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EXHIBIT 10.10
ERIZON OPTION
This STOCK OPTION AGREEMENT (this "Agreement") is made as of April 14, 2000
between Hanover Direct, Inc., a Delaware corporation (the "Company"), and Rakesh
K. Kaul (the "Executive").
WHEREAS, the Compensation Committee of the Company's Board of Directors
(the "Compensation Committee") has heretofore adopted and the Company's
shareholders have heretofore approved and ratified the Long-Term Incentive Plan
for Rakesh K. Kaul (the "Plan"); and
WHEREAS, the Plan provides for the granting of stock options in erizon,
Inc. subject to the terms set forth herein
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein set forth, the parties hereto agree as follows:
1. The Company hereby evidences and confirms the grant to the
Executive on the date hereof (the "Date of Grant") by the Compensation
Committee of an option (the "Initial Option") to purchase 60 shares of the
Common Stock of erizon, Inc. (the "Shares"), which amount represents 6% of
the fully diluted Common Stock (including all outstanding warrants and
options, vested and unvested) of erizon, Inc. as of the date hereof. The
exercise price for the Initial Option shall be equal to the fair market
value of the Common Stock of erizon, Inc. on the Date of Grant as
determined in good faith by the Board of Directors of the Company, provided
that the fair market value of the Common Stock of erizon, Inc. for purposes
of establishing the exercise price for the Initial Option shall not exceed
$200,000,000. Executive shall receive protection from further dilution of
the Shares until such time as erizon, Inc. completes its first round of
Board-approved equity or convertible debt financing after which time there
shall be no protection from further dilution of the Shares. Upon completion
of its first round of Board-approved equity or convertible debt financing,
the Company shall grant Executive an additional option (the "Additional
Option") to purchase Shares that, together with the Initial Option, shall
represent 6% of the fully diluted Common Stock of erizon, Inc. (including
all outstanding warrants and options, vested and unvested). The exercise
price for the Additional Option shall be equal to the fair market value of
the Common Stock on the date the Additional Option is granted to Executive,
as determined in good faith by the Board of Directors of the Company. Other
than as expressly provided for in this Section 1, the Initial Option and
the Additional Option (collectively the "Option") shall be treated as if
granted on the Date of Grant. The Option shall expire on March 6, 2010 (the
"Expiration Date"), subject to earlier cancellation or termination as
provided herein.
2. Subject to the other provisions contained herein regarding the
exercisability of the Option, the Option shall become exercisable only as
provided in this Section 2:
(a) Except as otherwise provided in paragraph (b), the Option shall
vest and become exercisable in equal parts on each successive
anniversary of March 6, 2000 over the four-year period commencing on
March 6, 2000 provided that Executive remains employed by the Company
and/or its affiliates or subsidiaries (collectively the "Company").
(b) Notwithstanding the foregoing, the Option shall immediately
vest and become exercisable in full (i) upon the termination of
Executive's employment by reason of death, Disability, by the Company
without Cause or by Executive within ninety days of an occurrence
constituting Good
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Reason (as such terms are defined in the Employment Agreement dated as
of March 6, 2000 between Executive and the Company (hereinafter the
"Employment Agreement")) or (ii) upon the occurrence of a Change of
Control (as such term is defined in the Hanover Direct, Inc. Thirty-Six
Month Compensation Continuation Plan (hereinafter the "Change of Control
Plan")).
3. In the event of a termination of the Executive's employment with
the Company while any portion of the Option remains unexercised, the
Executive's rights to exercise the Option shall be exercisable only as
follows:
(i) Involuntary Termination. If the Executive's employment is
involuntarily terminated by the Company other than for Cause or
Executive resigns for Good Reason (as such terms are defined in the
Employment Agreement), his Option may be exercised during the six-month
period following the later of (x) such termination or (y) the
registration of the Shares underlying the Option. For purposes hereof,
the provisions of the Employment Agreement shall apply in determining
whether the Executive's employment has been involuntarily terminated by
the Company other than for Cause or if Executive has resigned with Good
Reason.
(ii) Death. If the Executive's employment terminates by reason of
death, the Option may be exercised during the twelve-month period
following such termination.
(iii) Disability. If the Executive's employment terminates by
reason of Disability (as such term is defined in the Employment
Agreement), the Option may be exercised during the twelve-month period
following such termination. For purposes hereof, the provisions of the
Employment Agreement shall apply in determining whether the Executive's
employment has been terminated due to a Disability.
(iv) Change of Control. If Executive's employment terminates other
than for Cause or if Executive resigns with Good Reason (as such terms
are defined in the Employment Agreement) within twenty-four months of a
Change of Control (as such term is defined in the Employment Agreement),
the Option may be exercised during the twelve-month period following
such termination. For purposes hereof, the provisions of the Change of
Control Plan shall apply in determining whether a Change of Control has
occurred.
(v) Termination in Other Circumstances. If the Executive's
employment terminates in circumstances not described in clauses (i)
through (iv), the Executive may, within 30 days following such
termination, exercise the Option with respect to such number of Shares
as to which the Option is exercisable on the date of termination, as
determined pursuant to Section 2.
Notwithstanding the foregoing, the Option shall in no event be exercisable
in whole or in part after the Expiration Date.
4. If at the time of Executive's termination for any reason the Common
Stock of erizon, Inc. is not publicly-traded, at the Executive's request,
the Company shall purchase from the Executive the Shares as to which the
Option is exercisable, as determined pursuant to Section 2, or any portion
thereof at the then current fair market value as determined by the Board of
Directors of the Company in good faith. Any dispute concerning the
valuation of the fair market value of the Company will be determined using
a "baseball arbitration model" by a mutually agreed upon investment banking
company. The computation of fair market value will assume (i) underwriter
fees and discounts as if the Initial Public Offering had taken place, and
(ii) public market security.
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5. (a) Except as provided in paragraph (b), the Option is not
transferable by the Executive other than by will or the laws of descent and
distribution and is exercisable, during the Executive's lifetime, only by
the Executive.
(b) Notwithstanding the provisions of paragraph (a):
(i) In the event of the Executive's incapacity, the Option may be
exercised by a conservator, guardian, or the agent under a Durable Power
of Attorney;
(ii) Upon the Executive's death, the Option is transferable by
will, by a revocable or irrevocable trust established by the Executive,
or by a written beneficiary designation executed by the Executive and
delivered to the Company prior to the Executive's death;
(iii) The Executive may transfer the Option to the Executive's
spouse and/or issue or trusts for the benefit of the Executive. the
Executive's spouse, and/or the Executive's issue.
6. In order to exercise the Option, in whole or in part, the Executive
shall give written notice to the Company, specifying the number of Shares
to be purchased and the purchase price to be paid, and accompanied by the
payment of the purchase price. Such purchase price may be paid in cash, a
certified check, or a bank check payable to the Company, or in whole shares
of Common Stock held by the Executive for at least six months evidenced by
negotiable certificates, valued at their fair market value on the date of
exercise, or in a combination of the foregoing. Alternatively, the Option
may be exercised, in whole or in part, by delivering a properly executed
exercise notice together with irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds
necessary to pay the purchase price, and such other documents as the
Compensation Committee may require. Upon receipt of payment, the Company
shall deliver to the Executive (or to any other person entitled to exercise
the Option) a certificate or certificates for such Shares. If certificates
representing shares of Common Stock are used to pay all or part of the
purchase price of the Option, separate certificates shall be delivered by
the Company representing the same number of shares as each certificate so
used and an additional certificate shall be delivered representing the
additional shares to which the Executive is entitled as a result of
exercise of the Option.
7. The Option shall be exercised only with respect to full Shares or
fractional shares having a value of not less than $100,000; no fractional
Shares having lesser value shall be issued.
8. As a condition to the issuance of Shares under the Option, the
Executive agrees to remit to the Company at the time of exercise any taxes
required to be withheld by the Company under the applicable laws or other
regulations of any governmental authority, whether federal, state of local,
and whether domestic or foreign. The Company shall promptly remit such
taxes to the applicable governmental authority.
9. If the Executive so requests in writing, shares purchased upon
exercise of the Option may be issued in the name of the Executive and
another person jointly with the right of survivorship, or in the name of a
revocable trust of which the Executive is the grantor.
10. The Option does not qualify as an incentive stock option under
Section 422 of the Internal Revenue Code.
11. This Option shall be binding upon and inure to the benefit of any
successor or assignee of the Company and to any executor, administrator,
legal representative, legatee, or distributee or transferee entitled by law
or the provisions of the Plan to the Executive's rights hereunder.
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12. The Option is subject in all respects to the terms of the Plan,
the provisions of which are incorporated in this Agreement by reference.
13. This Agreement is entered into, and shall be construed and
enforced, under the laws of the State of New York, and shall not be
modified except by written agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HANOVER DIRECT, INC.
By: /s/ Ralph Bulle
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Its: Senior Vice President
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By: /s/ Curt Johnson
Its: Senior Vice President
/s/ Rakesh K. Kaul
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Rakesh K. Kaul
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