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1-800 CONTACTS, INC.
STOCK OPTION AGREEMENT
(Nonqualified Stock Option)
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and
entered into as of __________ __, 1997, by and between 1-800 CONTACTS, INC., a
Utah corporation (the "Company"), and the employee of the Company listed on the
signature page hereto ("Optionee").
The Company and the Optionee desire to enter into an agreement
to evidence the grant by the Company to the Optionee of an option (the "Option")
to acquire that number of shares of the Company's Common Stock, par value $.01
per share (the "Common Stock") listed on the signature page hereto (the "Option
Shares"). The Option evidenced hereby was granted by the Company to the Optionee
on the Grant Date. Capitalized terms used herein and not otherwise defined are
defined in Section 10 hereof.
The parties hereto agree as follows:
1. Option Terms. The Option granted by the Company to the
Optionee to purchase the Option Shares shall be at a price per share equal to
that amount listed on the signature page hereto (the "Exercise Price"). The
Exercise Price and the number and type of Option Shares will be equitably
adjusted for any stock split, stock dividend, reclassification or
recapitalization of the Company which occurs subsequent to the Grant Date as
provided in Section 9 hereof. The Options are not intended to be "incentive
stock options" within the meaning of Section 422A of the Code.
2. Exercisability of Option.
(a) Normal Vesting. The Option granted hereunder may be
exercised only to the extent it has become vested. The Option shall vest and
become exercisable with respect to the following number of Option Shares (set
forth on a cumulative basis): (i) 33 1/3% of the Option Shares on the first
anniversary of the Grant Date; (ii) 66 2/3% of the Option Shares on the second
anniversary of the Grant Date; and (iii) 100% of the Option Shares on the third
anniversary of the Grant Date (each a "Vesting Date"), if and only if the
Optionee is, and has been, continuously employed by the Company from the Grant
Date through the applicable Vesting Date.
(b) Sale of the Company. In the event of a Sale of the
Company, the Option shall be vested and become fully exercisable as to all of
the Option Shares.
(c) No Vesting After Termination Date. Notwithstanding any
provision of subsection 2(b) to the contrary, the Option shall cease to vest
after the Termination Date. Any portion of the Option which has vested and
become exercisable prior to the Termination Date shall remain exercisable for
the period set forth in Section 3.
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3. Expiration of Option.
(a) Normal Expiration. In no event shall any part of the
Option be exercisable after the Expiration Date.
(b) Expiration Upon Termination of Employment. Any portion of
the Option that was not vested and exercisable on the Termination Date shall
expire on such date and may not be exercised thereafter under any circumstance.
Any portion of the Option that was vested and exercisable on the Termination
Date shall expire on the earlier of (i) 90 days after the Termination Date and
(ii) the Expiration Date and may not be exercised thereafter under any
circumstance.
(c) Procedure for Exercise. At any time prior to the
Expiration Date, Optionee may exercise all or a portion of the Option (to the
extent vested), which has not expired pursuant to subsection 3(b) above, by
delivering written notice of exercise to the Company, together with (i) a
written acknowledgment that Optionee has read and has been afforded an
opportunity to ask questions of members of the Company's management regarding
all financial and other information provided to Optionee regarding the Company
and (ii) a certified check or wire transfer of funds in an amount equal to the
Exercise Price multiplied by the number of Option Shares being purchased. As a
condition to any exercise of the Options, Optionee will permit the Company to
deliver to him all financial and other information regarding the Company and its
Subsidiaries which it believes necessary to enable Optionee to make an informed
investment decision.
(d) Non-Transferability of Options. The Options are personal
to Optionee and are not transferable by Optionee except pursuant to the laws of
descent or distribution. Only Optionee or his or her legal guardian or
representative may exercise the Options.
4. Repurchase Option.
(a) Repurchase Option. If the Termination Date occurs, the
Option Shares, whether held by Optionee or one or more transferees, will be
subject to repurchase by the Company (solely at its option) pursuant to the
terms and conditions set forth in, and to the extent described in, this Section
4 (the "Repurchase Option").
(b) Repurchase Price. In the event the Termination Date
occurs, the outstanding Option Shares will be subject to the Repurchase Option
at a price per share equal to the Fair Market Value thereof as of the
Termination Date.
(c) Repurchase Procedures. The Repurchase Option is
exercisable by the Company delivering written notice (the "Repurchase Notice")
to the holder or holders of the Option Shares within 180 days after the
Termination Date. The Repurchase Notice will set forth the number of Option
Shares to be acquired from such holder(s), the aggregate consideration to be
paid for such holder's Option Shares and the time and place for the closing of
the transaction. If any Option Shares are held by any transferees of Optionee,
the Company will purchase the Option Shares elected to be purchased from such
holder(s), pro rata according to the number of Option Shares held by such
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holder(s) at the time of delivery of such Repurchase Notice (determined as
nearly as practicable to the nearest share).
(d) Closing. The closing of the transactions contemplated by
this Section 4 will take place on the date designated by the Company in the
Repurchase Notice, which date will not be more than 90 days after the delivery
of such notice. The Company will pay for any Option Shares to be purchased by
the Company pursuant to the Repurchase Option (if any) by delivery of (i) a
check payable to the holder of such Option Shares or (ii) a note or notes
payable in three equal annual installments beginning on the first anniversary of
the closing of such purchase and bearing interest at a rate per annum equal to
the prime rate (as published in the Wall Street Journal on the business day
immediately preceding the closing of such purchase), or (iii) a combination of
(i) and (ii). Any notes issued by the Company pursuant to this subsection 4(d)
will be subject to any restrictive covenants to which the Company is subject at
the time of such purchase. Notwithstanding anything to the contrary contained in
this Agreement, all repurchases of the Option Shares by the Company will be
subject to applicable restrictions contained in the applicable state corporate
law and in the Company's and its Subsidiaries' debt and equity financing
agreements. If any such restrictions prohibit the repurchase of the Option
Shares hereunder which the Company is otherwise entitled to make, the Company
may make such repurchases as soon as it is permitted to do so under such
restrictions; provided, however, that in such circumstances any such repurchases
for Fair Market Value shall be for the greater of (i) the Fair Market Value on
the date such restrictions lapse and (ii) the Fair Market Value on the
Termination Date. The Company will receive customary representations and
warranties from each seller regarding the sale of the Option Shares, including,
but not limited to, the representation that such seller has good and marketable
title to such Option Shares to be transferred free and clear of all liens,
claims and other encumbrances.
(e) Termination of Repurchase Option. The provisions of this
Section 4 will terminate upon the earlier of (i) a Sale of the Company or (ii) a
Qualified Public Offering.
5. Restrictions on Transfer of Option Shares.
(a) Transfer of Option Shares. The Optionee will not sell,
pledge, transfer or otherwise dispose of (a "Transfer") any interest in any
Option Shares, except pursuant to the provisions of Sections 4, 5, 6 and 7
hereof.
(b) Certain Permitted Transfers. The restrictions contained in
this Section 5 will not apply with respect to Transfers of the Option Shares (i)
pursuant to applicable laws of descent and distribution or (ii) among Optionee's
Family Group; provided that the restrictions contained in this Section 5 will
continue to be applicable to the Option Shares after any Transfer of the type
referred to in clause (i) or (ii) and the transferees of such Option Shares will
agree in writing to be bound by the provisions of this Agreement. Any transferee
of Option Shares pursuant to a transfer in accordance with the provisions of
this Section 5(b) is herein referred to as a "Permitted Transferee." Upon the
transfer of Option Shares pursuant to this Section 5(b), Optionee will deliver a
written notice (a "Transfer Notice") to the Company. In the case of a Transfer
pursuant to clause (i) or (ii) hereof, the Transfer Notice will disclose in
reasonable detail the identity of the Permitted Transferee(s).
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(c) Termination of Transfer Restrictions. The provisions of
this Section 5 will terminate upon the earlier of (i) a Sale of the Company and
(ii) a Qualified Public Offering.
6. Additional Restrictions on Transfer.
(a) Unless the Option Shares are covered by an effective
registration statement under the 1933 Act, the certificates representing the
Option Shares will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK OPTION AGREEMENT
BETWEEN THE ISSUER (THE "COMPANY") AND AN EMPLOYEE OF THE
COMPANY DATED AS OF DECEMBER __, 1997, A COPY OF WHICH MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE
OF BUSINESS WITHOUT CHARGE."
(b) No holder of Option Shares may Transfer any Option Shares
(except pursuant to an effective registration statement under the 1933 Act)
without first delivering to the Company an opinion of counsel reasonably
acceptable in form and substance to the Company (which counsel will be
reasonably acceptable to the Company) that registration under the 1933 Act is
not required in connection with such Transfer.
7. Definition of Option Shares. For all purposes of this
Agreement, Option Shares will continue to be Option Shares in the hands of any
holder other than Optionee (except for the Company and purchasers pursuant to an
offering registered under the 1933 Act or purchasers pursuant to a Rule 144
transaction (other than a Rule 144(k) transaction occurring prior to the time
the Company is a Public Company) and subsequent transferees), and each such
other holder of Option Shares will succeed to all rights and obligations
attributable to Optionee as a holder of Option Shares hereunder. Option Shares
will also include shares of the Company's capital stock issued with respect to
Option Shares by way of a stock split, stock dividend or other recapitalization.
8. Sale of the Company.
(a) If the holders of a majority of the shares of Common Stock
held by the Stockholder Group approve a sale of all or substantially all of the
Company's assets determined on a consolidated basis or a sale of all (or, for
accounting, tax or other reasons, substantially all) of the
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Company's outstanding capital stock (whether by merger, recapitalization,
consolidation, reorganization, combination or otherwise) to an Independent Third
Party or group of Independent Third Parties (each such sale, an "Approved
Sale"), each holder of Option Shares will vote for, consent to and raise no
objections against such Approved Sale. If the Approved Sale is structured as (i)
a merger or consolidation, each holder of Option Shares will waive any
dissenters' rights, appraisal rights or similar rights in connection with such
merger or consolidation or (ii) sale of stock, each holder of Option Shares will
agree to sell all of his or her shares of Option Shares and rights to acquire
shares of Option Shares on the terms and conditions approved by the Board and
the holders of a majority of the Common Stock then outstanding. Each holder of
Option Shares will take all necessary or desirable actions in connection with
the consummation of the Approved Sale as requested by the Company.
(b) The obligations of the holders of Common Stock with
respect to an Approved Sale of the Company are subject to the satisfaction of
the following conditions: (i) upon the consummation of such Approved Sale, each
holder of Common Stock will receive the same form of consideration and the same
portion of the aggregate consideration that such holders of Common Stock would
have received if such aggregate consideration had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in the Company's Certificate of Incorporation as in effect immediately prior to
such Approved Sale; (ii) if any holders of a class of Common Stock are given an
option as to the form and amount of consideration to be received, each holder of
such class of Common Stock will be given the same option; and (iii) each holder
of then currently exercisable rights to acquire shares of a class of Common
Stock will be given an opportunity to exercise such rights prior to the
consummation of such Approved Sale and participate in such Approved Sale as
holders of such class of Common Stock.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities and Exchange Commission may
be available with respect to such negotiation or transaction (including a
merger, consolidation or other reorganization), the holders of Option Shares
will, at the request of the Company, appoint a purchaser representative (as such
term is defined in Rule 501) reasonably acceptable to the Company. If any holder
of Option Shares appoints a purchaser representative designated by the Company,
the Company will pay the fees of such purchaser representative, but if any
holder of Option Shares declines to appoint the purchaser representative
designated by the Company, such holder will appoint another purchaser
representative, and such holder will be responsible for the fees of the
purchaser representative so appointed.
(d) Optionee and the other holders of Option Shares (if any)
will bear their pro rata share (based upon the number of shares sold) of the
costs of any sale of Option Shares pursuant to an Approved Sale to the extent
such costs are incurred for the benefit of all holders of Common Stock and are
not otherwise paid by the Company or the acquiring party. Costs incurred by
Optionee and the other holders of Option Shares on their own behalf will not be
considered costs of the transaction hereunder.
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(e) The provisions of this Section 8 will terminate upon the
consummation of a Qualified Public Offering.
9. Certain Adjustments. The Exercise Price and the number or
kind of shares of Common Stock or other securities covered by the Option shall
be equitably adjusted in order to prevent a dilution or enlargement of the
rights of the Optionee that otherwise would result from (i) any increase or
decrease in the number or change in the kind of shares of capital stock of the
Company by reason of a stock dividend, stock split, reverse stock split,
recapitalization, or other such increase or decrease or change effected without
the receipt of consideration by the Company, or (ii) any consolidation or merger
or other reorganization, or (iii) any distribution of rights or warrants to
purchase stock to all holders of the Company's common stock, or (iv) any other
corporate transaction or event having an effect similar to any of the foregoing.
DEFINITIONS
10. Definitions. The following terms are defined as
follows:
"1933 Act" means the Securities Act of 1933, as amended from
time to time.
"Affiliate" means, with respect to any Person, any other
Person who is controlling, controlled by, or under common control with such
Person and, in the case of a Person which is a partnership, any partner of such
Person.
"Board" means the Company's Board of Directors.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" shall mean the Compensation Committee of the Board
of Directors, or such other committee of the Board which may be designated by
the Board to administer employee compensation matters. Any reference herein to
the Committee shall be deemed to refer to the Board in the event that the Board
has not delegated the administration of such matters to the Committee.
"Common Stock" means the Company's Common Stock, par value
$.01 per share, or as such stock may be reconstituted from time to time.
"Company" means 1-800 CONTACTS, INC. and any successor or
assign.
"Expiration Date" means, with respect to any Option, the date
which is the tenth anniversary of the Grant Date.
"Fair Market Value" of each share of Common Stock means the
fair value of such security as determined in good faith by the Board, which
determination shall be reasonably acceptable to the Optionee. In the event that
the Board determination of Fair Market Value is not reasonably acceptable to the
Optionee, then such value will be determined by an independent appraiser
reasonably acceptable to the Board and the Optionee, which appraiser will submit
to the
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Board and the Optionee a written report setting forth such determination. If the
Board and the Optionee are unable to agree on an appraiser, each of the Board
and the Optionee will select an independent appraiser and the two appraisers so
selected will select a third independent appraiser to determine the Fair Market
Value of the Common Stock. The appraiser appointed hereunder will allocate its
costs and expenses incurred in determining the Fair Market Value based upon the
relative differences between the Board's and the Optionee's respective
determinations of Fair Market Value and such appraiser's determination of Fair
Market Value.
"Family Group" means Optionee's spouse and descendants
(whether natural or adopted) and any trust solely for the benefit of Optionee
and/or Optionee's spouse and/or descendants.
"Grant Date" means the date identified as the grant date on
the signature page hereto.
"Independent Third Party" means any Person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Common Stock on a fully diluted basis, who is not controlling, controlled by or
under common control with any such 5% owner of the Common Stock and who is not
the spouse or descendant (by birth or adoption) of any such 5% owner of the
Common Stock.
"Option Shares" means (i) all shares of Common Stock purchased
pursuant to the Options granted pursuant to this Agreement and (ii) all shares
of Common Stock issued with respect to Common Stock referred to in clause (i) by
way of stock dividend or stock split or in connection with a recapitalization or
other reorganization affecting the Common Stock.
"Person" means an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Public Company" means a company any of whose securities are
registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act.
"Public Sale" means any sale of Common Stock to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
(other than Rule 144(k) prior to the time the Company is a Public Company)
adopted under the 1933 Act.
"Qualified Public Offering" means an initial public offering
and sale of the Common Stock pursuant to an effective registration statement
under the 1933 Act resulting in net proceeds to the Company of at least $10.0
million.
"Sale of the Company" means any transaction involving the
Company and an Independent Third Party or affiliated group of Independent Third
Parties pursuant to which such party or parties acquire (i) a majority of the
outstanding shares of capital stock of the Company entitled to vote generally in
the election of the Board (whether by merger, consolidation or sale or
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Transfer of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
"Stockholder Group" means the existing stockholders of the
Company as of the date hereof.
"Subsidiary" means any corporation of which shares of stock
having a majority of the general voting power in electing the board of directors
are, at the time as of which any determination is being made, owned by the
Company either directly or through its Subsidiaries.
"Termination Date" means the date that Optionee ceases to be
employed by the Company or any of its Subsidiaries for any reason.
MISCELLANEOUS
11. Notices. Any notice provided for in this Agreement must be
in writing and must be personally delivered, received by certified mail, return
receipt requested, or sent by guaranteed overnight delivery service, to the
members of the Stockholder Group at the addresses indicated in the Company's
records, to the Optionee at the address appearing on the signature page hereto
and to the other recipients at the address indicated below:
To the Company:
1-800 CONTACTS, INC.
00000 Xxxxx Xxxxxxxxx Xxxx Xxxxx, Xxxxx X-000
Xxxxxx, Xxxx 00000
Attn: President
With a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
or such other address or to the attention of such other person as the recipient
party will have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
12. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law
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or rule in any jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or the effectiveness or validity of any
provision in any other jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
13. Complete Agreement. This Agreement embodies the complete
agreement and understanding among the parties and supersedes and preempts any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
14. Counterparts. This Agreement may be executed in separate
counterparts, each of which will be deemed to be an original and all of which
taken together will constitute one and the same agreement.
15. Successors and Assigns; Transfer. This Agreement is
intended to bind and inure to the benefit of and be enforceable by Optionee and
the Company and their respective successors and assigns, provided that Optionee
may not assign any of his or her rights or obligations, except as expressly
provided by the terms of this Agreement. Prior to Transferring any Option Shares
(other than in a Public Sale or any Approved Sale) to any person or entity,
Optionee will cause the prospective transferee to execute and deliver to the
Company an agreement containing the rights and restrictions set forth herein
with respect to such Option Shares.
16. GOVERNING LAW. THE CORPORATE LAW OF THE STATE UNDER WHICH
THE COMPANY IS INCORPORATED WILL GOVERN ALL QUESTIONS CONCERNING THE RELATIVE
RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL OTHER ISSUES CONCERNING THE
ENFORCEABILITY, VALIDITY AND BINDING EFFECT OF THIS AGREEMENT WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH, WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER
OF THE STATE OF UTAH OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION
OF THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF UTAH.
17. Remedies. The parties hereto acknowledge and agree that
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party hereto will have the right to injunctive
relief, in addition to all of its other rights and remedies at law or in equity,
to enforce the provisions of this Agreement.
18. Arbitration.
(a) Arbitration. In the event of disputes between the parties
with respect to the terms and conditions of this Agreement, such disputes will
be resolved by and through an arbitration proceeding to be conducted under the
auspices of the American Arbitration Association (or any like organization
successor thereto) at Salt Lake City, Utah. Such arbitration proceeding will be
conducted in as expedited a manner as is then permitted by the commercial
arbitration rules (formal or informal) of the American Arbitration Association,
and the arbitrator or arbitrators in any such arbitration will be persons who
are expert in the subject matter of the dispute. Both the foregoing agreement of
the parties to arbitrate any and all such claims, and the results,
determination, finding,
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judgment and/or award rendered through such arbitration, will be final and
binding on the parties hereto and may be specifically enforced by legal
proceedings. The parties agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that any
party may, in his or her or its sole discretion, ask for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
(b) Procedure. Such arbitration may be initiated by written
notice from either party to the other which will be a compulsory and binding
proceeding on each party. The arbitration will be conducted before a panel of
arbitrators selected in accordance with the rules of the American Arbitration
Association. The costs of said arbitrators and the arbitration will be borne
equally by the parties to the arbitration. Each party will bear separately the
cost of their respective attorneys, witnesses and experts in connection with
such arbitration. Time is of the essence of this arbitration procedure, and the
arbitrators will be instructed and required to render their decision within ten
(10) days following completion of the arbitration.
19. Effect of Transfers in Violation of Agreement. The Company
will not be required (a) to transfer on its books any Option Shares which have
been sold or transferred in violation of any of the provisions set forth in this
Agreement or (b) to treat as owner of such Option Shares, to accord the right to
vote as such owner or to pay dividends to any transferee to whom such Option
Shares have been transferred in violation of this Agreement.
20. Amendments and Waivers. Any provision of this Agreement
may be amended or waived only with the prior written consent of the Company and
the Optionee, and, in the case of Section 8, the members of the Stockholder
Group who hold 80% of the Common Stock held by the Stockholder Group as of the
date hereof.
21. Third Party Beneficiaries. The parties hereto acknowledge
and agree that the members of the Stockholder Group are third party
beneficiaries of Section 8 of this Agreement. Section 8 of this Agreement will
inure to the benefit of and be enforceable by any member and their respective
successors and assigns.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
1-800 CONTACTS, INC.
_____________________________________
By:
Its:
OPTIONEE:
_____________________________________
Name:
Address (please print):
_____________________________________
_____________________________________
Grant Date:__________________________
Number of Option Shares:_____________
Exercise Price:______________________
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SCHEDULE TO STOCK OPTION AGREEMENT
Name Grant Date Exercise Price Number of Shares
---- ---------- -------------- ----------------
Xxxxx X. Xxxxxx November 20, 1997 $4,555.925 115.8599
Xxxxxx X. Xxxxxx November 17, 1997 $4,555.925 46.3440
E. Xxxx Xxxxxx January 2, 1998 $4,555.925 173.7899
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