Exhibit 10.2
FORM OF
BADGER PAPER MILLS, INC.
1998 STOCK OPTION AGREEMENT
THIS AGREEMENT made and entered into as of the ___ day of ______, ____
(the "Grant Date"), by and between Badger Paper Mills, Inc., a Wisconsin
corporation (the "Company"), and ______________________, an employee of the
Company ("Participant").
R E C I T A L S
WHEREAS, the Company has in effect the Badger Paper Mills, Inc. 1998
Stock Option Plan (the "Plan"), which permits options to purchase shares of the
Company's common stock, no par value ("Stock"), to be granted to employees of
the Company, among others.
WHEREAS, the Company believes it to be in the best interests of the
Company and its shareholders for employees to obtain or increase their stock
ownership interest in the Company in order that they will have a greater
incentive to work for and manage the Company's affairs.
WHEREAS, the Participant is an employee of the Company and has been
selected by a committee of the Board of Directors of the Company appointed
pursuant to the Plan (the "Board") to receive an option under the Plan.
A G R E E M E N T
NOW, THEREFORE, in consideration of the promises and of the covenants
and agreements herein set forth, the parties hereby mutually covenant and agree
as follows:
1. Grant. Subject to the terms and conditions of the Plan, a copy of
which is made a part hereof, and this Agreement, the Company hereby grants to
Participant an option to purchase from the Company all or any part of an
aggregate number of __________ shares of Stock (hereinafter such shares of Stock
are referred to as the "Optioned Shares", and the option to purchase the
Optioned Shares is referred to as the "Option"). The Option is intended to
qualify as an "Incentive Stock Option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Vesting. The Option shall vest and become exercisable by Participant
during the period of his continuous employment by the Company with respect to
33-1/3 percent of the Optioned Shares on ________ __, _____, as to an additional
33-1/3 percent of the Optioned Shares on the first anniversary hereof in ______,
as to the remaining 33-1/3 percent of the Optioned Shares on the second
anniversary hereof in ______. If the Participant's employment with the Company
changes from full-time to part-time status or is interrupted by a leave of
absence, the Board, in its discretion, may delay the vesting of the Option
pursuant to this paragraph 2 for such period as it reasonably deems appropriate.
3. Price. The price to be paid for the Optioned Shares shall be $______
per share. The price shall represent not less than one hundred percent (100%) of
the Fair Market Value of the Optioned Shares on the Grant Date if such Option is
an Incentive Stock Option.
4. Term; Exercise. Subject to the terms and conditions of the Plan and
this Agreement, the Option may be exercised by the Participant while in the
employ of the Company, in whole or in part, from time to time with respect to
any shares for which the right to exercise shall have accrued pursuant to
paragraph 2 hereof, but only during the period beginning on the date of this
Agreement and ending on the seventh anniversary hereof.
5. Limit on Incentive Stock Options. If the Option is an Incentive
Stock Option, to the extent that the aggregate fair market value, as determined
by the Board, of the Stock with respect to which Incentive Stock Options are
first exercisable by the Participant during any calendar year (under the Plan
and all other plans of the Company and its Subsidiaries) exceeds One Hundred
Thousand Dollars ($100,000), such Option as to the excess shall be treated as a
non-qualified stock option.
6. Method of Exercise.
(a) The Option may be exercised only by written notice,
delivered or mailed by postpaid registered or certified mail, addressed
to the treasurer of the Company at the Company's principal executive
offices specifying the number of Optioned Shares being purchased. Such
notice shall be accompanied by payment of the entire Option price of
the Optioned Shares being purchased: (i) in cash or its equivalent;
(ii) with the consent of the Board, by tendering previously acquired
shares of Stock valued at their Fair Market Value at the time of
exercise; or (iii) with the consent of the Board, by any combination of
(i) and (ii). For purposes of this paragraph, Fair Market Value shall
be determined in the same manner as the Fair Market Value of the Stock
on the Grant Date was determined pursuant to paragraph 3 hereof.
(b) Shares of Stock tendered shall be duly endorsed in blank
or accompanied by stock powers duly endorsed in blank. Upon receipt of
the payment of the entire purchase price of the Optioned Shares so
purchased, certificates for such Optioned Shares shall be issued to the
Participant. The Optioned Shares so purchased shall be fully paid and
nonassessable.
(c) If the Option is an Incentive Stock Option, the
requirements for incentive stock options under Section 422 of the Code
include minimum holding period requirements that require the Stock
acquired upon exercise of the Option to be held for at least two years
from the date of grant and one year from the date of exercise.
7. Termination of Employment.
(a) Except as otherwise provided by the Board, if the
Participant ceases to be an employee of the Company for any reason
other than for cause or due to death or disability (as defined below),
then the Participant may exercise the Option, to the extent
-2-
vested and exercisable as of the date of the Participant's termination,
for a period of ninety (90) days after such termination of employment,
but in no event beyond the expiration date of the Option as specified
in paragraph 4 hereof (the "Expiration Date").
(b) If the Participant ceases to be an employee of the Company
by reason of death or disability as defined in Section 22(e)(3) of the
Code, then, notwithstanding the provisions of paragraph 2, the Option
shall be 100% vested on the date of death or disability and the
Participant (or the Participant's beneficiary or estate in the event of
the Participant's death) may exercise the Option for a period of one
(1) year following the date of death or disability, but in no event
beyond the Expiration Date.
(c) If the Participant's employment is terminated for "cause",
as determined by the Board, the Option shall terminate immediately upon
such termination of employment.
8. No Rights as a Shareholder. The Participant shall not be deemed for
any purposes to be a shareholder of the Company with respect to any shares that
may be acquired hereunder except to the extent that the Option shall have been
exercised with respect thereto and a stock certificate issued therefor.
9. Nontransferability; Collateral. The Option shall not be transferable
by the Participant otherwise than by will or the laws of descent and
distribution, and may be exercised during the life of the Participant only by
the Participant. The Option may not be assigned, mortgaged or pledged as any
type of security or collateral.
10. Restrictions on Transfers of Stock. The Participant agrees for
himself and his heirs, legatees and legal representatives, with respect to all
shares of Stock acquired pursuant to the terms and conditions of this Agreement
(or any shares of Stock issued pursuant to a stock dividend or stock split
thereon or any securities issued in lieu thereof or in substitution or exchange
therefor), that he and his heirs, legatees and legal representatives will not
sell or otherwise dispose of such shares except pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
or except in a transaction that, in the opinion of counsel for the Company, is
exempt from registration under the Act. As further conditions to the issuance of
the Optioned Shares, the Participant agrees for himself, and his heirs, legatees
and legal representatives, prior to such issuance, to execute and deliver to the
Company such investment representations and warranties, and to take such other
actions, as counsel for the Company determines may be necessary or appropriate
for compliance with the Act and any applicable securities laws. Unless otherwise
determined by the Board, the Participant agrees that any certificate
representing shares of Stock acquired upon exercise of the Option shall bear the
following legend:
-3-
The shares of Stock represented by this certificate are restricted
securities as that term is defined under Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Act"). These shares may not be
sold, transferred or disposed of unless they are registered under the
Act, or sold in a transaction that is exempt from registration under
the Act and any applicable state securities laws.
11. Adjustments. If the Company shall at any time change the number of
shares of its Stock without new consideration to the Company (such as by stock
dividend, stock split or similar transaction), or in the event there shall be
any other change in the number or kind of outstanding shares of Stock or of any
stock or other securities into which such Stock shall have been changed or for
which it shall have been exchanged, then the number or kind of shares subject to
the Option and the Option price shall be subject to adjustment in accordance
with Section 5.3 of the Plan.
12. Powers of Company Not Affected. The existence of the Option herein
granted shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issuance of
bonds, debentures, preferred, or prior preference stock ahead of or affecting
the Stock or the rights thereof, or dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
13. Interpretation. As a condition of the granting of the Option, the
Participant agrees for himself and his legal representatives, that any dispute
or disagreement which may arise under or as a result of or pursuant to this
Agreement shall be determined by the Board in its sole discretion, and any
interpretation by the Board of the terms of this Agreement shall be final,
binding and conclusive. Without derogation of the foregoing, whenever the
context requires, the gender of all words used herein shall not be restrictive,
and the singular shall include the plural and vice versa.
14. Amendment or Modification. No term or provision of this Agreement
may be amended, modified or supplemented orally, but only by an instrument in
writing signed by the party against whom or which the enforcement of the
amendment, modification or supplement is sought.
15. Governing Law. This Agreement shall be governed by the internal
laws of the State of Wisconsin as to all matters, including, but not limited to,
matters of validity, construction, effect, performance and remedies.
16. Terms of Plan Govern. All parties acknowledge that this option is
granted under and pursuant to the Plan, which shall govern all rights,
interests, obligations and undertakings of both the Company and the Participant.
All capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Plan.
-4-
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officers and its corporate seal hereunto
affixed, and the Participant has hereunto affixed his hand the day and year
first above written.
BADGER PAPER MILLS, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
PARTICIPANT:
__________________________________________
-5-