EXHIBIT 10.4
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FORM OF NON-QUALIFIED STOCK OPTION GRANT
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FOR NON-EMPLOYEE DIRECTORS
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THIS NON-QUALIFIED STOCK OPTION is granted as of (the
"Effective Date") by TOLL BROTHERS, INC., a Delaware corporation (the "Company")
under the Toll Brothers, Inc. Stock Incentive Plan (1998) (the "Plan"), to
"Optionee").
W I T N E S S E T H:
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1. Grant. As of the Effective Date, the Company granted to the Optionee
an option (the "Option") to purchase on the terms and conditions hereinafter set
forth all or any part of an aggregate of shares of the Company's Common
Stock, par value $0.01 per share, (the "Option Shares"), at the purchase price
of $ per share (the "Option Price"). The Optionee shall have the cumulative
right to exercise the Option, and the Option is only exercisable, with respect
to the following number of Option Shares on or after the following dates:
Number of Option Shares
that may be purchased on Total
or after , Option Shares
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200X 200X
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The Committee may, in its sole discretion, accelerate the date on which the
Optionee may purchase Option Shares.
2. Term. The Option granted hereunder shall expire in all events at
5:00 p.m. (local Philadelphia, Pennsylvania time) on , 201X,
unless sooner terminated as provided in Subparagraphs (a), (b), (c), (d) or
(e) below.
(a) Leaving Board of Directors. Except as otherwise provided
herein or in any separate provisions applicable to this Option, the Option shall
terminate three (3) months after the Optionee ceases to be a member of the Board
of Directors of the Company (the "Board") for any reason other than provided in
paragraph 2(b) below. During such three month period the Optionee may purchase
any remaining Option Shares which could have been purchased on the date
Optionee's service terminated, but may not purchase any Option Shares which
would otherwise first become purchasable during such three month period. As of
date of termination, provisions of Paragraph 6 shall not apply.
(b) Disability or Death. Except as otherwise provided herein
or in any separate provisions applicable to this Option, the Option shall
terminate one (1) year after the Optionee's employment with the Company and/or
its Affiliates is terminated by reason of the Optionee's Disability or by death.
During such one year period the Optionee (or, as applicable, the Optionee's
heirs or legal representative) may purchase any remaining Option Shares which
could have been purchased on the date Optionee's employment terminated, but may
not purchase any Option Shares which would otherwise become purchasable during
such one year period. The provisions of Paragraph 6 below shall not apply with
respect to Option Shares of any Optionee (or Option Shares acquired by the
Optionee's heirs or legal representatives) whose service with the Company
terminated by reason of the Optionee's Disability or death.
(c) Change in Accounting Treatment. If the Committee finds
that a change in the financial accounting treatment for options granted under
the Plan from that in effect on March 5, 1998, when the Plan was adopted,
adversely affects the Company or, in the determination of the Committee, may
adversely affect the Company in the foreseeable future, the Committee may, in
its discretion, set an accelerated termination date for the Option. In such
event, the Committee may take whatever other action, including acceleration of
any exercise provisions, it deems necessary.
(d) Change in Control. In the event of a Change in Control (as
defined in the Plan) the Option shall become immediately exercisable in full. In
addition, in such event the Committee may accelerate the termination date of the
Option to a date no earlier than thirty (30) days after notice of such
acceleration is given to the Optionee. Upon the giving of any such acceleration
notice, the Option shall become immediately exercisable in full.
(e) Definitions. For purposes of this Option: (i) the term
"Affiliate" shall mean a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of section
425(e) or (f) of the Code; (ii) the term "Cause" shall mean a breach by the
Optionee of his or her employment or service contract with the Company or an
Affiliate, or an act by the Optionee involving any sort of disloyalty to the
Company or an Affiliate, including, without limitation, fraud, embezzlement,
theft, commission of a felony or proven dishonesty in the course of his or her
employment or service or a disclosure of trade secrets of the Company or an
Affiliate; (iii) the term "Committee" shall refer to the Committee designated to
administer the Plan; and (iv) the term Disabliity shall means any condition that
constitutes a "disability" as that term is defined in section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code").
3. General Rules. To the extent otherwise exercisable, this Option may
be exercised in whole or in part except that (a) any partial exercise of this
Option must be for a round lot of 100 Option Shares or a whole number multiple
thereof and (b) this Option may in no event be exercised (i) with respect to
fractional shares or (ii) after the expiration of the Option term for any reason
under Paragraph 2 hereof.
4. Transfers. Except as otherwise provided herein or in any separate
provisions applicable to this Option, the Option is transferable by the Optionee
only by will or pursuant to the laws of descent and distribution in the event of
the Optionee's death, in which event the Option may be exercised by the heirs or
legal representatives of the Optionee. Any attempt at assignment, transfer,
pledge or disposition of the Option contrary to the provisions hereof or the
levy of any execution, attachment or similar process upon the Option shall be
null and void and without effect. Any exercise of the Option by a person other
than the Optionee shall be accompanied by appropriate proofs of the right of
such person to exercise the Option.
5. Method of Exercise and Payment.
a) Method of Exercise. When exercisable under Paragraphs 1, 2
and 3, the Option may be exercised by written notice, pursuant to Paragraph 10,
to the Committee specifying the number of Option Shares to be purchased and,
unless the Option Shares are covered by a then-current registration statement or
a Notification under Regulation A under the Securities Act of 1933 (the "Act")
and current registrations under all applicable state securities laws, containing
the Optionee's acknowledgement, in form and substance satisfactory to the
Company, that the Optionee (a) is purchasing such Option Shares for investment
and not for distribution or resale (other than a distribution or resale which,
in the opinion of counsel satisfactory to the Company, may be made without
violating the registration provisions of the Act), (b) has been advised and
understands that (i) the Option Shares have not been registered under the Act
and are "restricted securities" within the meaning of Rule 144 under the Act and
are subject to restrictions on transfer and (ii) the Company is under no
obligation to register the Option Shares under the Act or to take any action
which would make available to the Optionee any exemption from such registration,
and (c) has been advised and understands that such Option Shares may not be
transferred without compliance with all applicable federal and state securities
laws. The notice shall be accompanied by payment of the aggregate Option Price
of the Option Shares being purchased. Such exercise shall be effective upon the
actual receipt by the Committee of such written notice and payment. For these
purposes, the Optionee shall be deemed to have made the payment required for
exercise of the Option at such time as it is determined that satisfactory
arrangements have been made to ensure payment of all amounts as are required to
be paid by Optionee in connection with the exercise of the Option.
(b) Medium of Payment. An Optionee may pay for Option Shares,
and the amount of any tax withholding required under Paragraph 5(c) below, (i)
in cash, (ii) by certified check payable to the order of the Company, (iii) by
means of arranging through a broker designated by the Company to have the broker
remit sufficient proceeds from the sale of such shares, (iv) by a combination of
the foregoing, or by such other method as the Committee may determine to be
appropriate from time to time. Furthermore, subject to the restrictions
described below, payment of the Option Price of the Option Shares being
purchased may be made all or in part in shares of the Common Stock of the
Company held by the Optionee for more than one year. If payment is made in whole
or in part in shares of the Common Stock, then the Optionee shall (1) deliver to
the Company certificates registered in the name of such Optionee representing
shares of Common Stock legally and beneficially owned by such Optionee, free of
all liens, claims and encumbrances of every kind and having a fair market value
on the date of delivery of such notice that is not greater than the product of
the Option Price and the number of Option Shares with respect to which such
Option is to be exercised, accompanied by stock powers duly endorsed in blank by
the record holder of the shares represented by such certificates or (2) attest
to his ownership of shares of Common Stock having a fair market value on the
date of exercise at least equal to the options being exercised. Notwithstanding
the foregoing, the Board of Directors, in its sole discretion, may refuse to
accept shares of Common Stock in payment of the Option Price. In that event, any
certificates representing shares of Common Stock which were delivered to the
Company shall be returned to the Optionee with notice of the refusal of the
Board of Directors to accept such shares in payment of the Option Price. The
Board of Directors may impose such limitations and prohibitions on the use of
shares of the Common Stock to exercise an Option as it deems appropriate.
6. Sale of Option Shares. Option Shares may be sold or otherwise
disposed of by the Optionee (i) beginning three years after the Effective Date,
or (ii) an earlier date requested by the Optionee and approved by the Committee,
in its sole discretion.
7. Adjustments on Changes in Common Stock. In the event that, prior to
the delivery by the Company of all of the Option Shares in respect of which the
Option is granted, there shall be an increase or decrease in the number of
issued shares of Common Stock of the Company as a result of a subdivision or
consolidation of shares or other capital adjustment, or the payment of a stock
dividend or other increase or decrease in such shares, effected without receipt
of consideration by the Company, the remaining number of Option Shares still
subject to the Option and the Option Price therefor shall be adjusted in a
manner determined by the Committee so that the adjusted number of Option Shares
and the adjusted Option Price shall be the substantial equivalent of the
remaining number of Option Shares still subject to the Option and the Option
Price thereof prior to such change. For purposes of this Paragraph no adjustment
shall be made as a result of the issuance of Common Stock upon the conversion of
other securities of the Company which are convertible into Common Stock.
8. Legal Requirements. If the listing, registration or qualification of
the Option Shares upon any securities exchange or under any federal or state
law, or the consent or approval of any governmental regulatory body is necessary
as a condition of or in connection with the purchase of such Option Shares, the
Company shall not be obligated to issue or deliver the certificates representing
the Option Shares as to which the Option has been exercised unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained. If registration is considered unnecessary by the Company
or its counsel, the Company may cause a legend to be placed on the Option Shares
being issued calling attention to the fact that they have been acquired for
investment and have not been registered.
9. Administration. The Option has been granted pursuant to, and is
subject to the terms and provisions of, the Plan. All questions of
interpretation and application of the Plan and the Option shall be determined by
the Committee, and such determination shall be final, binding and conclusive.
The Option shall not be treated as an incentive stock option (as such term is
defined in section 422(b) of the Code) for federal income tax purposes.
10. Notices. Any notice to be given to the Company shall be addressed
to the Committee at its principal executive office, and any notice to be given
to the Optionee shall be addressed to the Optionee at the address then appearing
on the personnel records of the Company or the Affiliate of the Company by which
he is employed, or at such other address as either party hereafter may designate
in writing to the other. Any such notice shall be deemed to have been duly given
when deposited in the United States mail, addressed as aforesaid, registered or
certified mail, and with proper postage and registration or certification fees
prepaid.
IN WITNESS WHEREOF, the Company has granted this Option as of the day
and year first above written.
TOLL BROTHERS, INC.
By: __________________________
(Corporate Seal)
ADDENDUM TO GRANT
SPECIAL RULES APPLICABLE TO CONTINUATION OF OPTION FOLLOWING OPTIONEE'S
RETIREMENT, DEATH OR DISABILITY, AND PROVIDING FOR CERTAIN
PERMISSIBLE TRANSFERS.
This addendum, applicable to the Option granted to , the
Optionee, as of , and effective as of the Effective Date, for the
purpose of providing for continued exercisability and vesting of the Option in
certain circumstances (set forth below under the heading "Continuation of
Option") and for certain limited rights to transfer the Option (as set forth
below under the heading "Transferability") has been provided with respect to the
Option in connection with and as consideration for Optionee's agreement not to
engage in certain activities following his termination of service as a member of
the Board (as set forth below under the heading "Non-Competition Provisions").
In recognition of these mutual agreements as set forth herein, and intending to
be legally bound, the Company and the Optionee hereby agree as follows:
CONTINUATION OF OPTION
Notwithstanding the provisions of Paragraph 2 of this Option, if the
Optionee terminates his service as a member of the Board on or after attainment
of age 61 ("Retirement"), or by reason of his death or Disability:
A. The Optionee shall not be treated as having voluntarily terminated
his service as a Board member;
B. The Option shall continue to be exercisable and to vest pursuant to
the provisions of this Addendum; and.
C. The Option shall continue in effect following the death, Disability
or Retirement of the Optionee, and shall continue to vest and be exercisable
pursuant to the terms of Paragraphs 1 and 2 of the Option, except that
Optionee's termination of service by reason of death, Disability or Retirement
shall not be taken into account.
The provisions of Paragraph 2, other than Paragraphs 2(a), and (b)
shall continue to apply.
TRANSFERABILITY
Notwithstanding the limitations on transfers otherwise applicable to
this Option, the Option may be transferred by the Optionee in a transaction that
qualifies as a Family Transfer (as that term is defined in the Plan), and the
Option shall, thereafter, be exercisable by the person or entity receiving the
Option pursuant to such Family Transfer.
NON-COMPETITION PROVISIONS
In order to induce the Company to agree to the terms of this Stock
Option Grant, as modified by this Addendum, Optionee agrees that Optionee shall
not, except upon a waiver by the Committee in writing of these requirements, at
any time after the Optionee's Disability or Retirement engage directly or
indirectly, as a proprietor, equity holder, investor (except as a passive
investor holding not more than ten percent (10%) of the outstanding capital
stock of a publicly held company), lender, partner, director, officer, employee,
consultant or representative or in any other capacity in the "Home Building
Business". As used herein, the term "Home Building Business" shall mean any
business involved in the acquisition, development or improvement of any real
estate for potential residential use or the purchase, construction, development,
marketing or sale of single or multi-family residential units or any other
business which competes with the Company in the determination of the Committee.
This Option shall immediately terminate upon a finding by the
Committee, after full consideration of the facts presented on behalf of both the
Company and the Optionee, that the Optionee has breached terms of this Addendum.
In such event, in addition to immediate termination of the Option, the Optionee
shall automatically forfeit all Option Shares for which the Company has not yet
delivered the share certificates upon refund by the Company of the amount paid
for such Option Shares.
TOLL BROTHERS, INC.
By:__________________________
(Corporate Seal)