1933, by a "cashless
exercise" procedure if and in the manner approved by the Committee, or (iii) by
any other method approved by the Committee in writing. If requested by the
Committee, the Optionee shall deliver this Agreement evidencing the Option to
the Secretary of the Company who shall endorse thereon a notation of such
exercise and return such Agreement to the Optionee. It shall be a condition of
exercise that the Optionee execute a stockholder's agreement in a form
reasonably determined by the Company.
(e) EXERCISE UPON DEATH OR TERMINATION OF EMPLOYMENT. In
the event that the Optionee ceases to be employed by the Company, the Option
held by the Optionee (to the extent then outstanding) shall terminate as
follows:
(i) In the event of the termination of the
Optionee's employment (a) due to his death or (b) due to his
"Disability," the Option (to the extent vested at the time of the
Optionee's termination of employment) shall be exercisable for a period
of one year following such termination of employment, and shall
thereafter terminate. For purposes of this Agreement "Disability" shall
have the meaning set forth in any existing employment, consulting or
other agreement between the
Optionee and the Company, or in the absence of such an agreement, as
set forth in the Plan.
(ii) In the event of the termination of the
Optionee's employment by the Company for "Cause" shall terminate on the
date of the Optionee's termination of employment.
(iii) In the event of the termination of the
Optionee's employment by the Company other than for Cause or by the
Optionee for any reason (unless otherwise provided for in an employment
agreement between the Optionee and the Company), the Option (to the
extent vested at the time of the Optionee's termination of employment)
shall be exercisable for a period of 30 days following such termination
of employment, and shall thereafter terminate.
(iv) The non-exercisable portion of the Option
shall terminate immediately upon the termination of the Optionee's
employment for any reason.
(f) NONTRANSFERABILITY. This Option shall not be
transferable by the Optionee other than by will or the laws of descent and
distribution.
(g) RIGHTS AS STOCKHOLDER. The Optionee shall not be
deemed for any purpose to be the owner of any shares of Common Stock subject to
this Option unless, until and to the extent that (i) this Option shall have been
exercised pursuant to its terms, (ii) the Company shall have issued and
delivered to the Optionee the Option Shares, and (iii) the Optionee's name shall
have been entered as a stockholder of record with respect to such Option Shares
on the books of the Company.
(h) WITHHOLDING TAXES. Prior to the delivery of a
certificate or certificates representing the Option Shares, the Optionee must
pay in the form of a certified check to the Company any such additional amount
as the Company determines that it is required to withhold under applicable
federal, state or local tax laws in respect of the exercise or the transfer of
Option Shares; provided that the Committee may, in its sole discretion, allow
such withholding obligation to be satisfied by any other method described in the
Plan.
3. MISCELLANEOUS.
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(a) NOTICES. Any and all notices, designations, consents,
offers, acceptances and any other communications provided for herein shall be
given in writing and shall be delivered either personally or by registered or
certified mail, postage prepaid, which shall be addressed, in the case of the
Company to the Secretary of the Company at the principal office of the Company
and, in the case of the Optionee, to Optionee's address appearing on the books
of the Company
or to Optionee's residence or to such other address as may be designated in
writing by the Optionee.
(b) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan
or in this Agreement shall confer upon the Optionee any right to continue in the
employ of the Company or shall interfere with or restrict in any way the right
of the Company, which are hereby expressly reserved, to remove, terminate or
discharge the Optionee at any time for any reason whatsoever, with or without
cause.
(c) BOUND BY PLAN. By signing this Agreement, the
Optionee acknowledges that he has received a copy of the Plan and has had an
opportunity to review the Plan and agrees to be bound by all the terms and
provisions of the Plan.
(d) SUCCESSORS. The terms of this Agreement shall be
binding upon and inure to the benefit of the Company, its successors and
assigns, and of the Optionee and the beneficiaries, executors, administrators,
heirs and successors of the Optionee.
(e) INVALID PROVISION. The invalidity or unenforceability
of any particular provision hereof shall not affect the other provisions hereof,
and this Agreement shall be construed in all respects as if such invalid or
unenforceable provision had been omitted.
(f) MODIFICATIONS. No change, modification or waiver of
any provision of this Agreement shall be valid unless the same be in writing and
signed by the parties hereto.
(g) ENTIRE AGREEMENT. This Agreement and the Plan contain
the entire agreement and understanding of the parties hereto with respect to the
subject matter contained herein and therein and supersede all prior
communications, representations and negotiations in respect thereto.
(h) GOVERNING LAW. This Agreement and the rights of the
Optionee hereunder shall be construed and determined in accordance with the laws
of the State of New York.
(i) HEADINGS. The headings of the Sections hereof are
provided for convenience only and are not to serve as a basis for interpretation
or construction, and shall not constitute a part, of this Agreement.
(j) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto effective as of _______.
PARAGON TRADE BRANDS, INC.
By:
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Its:
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Signature:
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Name:
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Address:
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