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EXHIBIT 10.26
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT made as of August 11, 1999, between Apparel
Ventures, Inc., a Delaware corporation (the "Company"), and Xxxxx Xxxxxx
("Employee").
Reference is made to the Stock Option Agreements made as of August 11,
1999, between the Company and Xxxxxx Xxxxxxx and Xxxxxxx Xxxxxxxxxx (the
"Company Options").
To afford Employee the opportunity to purchase shares of common stock of
the Company ("Stock"), and in consideration of the mutual agreements and other
matters set forth herein, the Company and Employee hereby agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to Employee the
right and option ("Option") to purchase all or any part of an aggregate of fifty
thousand (50,000) shares of Class A Common Stock, par value $0.01 (the "Stock"),
on the terms and conditions set forth herein.
2.
3. Purchase Price. The purchase price of Stock purchased pursuant to the
exercise of this Option shall be $0.01 per share.
4.
5. Exercise of Option. Subject to the earlier expiration of this Option
as herein provided, this Option will vest and may be exercised, by written
notice to the Company at its principal executive office (located at 000 Xxxx
Xxxxxxxxxx, Xxxxxxx, Xxxxxxxxxx 90248) addressed to the attention of its Chief
Executive Officer, immediately upon or at any time and from time to time after
the third anniversary of the date of grant hereof.
6.
7. This Option is not transferable by Employee otherwise than by will or
the laws of the descent and distribution, and may be exercised only during
Employee's lifetime and while Employee remains an employee of the Company or a
subsidiary of the Company and will terminate, expire and cease to be exercisable
upon Employee's termination of employment with the Company or a subsidiary of
the Company for any reason, including involuntary and voluntary termination,
permanent disability or death; provided, however, that this Option may be
exercised by Employee (or Employee's estate or the person who acquires this
Option by will or the laws of descent and distribution or otherwise by reason of
the death of Employee) at any time during the period of 90 days following such
termination, but only as to the number of vested shares Employee was entitled to
purchase hereunder as of the date of such termination.
8.
9. This Option shall not be exercisable in any event after the expiration
of ten years from the date of grant hereof. Except as provided in Paragraph 4,
the purchase price of shares as to which this Option is exercised shall be paid
in full at the time of exercise (a) in cash (including check, bank draft or
money order payable to the order of the Company), (b) by delivering to the
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Company shares of Stock having a fair market value equal to the purchase price,
or (c) any combination of cash or Stock. No fraction of a share of Stock shall
be issued by the Company upon exercise of an Option or accepted by the Company
in payment of the purchase price thereof; rather, Employee shall provide a cash
payment for such amount as is necessary to effect the issuance and acceptance of
only whole shares of Stock. Unless and until a certificate or certificates
representing such shares shall have been issued by the Company to Employee,
Employee (or the person permitted to exercise this Option in the event of
Employee's death) shall not be or have any of the rights or privileges of a
shareholder of the Company with respect to shares acquirable upon an exercise of
this Option, except as provided for in the Stockholders Agreement, dated as of
August 10, 1999 between the Company and the persons named therein (the
"Stockholders Agreement").
10.
11. In the event of Employee's termination of employment with the Company
for any reason, including involuntary and voluntary termination, permanent
disability (as determined by the Company's regular physician) or death, then
this Option shall terminate, but only as to the number of shares that had not
vested or that Employee was not entitled to purchase pursuant to this paragraph
3 as of the date of such termination, death or permanent disability; provided,
however, that the vested portion of this Option may be exercised by Employee (or
Employee's estate or the person who acquires this Option by will or the laws of
descent and distribution or otherwise by reason of the death of Employee) at any
time during the period of 90 days following such termination. If the Company
recapitalizes, reclassifies its capital stock, or otherwise changes its capital
structure (a "recapitalization"), the number and class of shares of Stock
covered by the Option theretofore granted shall be adjusted so that the Option
shall thereafter cover the number and class of shares of stock and securities to
which the Employee would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to the recapitalization, the Employee had
been the holder of record of the number of shares of Stock then covered by such
Option. If (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity), (ii) the Company sells, leases or exchanges all or substantially all of
its assets to any other person or entity, (iii) the Company is to be dissolved
and liquidated, or (iv) any person or entity, including a "group" as
contemplated by Section 13(b)(3) of Securities Exchange Act of 1934, as amended,
acquires or gains ownership or control (including, without limitation, power to
vote) of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power) no later than (a) ten days after the approval by the
shareholders of the Company of such merger, consolidation, reorganization, sale,
lease or exchange of assets, dissolution or liquidation or (b) thirty days after
a change of control of the type described in Clause (iv), the exercise term of
the Option shall accelerate, any Stock that had not vested shall immediately
vest and this Option shall become immediately exercisable in full.
12.
13. WITHHOLDING OF TAX. TO THE EXTENT THAT THE EXERCISE OF THIS OPTION OR
THE DISPOSITION OF SHARES OF STOCK ACQUIRED BY EXERCISE OF THIS OPTION RESULTS
IN COMPENSATION INCOME TO EMPLOYEE FOR FEDERAL OR STATE INCOME TAX PURPOSES,
EMPLOYEE SHALL DELIVER TO THE COMPANY AT THE TIME OF SUCH EXERCISE OR
DISPOSITION SUCH AMOUNT OF MONEY OR SHARES OF STOCK AS THE COMPANY MAY REQUIRE
TO MEET ITS OBLIGATION UNDER APPLICABLE TAX LAWS OR
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REGULATIONS, AND, IF EMPLOYEE FAILS TO DO SO, THE COMPANY IS AUTHORIZED TO
WITHHOLD FROM ANY CASH OR STOCK REMUNERATION THEN OR THEREAFTER PAYABLE TO
EMPLOYEE ANY TAX REQUIRED TO BE WITHHELD BY REASON OF SUCH RESULTING
COMPENSATION INCOME. UPON AN EXERCISE OF THIS OPTION, THE COMPANY IS FURTHER
AUTHORIZED IN ITS DISCRETION TO SATISFY ANY SUCH WITHHOLDING
REQUIREMENT OUT OF ANY CASH OR SHARES OF STOCK DISTRIBUTABLE TO EMPLOYEE UPON
SUCH EXERCISE.
14.
15. Status of Stock. Employee understands that at the time of the execution
of this Agreement the shares of Stock to be issued upon exercise of this Option
have not been registered under the Securities Act of 1933, as amended (the
"Act"), or any state securities law, and that the Company does not currently
intend to effect any such registration. Until the shares of Stock acquirable
upon the exercise of the Option have been registered for issuance under the Act,
the Company will not issue such shares unless the holder of the Option provides
the Company with a written opinion of legal counsel, who shall be satisfactory
to the Company, addressed to the Company and satisfactory in form and substance
to the Company's counsel, to the effect that the proposed issuance of such
shares to such Option holder may be made without registration under the Act. In
the event exemption from registration under the Act is available upon an
exercise of this Option, Employee (or the person permitted to exercise this
Option in the event of Employee's death), if requested by the Company to do so,
will execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with applicable
securities laws.
16.
17. Employee agrees that the shares of Stock which Employee may acquire by
exercising this Option shall be acquired for investment without a view to
distribution, within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged or hypothecated except as provided for in the Stockholders
Agreement. Employee also agrees that the shares of Stock which Employee may
acquire by exercising this Option will not be sold or otherwise disposed of in
any manner which would constitute a violation of any applicable securities laws,
whether federal or state.
18.
19. In addition, Employee agrees (i) that the certificates representing the
shares of Stock purchased under this Option may bear such legend or legends as
the Company deems appropriate and as provided for in the Stockholders Agreement
in order to assure compliance with applicable securities laws or any
stockholders agreements in effect, (ii) that the Company may refuse to register
the transfer of the shares of Stock purchased under this Option on the stock
transfer records of the Company if such proposed transfer would in the opinion
of counsel satisfactory to the Company constitute a violation of any applicable
securities law and (iii) that the Company may give related instructions to its
transfer agent, if any, to stop registration of the transfer of the shares of
Stock purchased under this Option.
20.
21. Employment Relationship. For purposes of this Agreement, Employee shall
be considered to be in the employment of the Company as long as Employee remains
an employee of either the Company, or a subsidiary corporation of the Company.
Any question as to whether and when there has been a termination of such
employment, and the cause of such termination,
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shall be determined by the Board of Directors of the Company, and its
determination shall be final.
22.
23. Recapitalization or Reorganization. This Agreement is subject to all
the terms and conditions set forth in the Company's Stockholders Agreement and
in the event that a conflict exists between this Agreement and the Stockholders
Agreement, the terms and conditions of the Stockholders Agreement shall
continue.
24. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Employee.
25.
26. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
27.
28. Amendments. This Agreement may not be amended or modified without
the prior written approval of the Company and the Employee.
29.
30. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its President thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.
31.
32. APPAREL VENTURES, INC.
33.
34.
35.
36. By: Xxxx X. Xxxxxx
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37. Name: Xxxx X. Xxxxxx
38. Title:Vice President
39.
40.
41. EMPLOYEE:
42.
43.
44. By: /s/ Xxxxx Xxxxxx
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By: Xxxxx Xxxxxx
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