EXHIBIT 10.10
KIRKLAND'S, INC. 1996 EXECUTIVE INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN
(AS AMENDED THROUGH APRIL 17, 2002)
Section 1. Purposes.
The purposes of the Plan are to recognize the accomplishments of and
compensate selected employees who contribute to the development and success of
Kirkland's, Inc. (the "Company") and to encourage stock ownership by such
employees by issuing options to such persons to acquire or increase their
proprietary interest in the Company. The options issued pursuant to this Plan
are intended to constitute either incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
non-qualified stock options, at the discretion of the Board of Directors, as
determined at the time of grant.
Section 2. Definitions.
"Aggregate Number" means, with respect to an Option, the number of
shares of Common Stock issuable by the Company upon exercise of the Option
(whether or not then vested), as such number may be adjusted from time to time
pursuant to Section 6(h) hereof.
"Board of Directors" means the Board of Directors of the Company, as
constituted from time to time.
"Change of Control" means the sale, transfer, assignment or other
disposition (including by merger or consolidation, but excluding pursuant to a
Public Offering) by Stockholders of the Company, in one transaction or a series
of related transactions, of more than fifty percent (50%) of the voting power
represented by the then outstanding Stock to one or more Persons other than any
such sales, transfers, assignments or other dispositions by the Stockholders to
(i) other persons who are then Stockholders of the Company pursuant to exercise
(in their own right or as assignee) of rights of first refusal with respect to
such Shares, (ii) any person the transfer to whom or which is not restricted by
the terms of the Shareholders Agreement because such transferee is an Affiliate
or Permitted Transferee of such transferor (as such terms are defined in the
Shareholders Agreement).
"Common Stock" means common stock of the Company.
"Convertible Securities" means securities convertible into or
exchangeable for shares of Common Stock.
"Disabled" means, with respect to an Optionee, (i) when the Optionee is
determined to be disabled within the meaning of any long-term disability policy
or program sponsored by the Company covering the Optionee, as in effect as of
the date of such determination, or (ii) if no such policy or program shall be in
effect, when the Optionee is prevented by a physical or mental impairment from
engaging in any substantial gainful activity for a period of at least six (6)
months or when such physical or mental impairment is likely to result in death.
The determination of whether an Optionee is Disabled pursuant to (ii) above
shall be determined by the Board of Directors, whose determination shall be
conclusive; provided that, (i) if an Optionee is bound by the terms of an
Employment Agreement between
the Optionee and the Company, whether the Optionee is "Disabled" for purposes of
the Plan shall be determined in accordance with the procedures set forth in said
Employment Agreement, if such procedures are therein provided; and (ii) an
Optionee bound by such an Employment Agreement shall not be determined to be
Disabled under the Plan any earlier than he would be determined to be disabled
under his Employment Agreement.
"Fair Market Value Per Share" means the fair market value per share of
Common Stock as determined by the Option Committee or the Board of Directors in
good faith.
"Option" means an option to purchase Common Stock that is granted
pursuant to this Plan.
"Optionee" means an employee to whom an Option is granted.
"Person" means an individual, partnership, corporation, joint venture,
association, trust, limited liability company, limited liability partnership,
unincorporated association, other entity or association.
"Plan" means this Kirkland's, Inc. 1996 Executive Incentive and
Non-Qualified Stock Option Plan.
"Sale of the Company" means a sale, transfer, assignment or other
disposition (including by merger or consolidation) of all of the Stock of the
Company, or of all or substantially all of the assets of the Company, or a
liquidation or dissolution of the Company.
"Stock" means the Common Stock issued by the Company and from time to
time outstanding.
"Stock Option Agreement" means the agreement evidencing the grant of an
Option, which is more fully described in Section 6 hereof.
"Stockholders" mean the holders of Stock from time to time outstanding.
"Shareholders Agreement" shall mean the Shareholders Agreement dated as
of June 12, 1996 among the Company and its shareholders, which agreement
restricts the transferability of the Stock as well as affords certain rights and
imposes certain obligations on the holders thereof.
Section 3. Administration.
a. The Plan shall be administered by the Board of Directors or a
committee appointed by the Board of Directors (the "Option Committee"). The
Option Committee shall be composed of three members of the Board of Directors
and shall be appointed by the Board of Directors. Every member of the Option
Committee shall be a "Non-Employee Director" within the meaning of Rule 16b-3 of
the Securities Exchange Act of 1934.
b. Except as provided in the last sentence of this subparagraph
(b), all determinations under the Plan shall be made by a majority of the Option
Committee or the Board
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of Directors at a duly convened meeting where at least a quorum is present
(including by telephone contact). Any decision or determination reduced to
writing and signed by all of the members of the Option Committee or the Board of
Directors shall be fully effective as if it had been made by a majority vote at
a meeting duly called and convened.
c. Except to the extent otherwise provided in the Plan, the
Option Committee or the Board of Directors shall have the authority to interpret
the Plan, to prescribe, amend and rescind rules regarding it, and to make all
other determinations necessary or advisable for the administration of the Plan.
Any determination made pursuant to this provision shall be final.
d. Notwithstanding anything herein to the contrary, no member of
the Option Committee or the Board of Directors shall be liable for any good
faith determination, action, or failure to act in connection with the Plan or
any grant hereunder.
Section 4. Eligibility.
Options may be granted to any employee (including an employee who is
also an officer or a member of the Board of Directors) of the Company. Optionees
shall be selected by the Option Committee or the Board of Directors.
Section 5. Common Stock Subject to Option.
The shares subject to any Option will be treasury shares of Common
Stock. Options will not be granted with respect to more than 23,500 shares of
Common Stock, subject, however, to adjustment as provided in Section 6(h)(i)
hereof.
Section 6. Terms and Conditions of Options.
Each Option granted pursuant to this Plan shall be authorized by the
Option Committee or the Board of Directors and shall be evidenced and governed
by a Stock Option Agreement in such form as the Option Committee or the Board of
Directors may from time to time determine. Each Stock Option Agreement shall
include the information required in subsections (a) through (f), (g)(i) and
(h)(ii) of this Section 6, may include information contained in other
subsections of this Section 6, and shall otherwise be in conformity with and
shall incorporate by reference the other terms and conditions of the Plan.
a. Number of Shares. The number of shares of Common Stock
subject to the Option shall be stated in the Stock Option Agreement.
b. Option Price. The price per share of Common Stock payable on
the exercise of the Option shall be stated in the Stock Option Agreement. In the
case of the grant of an incentive stock option, the exercise price shall not be
less than the fair market value of the stock at the time such Option is granted;
except that, in the event an Option is granted to a person who is a "10-percent
shareholder" within the meaning of Section 422 of the Code, the Option price
shall not be less than one hundred ten percent (110%) of the fair market value
of the Common Stock subject to the Option at the time such Option is granted.
The fair market value
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of Common Stock of the Company shall be determined in good faith by the Option
Committee or the Board of Directors.
c. Form of Option. The Stock Option Agreement shall state
whether the Option granted is an incentive stock option or a non-qualified stock
option.
d. Vesting. The Options granted shall mature and become
exercisable in whole or in part in accordance with a vesting schedule set forth
in the Stock Option Agreement. Notwithstanding the above, and subject to such
vesting conditions as may be set forth in the Stock Option Agreement, in the
event of a Sale of the Company or a Change in Control, all Options which have
not yet vested shall vest, mature and become exercisable in whole or in part
immediately prior to the event constituting the Sale of the Company or Change of
Control, provided that such accelerated vesting shall occur sufficiently prior
to any such event so as to allow Optionee to exercise any rights he may have in
respect of such Options and the stock obtainable upon exercise thereof which
rights arise by reason of such event. Furthermore, each Option shall vest,
mature and become exercisable eight (8) years from the date it was granted, if
such Option has not already become vested or been terminated or forfeited prior
to that date.
e. Payment. The price payable on the exercise of the Option in
whole or in part shall be equal to the purchase price per Share (provided
pursuant to clause (b) above) multiplied by the number of shares as to which the
Option is exercised, and shall be paid in full upon exercise of any Option in
cash, by check or by delivery to the Company of shares of the Company's Stock
having a fair market value equal to the aggregate exercise price of the shares
of Common Stock being purchased upon exercise of the Option; provided that
shares of Common Stock acquired upon exercise of incentive stock options may not
be so used without the express written consent of the Board of Directors (or
Option Committee) and this Optionee if to do so would violate the holding period
requirements for such Stock under Section 422 of the Code.
f. Term and Exercise of Options.
(i) Options granted hereunder shall be exercisable at such
times as the Option Committee or the Board of Directors shall designate in
accordance with the terms and provisions of this Plan, such designation to be
reflected in the Option Agreement.
(ii) An Option shall be exercisable by written notice which
shall state the number of shares of Common Stock in respect of which the Option
is being exercised. Such notice shall be addressed to the Secretary of the
Company and shall be accompanied by a check for the aggregate amount of the
exercise price payable to the Company. An Option shall be treated as exercised
on the date that proper notice of exercise accompanied by the aggregate exercise
price is received by the Company.
g. Termination of Options.
(i) Except as otherwise provided in Subsection 6(g)(ii) of
this Plan, Options granted hereunder shall terminate at such time as the Option
Committee or the Board of Directors shall designate, such designation to be
reflected in the Stock Option
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Agreement; provided, however, that if a Stock Option Agreement does not specify
the time at which an Option will terminate, such Option shall terminate three
(3) months following the date as of which the Optionee ceases to be employed by
the Company for reasons other than the Optionee's death or becoming Disabled.
(ii) Upon the death of an Optionee while in the employ of the
Company, or if an Optionee becomes Disabled while in the employ of the Company,
Options held by such Optionee shall terminate on the date that is twelve (12)
months after the date the Optionee dies or becomes Disabled; provided, however,
that an Optionee of incentive stock options shall be considered to be Disabled
for purposes of this sentence only if he is Disabled within the meaning of
Section 22(e)(3) of the Code. If an Optionee of incentive stock options is
Disabled within the meaning of this Plan, but not within the meaning of Section
22(e)(3), the incentive stock options held by such Optionee shall terminate
three (3) months after the Optionee is terminated from his employment by reason
of having become Disabled. Options which are exercisable on the date the
Optionee dies or becomes Disabled shall be exercisable by the Optionee, his or
her executor(s) or administrator(s) or legal representative for a period of
twelve (12) months (in the event of death) or three (3) months (in the event of
disability) from the date such Optionee dies or becomes Disabled, subject to the
Optionee's, executor's or administrator's obligation to sell the Common Stock
acquired upon such exercise to the Company pursuant to the terms of the
Shareholders Agreement.
h. Anti-Dilution Adjustments to Aggregate Number.
(i) Subject to required action by the stockholders, if any,
the number of Shares as to which Options may be awarded under this Plan and the
number of Shares subject to outstanding Options and the option prices thereof
shall be adjusted proportionately for any increase or decrease in the number of
outstanding shares of Common Stock of the Company resulting from stock splits,
reverse stock splits, stock dividends, reclassifications and recapitalizations.
(ii) The Aggregate Number shall be subject to any
anti-dilution protection adjustments set forth in the Stock Option Agreement.
i. Other Terms. Notwithstanding any other provision of this
Plan:
(i) No Option shall be granted under this Plan after ten (10)
years after the date the Plan is adopted.
(ii) No Option granted under this Plan shall be exercisable
after ten (10) years from the date it is granted.
(iii) No Option granted under this Plan that is an incentive
stock option shall be exercisable later than five (5) years from the
date it is granted if the Optionee thereof is a "10-percent shareholder"
within the meaning of Section 422 of the Code.
(iv) No Option granted to any Optionee shall be treated as an
incentive stock option to the extent such Option would cause the
aggregate fair market value (determined as of the date of grant of each
such Option) of the shares of Common Stock with
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respect to which incentive stock options are exercisable by such
Optionee for the first time during any calendar year to exceed one
hundred thousand dollars ($100,000). For purposes of determining whether
an incentive stock option would cause the aggregate fair market value of
the shares to exceed the one hundred thousand dollars ($100,000)
limitation, such incentive stock options shall be taken into account in
the order granted. For purposes of this subsection (iv), incentive stock
options include all incentive stock options granted to Optionees under
this Plan and all other plans of the Company.
(v) Options granted pursuant to this Plan may be exercised in
any order elected by the Optionee whether or not the Optionee holds any
unexercised Options under this Plan or any other plan of the Company.
j. Rights as a Stockholder. The Optionee shall have no rights as
a Stockholder with respect to any shares of Common Stock subject to an Option
until such Option has been exercised and a certificate evidencing the shares
purchased upon exercise has been issued to him and the condition of Section 6
(m) hereof are satisfied.
k. Modification, Extension and Renewal of Option. Subject to the
terms and conditions of this Plan, the Board of Directors may modify, extend or
renew an Option, or accept the surrender of an unexercised Option, provided that
no incentive stock option may be modified, extended, or renewed if such action
would cause it to cease to be an incentive stock option. Notwithstanding the
foregoing, no modification of an Option shall be made to the extent it adversely
affects the Optionee without such Optionee's consent.
l. Purchase for Investment. The issuance of shares of Common
Stock on exercise of an Option shall (i) be conditioned on obtaining appropriate
representations and warranties of the Optionee that the purchase of shares
thereunder will be for investment, and not with a view to the public resale or
distribution thereof, unless the shares subject to the Option are registered
under the Securities Act of 1933, as amended (the "Act"), and (ii) comply with
any other law, regulation or rule applicable thereto. Unless the shares subject
to the Option are registered under the Act, the Optionee shall acknowledge that
the shares purchased on exercise of the Option are not registered under the Act
and may not be sold or otherwise transferred unless the shares have been
registered under the Act, or unless counsel satisfactory to the Company provides
a written opinion that the sale or other transfer is exempt from registration
under the Act, and is in compliance with any other applicable law, including all
applicable state securities laws. Certificates evidencing shares of Common Stock
purchased upon exercise of Options shall contain a legend in substantially the
following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW TO
DISTRIBUTION OR RESALE AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED
OF, BY GIFT OR OTHERWISE, OR IN ANY WAY ENCUMBERED
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WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE LAWS, OR A
SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO KIRKLAND'S, INC. THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND UNDER APPLICABLE STATE
LAWS. MOREOVER, THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AND RESTRICTED BY THE PROVISIONS OF THE SHAREHOLDERS AGREEMENT DATED
JUNE 12, 1996, COPIES OF WHICH WILL BE FURNISHED BY KIRKLAND'S, INC.
UPON WRITTEN REQUEST AND WITHOUT CHARGE, AND ALL OF THE PROVISIONS OF
WHICH ARE INCORPORATED BY REFERENCE IN THIS CERTIFICATE.
m. Shareholders Agreement. Notwithstanding any other provision
of this Plan, the Company shall not issue any shares of Common Stock upon the
exercise of an Option unless the Optionee executes (i) a counterpart to the
Shareholders Agreement, and (ii) a counterpart to the Registration Rights
Agreement, in each case among the Company, its shareholders and holders of
warrants.
Section 7. No Right to Employment.
No individual shall have the right to continue in the employment of the
Company by reason of the grant of any Option under this Plan. An Optionee whose
employment is terminated shall have no rights against the Company by reason of
the termination of such Option.
Section 8. Term of Plan.
Options may be granted from time to time within a period of ten (10)
years after the date the Plan is effective.
Section 9. No Obligation to Exercise Option.
The granting of an Option does not impose any obligation upon the
Optionee to exercise such Option.
Section 10. Amendment of the Plan.
Insofar as permitted by law and the Plan, the Board of Directors may
from time to time suspend or discontinue the Plan or revise or amend it in any
respect whatsoever; provided, however, that no such suspension, discontinuance,
revision or amendment that would constitute a diminution in rights with respect
to any Option then outstanding may be accomplished without the consent of the
Optionee; and provided further, that no suspension, discontinuance, revision or
amendment may change the aggregate number of shares for which Options may be
granted, change the designation of the class of individuals eligible to receive
Options or decrease the price at which Options may be granted without the
approval of the Stockholders.
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Section 11. Approval of Stockholders.
This Plan shall become effective on the date that it is adopted by the
Board of Directors; provided, however, that the Plan and all Options and Stock
Option Agreements granted under the Plan shall become null and void, ab initio,
if the Plan is not approved by a majority of the holders of the Company's
outstanding Common Stock within one year (365 days) of its adoption by the Board
of Directors.
Section 12. Forfeiture.
Notwithstanding any other provision of this Plan, if the Board of
Directors makes a finding, after full consideration of the facts presented on
behalf of both the Company and the Optionee, that the Optionee (i) has engaged
in conduct involving any type of disloyalty to the Company or willful misconduct
with respect to the Company, including without limitation, fraud, embezzlement,
theft, or proven dishonesty in the course of his employment, (ii) has been
convicted of a felony, or (iii) has disclosed, without the prior written consent
of the Company, to any third party or used for his benefit, or for any purpose
other than the exclusive benefit of the Company, any confidential, proprietary,
business and technical information or trade secrets of the Company or of any
subsidiary or Affiliate of the Company, which is revealed, obtained or developed
in the course of Optionee's employment with the Company, then all unexercised
Options shall terminate on the date of such finding. In the event of such a
finding, in addition to immediate termination of all unexercised Options, the
Optionee shall forfeit all Option shares for which the Company has not yet
delivered share certificates to the Optionee and the Company shall refund to the
Optionee the purchase price therefor paid to it upon exercise of the Option, if
any. Notwithstanding anything herein to the contrary, the Company may withhold
delivery of share certificates pending the resolution of any inquiry that could
lead to a finding resulting in forfeiture.
Section 13. Transferability.
No Option shall be assignable or transferable otherwise than by will or
by the laws of descent and distribution. During the lifetime of the Optionee,
his Options shall be exercisable only by him, or, in the event such Optionee is
Disabled, by his legal representative.
Section 14. Application of Funds.
The proceeds received by the Company from the sale of shares pursuant to
the exercise of Options shall be used for general corporate purposes.
Section 15. Withholding.
Anything to the contrary herein notwithstanding, all payments required
to be made or Stock required to be issued by the Company hereunder to an
Optionee, his legal representative, heir or devisee shall be subject to the
withholding of such amounts as the Company may determine that it is required to
withhold pursuant to any applicable federal, state or local law or regulation.
Optionee may, at his option, pay to Company cash in the amount of such
withholding in lieu of shares being withheld upon Optionee's exercise to pay
such withholding.
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