EXHIBIT 10.2
EMPLOYEE STOCK OPTION AGREEMENT
UNDER THE FRANK'S NURSERY & CRAFT, INC.
2002 STOCK OPTION PLAN
THIS AGREEMENT, made as of the 12th day of September, 2002, by
and between Frank's Nursery & Craft, Inc., a Delaware corporation (the
"Company") and Steve Fishman (the "Optionee").
WITNESSETH:
WHEREAS, the Optionee is now employed by the Company in a key
capacity, and the Company desires to have him remain in such employment and to
afford him the opportunity to acquire, or enlarge, his ownership of the
Company's Common Stock, par value $.001 per share ("Stock"), so that he may have
a direct proprietary interest in the Company's success;
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. Subject to the terms and conditions set
forth herein and in the Company's 2002 Stock Option Plan (the "Plan"), the
Company hereby grants to the Optionee, as of the effective date of the Company's
Plan of Reorganization (the "Grant Date"), during the period commencing Grant
Date and ending on the tenth anniversary of the Grant Date (the "Expiration
Date"), the right and option (the right to purchase any one share of Stock
hereunder being an "Option") to purchase from the Company an aggregate of
1,826,117 shares of Stock at a price of $1.15 per share ("Option Price").
2. Limitations on Exercise of Options. Subject to early
expiration of the Options upon a termination of employment with the Company, as
set forth in Section 3 below, and compliance with the terms and conditions set
forth herein, the Options shall vest and become exercisable as to fifty percent
(50%) of the Options on the Grant Date and as to the remaining fifty percent
(50%) of the Options on the one year anniversary of the Grant Date. To the
extent not exercised, vested Options shall accumulate and be exercisable, in
whole or part, at any time after becoming exercisable, but not later than the
date the Options expire.
3. Termination of Employment. (a) If prior to the Expiration
Date, the Optionee shall cease to be employed by the Company for any reason
other than death, disability, or retirement, the Options shall remain
exercisable until the earlier of the Expiration Date or 90 days after the date
of cessation of employment, but only to the extent the Options were exercisable
at the time of such cessation of employment.
(b) If, prior to the Expiration Date, the Optionee shall enter
retirement (in accordance with any qualified retirement plan maintained by the
Company) from employment or cease to be employed by the Company by reason of
death or disability, or the Optionee shall die
or become disabled while entitled to exercise any of the Options pursuant to
Section 3(a), the Optionee or, in the event of death, the executor or
administrator of the estate of the Optionee, or the Trustee of any trust
established by the Optionee, or the person or persons to whom the Options shall
have been validly transferred by the executor or administrator pursuant to will
or the laws of descent and distribution, or in the event of disability, the
person appointed by the Optionee, shall have the right, until the earlier of the
Expiration Date or twelve (12) months after the date of retirement or death, to
exercise the Options to the extent that the Optionee was entitled to exercise
them on the date of retirement or death, subject to any other limitation
contained herein on the exercise of the Options in effect on the date of
exercise.
(c) After the expiration of any exercise period described in
either of Section 3(a) or 3(b) hereof, the Options shall terminate together with
all of the Optionee's rights hereunder, to the extent not previously exercised.
4. Repurchase of Stock by Company. If the Optionee's
employment with the Company is terminated for any reason during a time when the
Stock is not listed or quoted on a national securities exchange or in the
over-the-counter market, the Company shall have the right, within 120 days of
the date of such termination, to purchase all of the Options and all shares of
Stock acquired upon exercise of any Option. In such case the purchase shall be
made at the "Fair Market Value" (as defined in the Plan) of a share of Stock on
the purchase date (less, in the case of the purchase of any Option, the
applicable Option Price).
5. Non-Transferable. Unless otherwise determined by the
Committee (as defined in the Plan), the Optionee may not transfer the Options
except by will or the laws of descent and distribution and Options shall be
exercisable during the Optionee's lifetime only by the Optionee or his guardian,
trustee or legal representative; provided, however, that Optionee shall have the
right to transfer such options to any trust in which Optionee is the beneficiary
during his lifetime; further, provided, however, that any such transfer must be
permissible under the rules and regulations governing Form S-8, as promulgated
by the Securities Exchange Commission. No purported assignment or transfer of
the Options, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise (except by will or the laws of
descent and distribution), shall vest in the assignee or transferee any interest
or right herein whatsoever, except for permitted transfers to any trust in which
Optionee is the beneficiary during the Optionee's lifetime.
6. Adjustments and Corporate Reorganizations. If one of the
events set forth in Section 14(a) of the Plan shall occur, the Committee shall
conclusively determine the appropriate adjustments, if any, to the number and
class of shares of Stock which are subject to outstanding Options and the Option
price therefor, if applicable. (a) If, by reason of such event, Optionee shall
be entitled to exercise an Option with respect to new, additional or different
shares of stock or securities, such new, additional or different shares shall
thereupon be subject to all of the conditions which were applicable to the
shares of Stock subject to the Option, as the case may be, prior to such event.
7. Exercise: Payment For and Delivery of Stock. (a) The
Options shall be exercised by delivering written notice to the Company stating
the number of shares of Stock to be purchased, the person or persons in whose
name the shares of Stock are to be registered and
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each such person's address and social security number. Such notice shall not be
effective unless accompanied by the full Option price for all shares to be
purchased, and any applicable withholding (as described below). The Option price
shall be payable in cash, stock or by such other means as shall be acceptable to
the Committee in its discretion; provided that if the Optionee uses Stock in
payment of the exercise price, the shares so used must be considered "mature"
for purposes of generally accepted accounting principles, i.e., (i) been held by
the Optionee free and clear for at least six months prior to the use thereof to
pay part of an Option exercise price, (ii) been purchased by the Optionee on the
open market, or (iii) meet any other requirements for "mature" shares as may
exist on the date of the use thereof to pay part of an Option exercise price.
Payment in currency or by certified or cashier's check shall be considered
payment in cash. In the event that all or part of the Option price is paid in
shares of Stock, the shares used in payment shall be valued at their Fair Market
Value on the date of exercise of the Options.
(b) The Company's obligation to deliver shares of Stock upon
exercise of an Option is subject to the Optionee's satisfaction of all
applicable federal, state and local income and employment tax withholding
obligations. The Optionee shall satisfy such obligations by making a payment of
the requisite amount in cash, by check, by tendering shares of stock considered
"mature," valued at their Fair Market Value on the date of exercise, or by such
other means as shall be acceptable to the Committee in its discretion.
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
Payment would be subject to the Excise Tax, then the Executive shall be entitled
to receive an additional payment (the "Gross-Up Payment") in an amount such
that, after payment by the Executive of all taxes (and any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The
Company's obligation to make Gross-Up Payments under this Section 8 shall not be
conditioned upon the Executive's termination of employment.
(b) (i) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
Grant Thornton LLP, or such other nationally recognized certified public
accounting firm as may be designated by the Board (the "Accounting Firm"). The
Accounting Firm shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested
by the Company. In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting a change in control
which requires a determination under this Section 8, the Board may appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up
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Payment, as determined pursuant to this Section 8, shall be paid by the Company
to the Executive within 5 days of the receipt of the Accounting Firm's
determination. Except as provided in subparagraph 8(b)(ii), any determination by
the Accounting Firm shall be binding upon the Company and the Executive.
(ii) As a result of the uncertainty in the application of
Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments that will not have
been made by the Company should have been made (the "Underpayment"), or
that Gross-Up Payments will have been made by the Company that should
not have been made (the "Overpayments"), in each case consistent with
the calculations required to be made hereunder. In the event the
Company exhausts its remedies pursuant to Section 8(c) and the
Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive. If subsequent to the
making of any Payments by the Company the Accounting Firm determines
that an Overpayment has been made (whether on the basis of previous
error, erroneous facts, changes in law or otherwise), the Executive
shall promptly pay to the Company the amount of such Overpayment.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable, but no later than 10 business days after the Executive
is informed in writing of such claim. The Executive shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
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provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 11(c),
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that, if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties) imposed with respect to such
advance or with respect to any imputed income in connection with such advance;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder,
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 8, the
Company may, in its sole discretion, withhold and pay over to the Internal
Revenue Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of any Gross-Up Payment, and the Executive hereby
consents to such withholding.
(f) Definitions. The following terms shall have the following
meanings for purposes of this Section 8.
(i) "Excise Tax" shall mean the excise tax imposed by Section
4999 of the Code, together with any interest or penalties imposed with
respect to such excise tax.
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(ii) A "Payment" shall mean any payment or distribution in the
nature of compensation (within the meaning of Section 280G(b)(2) of the
Code) to or for the benefit of the Executive, whether paid or payable
pursuant to this Agreement or otherwise.
9. Rights as Stockholder. The Optionee or a transferee of the
Options shall have no rights as a stockholder with respect to any shares covered
by the Options until he shall have become the holder of record of such shares,
and, except as provided in Section 5 hereof, no adjustment shall be made for
dividends or distributions or other rights in respect of such shares for which
the record date is prior to the date upon which he shall become the holder or
record thereof.
10. Company; Optionee. (a) The term "Company" as used in this
Agreement with reference to employment or service as a consultant shall include
the Company and its Subsidiaries (as defined in the Plan), successors and
assigns.
(b) Whenever the word "Optionee" is used in any provision of
this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, or the person or
persons to whom the Options may be transferred by will or by the laws of descent
and distribution or otherwise, the word "Optionee" shall be deemed to include
such person or persons.
11. Requirements of Law. No certificate or certificates for
shares of Stock may be purchased, issued or transferred if the exercise hereof
or the issuance or transfer of such shares shall constitute a violation by the
Company or the Optionee of any (i) provision of any Federal, state or other
securities law, (ii) requirement of any securities exchange listing agreement to
which the Company may be a party, or (iii) other requirement of law or of any
regulatory body having jurisdiction over the Company. Any reasonable
determination in this connection by the Committee, upon notice given to the
Optionee, shall be final, binding and conclusive. In the event the Company is
unable to issue a certificate for shares of Stock issuable pursuant to the
exercise of the Options, the Optionee shall have the right to pursue any
available claim that he may have against the Company.
12. Notices. Any notice to be given to either party shall be
in writing and shall be given by hand delivery to such party or by registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Company in care of its Secretary at its principal office, and to the Optionee at
the address given beneath his signature hereto, or at such other address as
either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by
the addressee.
13. Non-Qualified Options. The Options granted hereunder are
not intended to be incentive stock options within the meaning of Section 422 of
the Code.
14. Binding Effect. Subject to Section 5 hereof, this
Agreement shall be binding upon the heirs, executors, administrators, successors
and permitted assigns of the parties hereto.
15. Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
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16. Plan. The terms and provisions of the Plan are
incorporated herein by reference. In the event of a conflict or inconsistency
between discretionary terms and provisions of the Plan and the express
provisions of this Agreement, this Agreement shall govern and control. In all
other instances of conflicts or inconsistencies or omissions, the terms and
provisions of the Plan shall govern and control. Any capitalized term not
defined herein shall have the meaning attributed thereto in the Plan.
IN WITNESS WHEREOF, the Company has granted this Option on the
date of grant specified above.
This instrument may be executed in any number of counterparts,
each of which shall be deemed to be an original, and such counterparts together
shall constitute one and the same instrument.
FRANK'S NURSERY & CRAFT, INC.
By:/s/ Michael D. McBride
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Name: Michael D. McBride
Title: Vice President and Secretary
ACCEPTED:
/s/ Steven S. Fishman
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Print Name: Steven S. Fishman
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Street Address
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City and State
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