X.X. XXXXX ARTS & CRAFTS, INC.
INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT made _____________, 1997, between X.X. XXXXX ARTS
& CRAFTS, INC. (the "Company"), a Pennsylvania corporation having
a principal place of business in Xxxxxxxxx, New Jersey and
____________________ (the "Participant").
WHEREAS, the Company desires to grant to the Participant an Option to
purchase shares of its common stock, no par value (the "Shares") under and for
the purposes of the 1997 Employee, Director and Consultant Stock Option Plan of
the Company (the "Plan");
WHEREAS, the Company and the Participant understand and agree that any
terms used and not defined herein have the same meanings as in the Plan;
WHEREAS, the Company and the Participant each intend that the Option
granted herein shall be a Incentive Stock Option ("ISO").
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto
agree as follows:
1. GRANT OF OPTION.
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The Company hereby irrevocably grants to the Participant the right and
option to purchase all or any part of an aggregate of ___________ Shares, on the
terms and conditions and subject to all the limitations set forth herein and in
the Plan, which is incorporated herein by reference. The Participant
acknowledges receipt of a copy of the Plan.
2. PURCHASE PRICE.
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The purchase price of the Shares covered by the Option shall be $9.00
per Share, subject to adjustment, as provided in the Plan, in the event of a
stock split, reverse stock split or other events affecting the holders of
Shares. Payment shall be made in accordance with Paragraph 7 of the Plan.
3. EXERCISE OF OPTION.
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Subject to the terms and conditions set forth in this Agreement and the
Plan, the Option granted hereby shall be exercisable as follows:
On the first anniversary of the up to 1/3 of the Shares
date of this Agreement
On the second anniversary of the an additional 1/3 of the
date of this Agreement Shares
On the third anniversary of the an additional 1/3 of the
date of this Agreement Shares
The foregoing rights are cumulative and are subject to the other terms
and conditions of this Agreement and the Plan.
Should the Company (i) merge or consolidate with another corporation
under circumstances where the Company is not the surviving corporation, (ii)
sell all or substantially all of its assets, (iii) liquidate or dissolve, or
(iv) register the transfer of eighty percent (80%) or more of its outstanding
Common Stock to persons who were not owners (or considered to be owners pursuant
to Section 318 of the Code) of Common Stock immediately prior to such transfer,
and the Participant continues his/her employment with the Company, or its
successor, for a period of not less than twelve (12) months from the date of the
merger, sale or transfer then 100% of such Option not yet vested shall vest at
the end of such 12-month term, and the holder of this Option shall have the
right to exercise any and all of the Option shares, unless this Option has
otherwise expired or been terminated pursuant to its terms or the terms hereof.
At any time after the Company is involved in a merger, consolidation,
sale or transfer as described above, and
a) the Participant shall fail to be vested with power and authority
analogous to the Participant's title and/or office prior to the merger,
consolidation, sale or transfer, or
b) the Participant shall lose any significant duties or
responsibilities attending such office, or
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c) if there shall occur a reduction in the Participant's base
compensation, or
d) the Participant's employment with the Company, or its successor, is
terminated without cause, then 100% of such option not yet vested shall
immediately vest and the holder of this Option shall have the right, immediately
prior to the effectiveness of consummation of such event, to exercise any and
all of the Option shares, unless this option has otherwise expired or been
terminated pursuant to its terms or the terms hereof.
4. TERM OF OPTION.
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The Option shall terminate ten (10) years from the date of this
Agreement, but shall be subject to earlier termination as provided herein or in
the Plan.
If the Participant ceases to be an employee, director or consultant of
the Company or of an Affiliate (for any reason other than death or Disability or
termination for "cause" as defined in the Plan), the Option may be exercised
within ninety (90) days after the date the Participant ceases to be an employee,
director or consultant of the Company or an Affiliate, or within the originally
prescribed term of the Option, whichever is earlier, but may not be exercised
thereafter. In such event, the Option shall be exercisable only to the extent
that the right to purchase Shares under this Agreement or the Plan has accrued
and is in effect at the date of such cessation of employment, consultancy or
directorship. The provisions of this paragraph shall apply if the Participant
subsequently becomes disabled or dies after ceasing to be an employee,
consultant or director, provided, however, in the case of the Participant's
death within three (3) months after ceasing to be an employee, consultant or
director, the Option may be exercised by the Participant's Survivors within one
(1) year after the date of the Participant's death but in no event after the
date of expiration of the term of the Option.
In the event the Participant's employment, directorship or consultancy
is terminated for "cause" (as defined in the Plan), the Participant's right to
exercise any unexercised portion of this Option shall cease forthwith, and this
Option shall thereupon terminate. Notwithstanding anything herein to the
contrary, if subsequent to the Participant's termination as an
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employee, director or consultant but prior to the exercise of the Option, the
Board of Directors of the Company determines that, either prior or subsequent to
the Participant's termination, the Participant engaged in conduct which would
constitute "cause", then the Participant shall forthwith cease to have any right
to exercise the Option.
In the event of the Disability of the Participant, as determined in
accordance with the Plan, the Option shall be exercisable within one (1) year
after the date of such Disability or, if earlier, the term originally prescribed
by the Option. In such event, the Option shall be exercisable:
a) to the extent that the right to purchase the Shares
hereunder has accrued on the date the Participant becomes
Disabled and is in effect as of the date of Disability; and
b) in the event rights to exercise the Option accrue periodically, to
the extent of a pro rata portion of any additional rights as would have accrued
had the Participant not become Disabled prior to the end of the particular year.
The proration shall be based upon the number of days of the accrual period
during which the Participant was not Disabled.
In the event of the death of the Participant while an employee,
consultant or director of the Company or of an Affiliate, the Option:
x) to the extent exercisable but not exercised as of the date of death;
and
y) in the event rights to exercise the Option accrue periodically, to
the extent of a pro rata portion of any additional rights to exercise the Option
as would have accrued had the Participant not died during that year
may be exercised by the Participant's Survivors. The proration shall be based
upon the number of days during the accrual period prior to the Participant's
death. In such event, the Option must be exercised, if at all, within one (1)
year after the date of death of the Participant or, if earlier, within the
originally prescribed term of the Option.
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5. METHOD OF EXERCISING OPTION.
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Subject to the terms and conditions of this Agreement, the Option may
be exercised by written notice to the Company, at the principal executive office
of the Company. Such notice shall state the election to exercise the Option and
the number of Shares in respect of which it is being exercised, shall be signed
by the person or persons so exercising the Option, and shall be in substantially
the form attached hereto as Exhibit A. Payment of the full purchase price for
such Shares shall be made in accordance with Paragraph 7 of the Plan, and the
Company shall deliver a certificate or certificates representing such Shares as
soon as practicable after the notice shall be received, provided, however, that
the Company may delay issuance of such Shares until completion of any action or
obtaining of any consent, which the Company deems necessary under any applicable
law (including, without limitation, state securities or "blue sky" laws). The
certificate or certificates for the Shares as to which the Option shall have
been so exercised shall be registered in the name of the person or persons so
exercising the Option (or, if the Option shall be exercised by the Participant
and if the Participant shall so request in the notice exercising the Option,
shall be registered in the name of the Participant and another person jointly,
with right of survivorship) and shall be delivered as provided above to or upon
the written order of the person or persons exercising the Option. In the event
the Option shall be exercised, pursuant to Section 4 hereof, by any person or
persons other than the Participant, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All Shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. PARTIAL EXERCISE.
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Exercise of this Option to the extent above stated may be made in part
at any time and from time-to-time within the above limits, except that no
fractional share shall be issued pursuant to this Option.
7. NON-ASSIGNABILITY.
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The Option shall not be transferable by the Participant otherwise than
by will or by the laws of descent and distribution
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and shall be exercisable, during the Participant's lifetime, only by the
Participant. Except as provided in the preceding sentence, the Option shall not
be assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
Any attempted transfer, assignment, pledge, hypothecation or other disposition
of the Option or of any rights granted hereunder contrary to the provisions of
this Section 7, or the levy of any attachment or similar process upon the Option
or such rights, shall be null and void.
8. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE.
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The Participant shall have no rights as a stockholder with respect to
Shares subject to this Agreement until a stock certificate therefore has been
issued to the Participant and is fully paid for. Except as is expressly provided
in the Plan with respect to certain changes in the capitalization of the
Company, no adjustment shall be made for dividends or similar rights for which
the record date is prior to the date such stock certificate is issued.
9. CAPITAL CHANGES AND BUSINESS SUCCESSIONS.
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The Plan contains provisions covering the treatment of Options in a
number of contingencies such as stock splits and mergers. Provisions in the Plan
for adjustment with respect to stock subject to Options and the related
provisions with respect to successors to the business of the Company are hereby
made applicable hereunder and are incorporated herein by reference.
10. TAXES AND WITHHOLDING.
---------------------
The Participant acknowledges that upon exercise of the Option the
Participant will be deemed to have taxable income measured by the difference
between the then fair market value of the Shares received upon exercise and the
price paid for such Shares pursuant to this Agreement (the "Taxable Income").
The Participant acknowledges that any income or other taxes due from him or her
with respect to this Option or the Shares issuable pursuant to this Option shall
be the Participant's responsibility.
If the Company in its discretion determines that it is obligated to
withhold income taxes with respect to the exercise
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of the Option, the Participant hereby agrees that the Company may withhold from
the Participant remuneration, if any, the appropriate amount of federal, state
and local withholding attributable to such amount that is considered
compensation includible in such person's gross income.
11. NO OBLIGATION TO EMPLOY.
-----------------------
The Company is not by the Plan or this Option or any other agreement
obligated to continue the Participant as an employee, consultant or director of
the Company.
12. NOTICES.
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Any notices required or permitted by the terms of this Agreement or the
Plan shall be given by recognized courier service, facsimile, registered or
certified mail, return receipt requested, addressed as follows:
To the Company: X.X. XXXXX ARTS & CRAFTS, INC.
000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
To the Participant:
(address)
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given when
mailed in accordance with the foregoing provisions.
13. GOVERNING LAW.
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This Agreement shall be construed and enforced in accordance with the
law of the State of Pennsylvania.
14. BENEFIT OF AGREEMENT.
--------------------
Subject to the provisions of the Plan and the other provisions thereof,
this Agreement shall be for the benefit of and shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
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15. ENTIRE AGREEMENT.
----------------
This Agreement, together with the Plan, embodies the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement not expressly set forth in this Agreement shall affect or
be used to interpret, change or restrict, the express terms and provisions of
this Agreement, provided, however, in any event, this Agreement shall be subject
to and governed by the Plan.
16. MODIFICATIONS AND AMENDMENTS.
----------------------------
The terms and provisions of this Agreement may be modified or amended
only by written agreement executed by all parties hereto.
17. WAIVERS AND CONSENTS.
--------------------
The terms and provisions of this Agreement may be waived, or consent
for the departure therefrom granted, only by written document executed by the
party entitled to the benefits of such terms or provisions. No such waiver or
consent shall be deemed to be or shall constitute a waiver or consent with
respect to any other terms or provisions of this Agreement, whether or not
similar. Each such waiver or consent shall be effective only in the specific
instance and for the purpose for which it was given, and shall not constitute a
continuing waiver or consent.
18. HOLDING PERIOD APPLICABLE TO PERSONS SUBJECT TO SECTION 16 OF
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THE SECURITIES EXCHANGE ACT OF 1934.
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If the Participant to whom the Option has been granted pursuant to this
Agreement is subject to Section 16 of the Securities Exchange Act of 1934, then
at least six (6) months must elapse from the date of grant of the Option to the
date of disposition of the Shares.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer, and the Participant has hereunto set his
or her hand and seal, all as of the day and year first above written.
X.X. XXXXX ARTS & CRAFTS, INC.
By: __________________________
Xxxx X. Xxxxxx, President
PARTICIPANT
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Exhibit A
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NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
To: X.X. XXXXX ARTS & CRAFTS, INC.
IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time
as the Company has filed a Registration Statement with the Securities and
Exchange Commission under which the issuance of the Shares for which this
exercise is being made are registered and such Registration Statement remains
effective.
Ladies and Gentlemen:
I hereby exercise my Incentive Stock Option to purchase ______ shares
(the "Shares") of the common stock, no par value, of X.X. XXXXX ARTS & CRAFTS,
INC. (the "Company"), at the exercise price of $___________ per share, pursuant
to and subject to the terms of that certain Incentive Stock Option Agreement
between the undersigned and the Company dated _________, 1997.
I understand that the nature of the investment I am making and the
financial risks thereof. I am aware that it is my responsibility to have
consulted with competent tax and legal advisors about the relevant national,
state and local income tax and securities laws affecting the exercise of the
Option and the purchase and subsequent sale of the Shares.
I am paying the option exercise price for the Shares as
follows:________________________________________________________
________________________________________________________________.
If I am subject to Section 16 of the Securities Exchange Act of 1934, I
understand that at least six (6) months must elapse from the date of grant of
the Option to the date of disposition of the Shares.
Please issue the stock certificate for the Shares (check one):
_____ to me
_____ to me and _________________________ as joint
tenants with right of survivorship
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and mail the certificate to me at the following address:
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