EXHIBIT 10.4 AMERICAN ITALIAN PASTA COMPANY 2000 EQUITY INCENTIVE PLAN NON-QUALIFIED STOCK OPTION AWARD AGREEMENT This Stock Option Award Agreement (the "Award Agreement"), made this _____ day of ______________, 200___ evidences the grant, by American Italian Pasta Company, (the "Company"), of a stock option to ______________________ (the "Grantee") on the date hereof (the "Date of Grant"). By accepting the Award and executing this Award Agreement, the Grantee agrees to be bound by the provisions hereof and of the American Italian Pasta Company 2000 Equity Incentive Plan (the "Plan"). Capitalized terms not defined herein shall have the same meaning as used in the Plan. 1. Shares Optioned and Option Price. The Grantee shall have an option to purchase __________ shares of the Company's Common Stock, $0.01 par value (the "Shares"), at an exercise price of $___________ for each share (the "Option"), subject to the terms and conditions of this Award Agreement and of the Plan, the provisions of which are incorporated herein by this reference. The Option is not, nor is it intended to be, an Incentive Stock Option as described in section 422 of the Internal Revenue Code of 1986. 2. Exercise Period. The Option may be exercised, from time to time, with respect to the following number of Shares subject to this Option: (i) prior to the first anniversary of the Date of Grant, none of such Shares; (ii) from and after the first anniversary of the Date of Grant, _____% of such Shares; (iii) from and after the second anniversary of the Date of Grant, _____% of such Shares (less any Shares as to which this Option shall have been exercised prior to such second anniversary); (iv) from and after the third anniversary of the date of Grant, _____% of such Shares (less any Shares as to which this Option shall have been exercised prior to such third anniversary); (v) from and after the fourth anniversary of the Date of Grant, _____% of such Shares (less any Shares as to which this Option shall have been exercised prior to such fourth anniversary), and (vi) from and after the fifth anniversary of the Date of Grant, _____% of such Shares (less any Shares as to which this Option shall have been exercised prior to such fifth anniversary. Provided, however, that the Grantee's right to exercise the Option shall terminate on the earliest to occur of the following dates: (a) the tenth anniversary of the Date of Grant; (b) the first anniversary of the date of the Grantee's Termination of Service on account of Retirement, Disability or death; (c) the date three months following the date of the Grantee's Termination of Service for any reason other than Retirement, Disability, death or for Cause (the "Termination Date"); provided, however, the Committee may, in its sole discretion, allow the Grantee to exercise this option at a later date following the Termination Date; and (d) immediately upon a Termination of Service for Cause.
Provided further that, during any period in which exercise is allowed following the date of the Grantee's Termination of Service for any reason, that portion of the Shares that was not exercisable on the date of the Grantee's Termination of Service shall not become exercisable. 3. Restriction on Exercise. Notwithstanding the foregoing provisions of paragraph 2 or any other provision of this Award Agreement, the Committee, in its sole discretion, may, only with respect to any unvested portion of this Option, reduce the number of Shares subject to the Option or may cancel the Option in its entirety if the Grantee (a) takes other employment or renders services to others without the written consent of the Company; or (b) conducts himself or herself in a manner that the Committee, in its sole discretion, deems has adversely affected or may adversely affect the Company. Except as provided in the last sentence of this paragraph, the Grantee will not be entitled to any remuneration or compensation whatsoever for the loss of all or a portion of the Grantee's Option if the number of Shares subject to the Grantee's Option are reduced, or if the Grantee's Option is canceled in its entirety, pursuant to this paragraph. If at the time this Option was granted the Grantee and the Company acknowledged in writing that this Option was being granted in lieu of other specifically described compensation to the Grantee, then, to the extent that pursuant to this paragraph the number of Shares subject to this Option is reduced or this Option is canceled, then, the Company shall pay to the Grantee the proportionate amount of such forgone compensation represented by the reduced number of Shares or cancellation of this Option. 4. Reload Option. (a) Subject to Section 4(b) below, in addition to the Option granted hereby (the "Underlying Option"), the Company will grant to Grantee a reload option (the "Reload Option") if the Grantee (i) is a Participant when Grantee exercises all or a portion of the Underlying Option or all or a portion of a Reload Option granted hereunder, (ii) has not received a Reload Option pursuant to any other option exercise within the six (6) months prior to the exercise of all or a portion of the Underlying Option, and (iii) pays the Exercise Price for such Shares or any required tax withholding with respect to such Shares with Shares that have been held by the Grantee for at least six (6) months (the "Tendered Shares"). The Reload Option shall grant the right to purchase Shares of Common Stock equal in number to the number of Tendered Shares. The date on which the Tendered Shares are tendered to the Company is the Reload Grant Date. The Exercise Price of the Reload Option is the Fair Market Value of the Common Stock on the Reload Grant Date. The Reload Option may be exercised at any time during the remaining term of the Underlying Option (subject to earlier termination as provided in the Plan or in this Award Agreement). Except as provided in this Section 4, the Reload Option is subject to all of the other terms and provisions of this Award Agreement. (b) No Reload Option will be granted hereunder and no Reload Option may be exercised if, at the time of such proposed grant or exercise, all Shares reserved for issuance under the Plan are the subject of outstanding Options. Any rights of the Grantee with respect to such Reload Option shall be automatically void at such 2
time. No Reload Option shall be granted in connection with the exercise of an Option that has been transferred by the initial Grantee. 5. Method of Exercise. To the extent that the Option is exercisable hereunder, it may be exercised in full or in part by the Grantee or, in the event of the Grantee's death, by the person or persons to whom the Option was transferred by will or the laws of descent and distribution, by delivering or mailing written notice of the exercise and full payment of the purchase price to the Secretary of the Company and any applicable withholding taxes. The written notice shall be signed by each person entitled to exercise the Option and shall specify the address and social security number of each person. If any person other than the Grantee purports to be entitled to exercise all or any portion of the Option, the written notice shall be accompanied by proof, satisfactory to the Secretary of the Company, of that entitlement. The written notice shall be accompanied by full payment made by any one or more of the following means: (a) cash, personal check or electronic funds, transfer; (b) shares of Stock with a Fair Market Value on the effective date of such exercise equal to the Exercise Price and owned by the Grantee for at least six (6) months (or such longer period as is determined by the Company required by applicable accounting standards to avoid a charge to the Company's earnings) or shares of Stock that were purchased on the open market; or (c) pursuant to procedures previously approved by the Company, through the sale of the Shares acquired on exercise of this Option through a broker-dealer to whom the Grantee has submitted an irrevocable notice of exercise and irrevocable instructions to deliver promptly to the Company the amount of sale or loan proceeds sufficient to pay for such Shares, together with, if requested by the Company, the amount of federal, state, local or foreign withholding taxes payable by reason of such exercise. Payment may also be made in such other manner as may be permitted by the Plan at the time of exercise, subject to approval by the Committee. The written notice will be effective and the Option shall be deemed exercised to the extent specified in the notice on the date that the written notice (together with required accompaniments) is received by the Secretary of the Company at its then executive offices during regular business hours. 6. Issue of Shares Upon Exercise. As soon as practicable after receipt of an effective written notice of exercise and full payment of the purchase price as provided in paragraph 4, the Secretary of the Company shall cause ownership of the appropriate number of Shares to be transferred to the person or persons exercising the Option by having a certificate or certificates for those Shares registered in the name of such person or persons and shall have each certificate delivered to the appropriate person. Notwithstanding the foregoing, if the Company or a Subsidiary requires reimbursement of any tax required by law to be withheld with respect to Shares received upon exercise of an Option, the Secretary shall not transfer ownership of those Shares until the required payment is made. 7. Transferability of Options. The Grantee may transfer the Option to (i) the spouse, children, or grandchildren of the Grantee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefits of such Immediate Family Members, or (iii) a partnership in which such Immediate Family Members are the only partners, provided that (a) there may be no consideration for any such transfer and (b) subsequent transfers of the Option shall be prohibited, except by will or the laws of descent and distribution. Following transfer, the Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to 3
transfer, provided that for the purposes of the Award Agreement, the term "Grantee" shall be deemed to refer to the transferee. The event of a Termination of Service shall continue to be applied with respect to the original Grantee, following which the Option shall be exercisable by the transferee only to the extent, and for the periods, specified in Paragraph 2. Neither the Committee nor the Company shall have any obligation to provide notice to a transferee of termination of the Option under the terms of this Award Agreement. 7.1 Transferees of Stockholders. The Company shall not be required to transfer any Shares on its books which shall have been sold, assigned or otherwise transferred in violation of this Award Agreement, or to treat as owner of such shares of stock, or to accord the right to vote as such owner or to pay dividends to, any person or organization to which any such Shares shall have been sold, assigned or otherwise transferred, from and after any sale, assignment or transfer of any Share made in violation of this Award Agreement. Any transfer in violation of the terms of this Award Agreement shall be deemed null and void. 8. Authorized Leave. For purposes hereof, an authorized leave of absence (authorized by the Company or a Subsidiary to the Grantee in writing) shall not be deemed a Termination of Service hereunder. 9. Taxes. The Grantee will be solely responsible for any Federal, state or local income taxes imposed in connection with the exercise of the Option or the delivery of Shares incident thereto, and the Grantee authorizes the Company or any Subsidiary to make any withholding for taxes which the Company deems necessary or proper in connection therewith, from any amounts due to the Grantee by the Company. Subject to approval by the Committee, the Grantee may satisfy such withholding obligations, in whole or in part, by (a) electing to have the Company withhold otherwise deliverable Shares or (b) delivering to the Company Shares then owned by Grantee having a Fair Market Value equal to the amount required to be withheld. 10. No Conflict. In the event of a conflict between this Award Agreement and the Plan, the provisions of the Plan shall govern. 11. Governing Law. This Award shall be governed under the laws of the State of Delaware. 12. Change in Control. The effect of a Change of Control shall be as set forth in the Plan. Change as determined by the Committee. AMERICAN ITALIAN PASTA COMPANY By:______________________________________ Name: Timothy S. Webster Title: President & CEO 4
ACKNOWLEDGMENT The undersigned Grantee acknowledges that he or she understands and agrees to be bound by each of the terms and conditions of this Award Agreement. _________________________________ _________________________________ Printed Name Signature Date:____________________________ 5