Incentive Stock Option Agreement - Natrol Inc. and Laura Moore
Incentive Stock Option Agreement
under the Natrol, Inc.
1996 Stock Option and Grant Plan
Name of Optionee: Laura Moore
No./Class of Option Shares: 50 Shares of Common Stock
Grant Date: April 8, 1998
Expiration Date: April 8, 2008
Option Exercise Price/Share: $1040
Pursuant to the Natrol, Inc. 1996 Stock Option and Grant Plan, as amended
(the "Plan"), Natrol, Inc., a Delaware corporation (together with all successors
thereto, the "Company"), hereby grants to the person named above (the
"Optionee"), who is an officer or full-time employee of the Company or any of
its subsidiaries, an option (the "Stock Option") to purchase on or prior to the
expiration date specified above, or such earlier date as is specified herein,
all or any part of the number of shares of Common Stock, par value $0.01 per
share ("Common Stock"), of the Company indicated above (the "Option Shares"), at
the per share option exercise price specified above, subject to the terms and
conditions set forth in this Incentive Stock Option Agreement (the "Agreement")
and in the Plan. This Stock Option is intended to qualify as an "incentive stock
option" as defined in Section 422(b) of the Internal Revenue Code of 1986, as
amended from time to time (the "Code") to the extent permitted by applicable
law. To the extent that any portion of the Stock Option does not so qualify, it
shall be deemed a non-qualified stock option. All capitalized terms used herein
and not otherwise defined shall have the respective meanings set forth in the
Plan.
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1. Vesting and Exercisability.
(a) No portion of this Stock Option may be exercised until such
portion shall have vested.
(b) Except as set forth below and in Section 6, and subject to the
determination of the Compensation Committee of the Board of Directors of the
Company or the Board of Directors of the Company, as applicable (the
"Committee"), in its sole discretion to accelerate the vesting schedule
hereunder, this Stock Option shall be vested and exercisable with respect to the
following number of Option Shares on the respective dates indicated:
<TABLE>
<CAPTION>
Incremental/Aggregate Number
Of Option Shares Exercisable* Vesting Date
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<S> <C>
10/10 April 8, 1999
10/20 April 8, 2000
10/30 April 8, 2001
10/40 April 8, 2002
10/50 April 8, 2003
</TABLE>
Notwithstanding the foregoing, as of the effective date of any Sale Event
(as defined in Section 6), one half of each annual tranche of the Option Shares
listed above, i.e. 5 Shares per tranche (subject to adjustment as set forth in
Section 5), which is then unvested shall vest and be deemed vested. Further,
notwithstanding anything herein to the contrary but without limitation of
Section 6, in the event that this Stock Option is assumed or continued by the
Company in the sole discretion of the parties to a Sale Event and thereafter
remains in effect
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* Subject to Section 5.
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following such Sale Event as contemplated by Section 6, then this Stock Option
shall be deemed vested and exercisable in full upon the date on which the
Optionee's employment with the Company and its subsidiaries or successor entity
terminates if (i) such termination occurs within eighteen (18) months of such
Sale Event and (ii) such termination is by the Company without Cause (as defined
in the Plan as in effect on the date hereof) or by the Optionee for Good Reason
(as defined in the Plan as in effect on the date hereof), subject, however, to
the following sentence. Notwithstanding the foregoing, in the event that the
Company receives written advice from its independent public accountants in
connection with any transaction constituting a Sale Event to the effect that
vesting of this Stock Option under the circumstances contemplated by the
preceding sentence would preclude or otherwise adversely affect the ability of
the Company or any other party to such transaction to account for the same as a
"pooling of interests" within the meaning of APB No. 16 (or any successor
provision), which transaction would otherwise qualify for such accounting
treatment, then vesting of this Stock Option shall not accelerate on a
subsequent termination of the Optionee's employment within 18 months following a
Sale Event as contemplated by the preceding sentence.
(c) In the event that the Optionee's Service Relationship (as
hereinafter defined) with the Company and its subsidiaries terminates for any
reason or under any circumstances, including the Optionee's resignation,
retirement or termination by the Company, upon the Optionee's death or
disability, or for any other reason, regardless of the circumstances thereof,
this Stock Option shall no longer vest or become exercisable with respect to any
Option Shares not vested (or which do not vest) as of the date of such
termination from and after the date of such termination, and this Stock Option
may thereafter
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be exercised, to the extent it was vested and exercisable on such date of such
termination, until the Expiration Date contemplated by Section 1(d), except as
the Committee may otherwise determine. For purposes hereof, a "Service
Relationship" shall mean any relationship as an employee, part-time employee or
consultant of the Company or any subsidiary of the Company such that, for
example, a Service Relationship shall be deemed to continue without interruption
in the event the Optionee's status changes from full-time employee to part-time
employee or consultant.
(d) Once any portion of this Stock Option becomes vested and
exercisable, it shall continue to be exercisable by the Optionee or his or her
successors as contemplated herein at any time or times prior to the earlier of
(i) the date which is twelve months following the date on which the Optionee's
Service Relationship with the Company and its subsidiaries terminates due to
death or disability (as defined in Section 422(c)(6) of the Code) or for 90 days
following the date on which the Optionee's Service Relationship with the Company
terminates if the termination is due to any other reason or (ii) April 8, 2008,
subject to the provisions hereof, including, without limitation, Section 6
hereof which provides for the termination of unexercised options upon completion
of certain transactions as described therein (the earliest to occur of such
dates being referred to as the "Expiration Date"). The Committee shall have sole
discretion to determine the reason for the termination of the Optionee's Service
Relationship with the Company and its subsidiaries.
(e) It is understood and intended that this Stock Option is intended
to qualify as an "incentive stock option" as defined in Section 422 of the Code
to the extent permitted under applicable law. Accordingly, the Optionee
understands that in order to obtain the
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benefits of an incentive stock option under Section 422 of the Code, no sale or
other disposition may be made of Option Shares for which incentive stock option
treatment is desired within the one-year period beginning on the day after the
day of the transfer of such Option Shares to him or her, nor within the two-year
period beginning on the day after the grant of this Stock Option and further
that this Stock Option must be exercised within three months after termination
of employment (or twelve months in the case of death or disability) to qualify
as an incentive stock option. If the Optionee disposes (whether by sale, gift,
transfer or otherwise) of any such Option Shares within either of these periods,
he or she will notify the Company within thirty (30) days after such
disposition. The Optionee also agrees to provide the Company with any
information concerning any such dispositions required by the Company for tax
purposes. Further, to the extent Option Shares and any other incentive stock
options of the Optionee having an aggregate exercise price in excess of $100,000
vest in any year, such options will not qualify as incentive stock options.
2. Exercise of Stock Option.
(a) The Optionee may exercise only vested portions of this Stock
Option and only in the following manner: Prior to the Expiration Date (subject
to Section 6), the Optionee may deliver a Stock Option Exercise Notice (an
"Exercise Notice") in the form of Appendix A hereto indicating his or her
election to purchase some or all of the Option Shares with respect to which this
Stock Option has vested at the time of such notice. Such notice shall specify
the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or
more (if applicable) of the following methods: (i) in cash, by certified or bank
check or other
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instrument acceptable to the Committee; or (ii) if the closing of the first
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock of the Company to the public has occurred, then (A) through the
delivery (or attestation to ownership) of shares of Common Stock that have been
purchased by the Optionee on the open market or that have been held by the
Optionee for at least six months and are not subject to restrictions under any
plan of the Company, (B) by the Optionee delivering to the Company a properly
executed Exercise Notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the
Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements
of indemnity and other agreements as the Committee shall prescribe as a
condition of such payment procedure, or (C) a combination of (i), (ii)(A) and
(ii)(B) above. Payment instruments will be received subject to collection.
(b) Certificates for the Option Shares so purchased will be issued
and delivered to the Optionee upon compliance to the satisfaction of the
Committee with all requirements under applicable laws or regulations in
connection with such issuance. Until the Optionee shall have complied with the
requirements hereof and of the Plan, the Company shall be under no obligation to
issue the Option Shares subject to this Stock Option, and the determination of
the Committee as to such compliance shall be final and binding on the Optionee.
The Optionee shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares of stock subject to this Stock
Option unless and until
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this Stock Option shall have been exercised pursuant to the terms hereof, the
Company shall have issued and delivered the Option Shares to the Optionee, and
the Optionee's name shall have been entered as a stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full dividend and other
ownership rights with respect to such Option Shares, subject to the terms of
this Agreement.
(c) Notwithstanding any other provision hereof or of the Plan, no
portion of this Stock Option shall be exercisable after the Expiration Date,
including such date as is contemplated by Section 6 hereof.
3. Incorporation of Plan. Notwithstanding anything herein to the contrary,
this Stock Option shall be subject to and governed by all the terms and
conditions of the Plan.
4. Transferability. This Agreement is personal to the Optionee and is not
transferable by the Optionee in any manner other than by will or by the laws of
descent and distribution. This Stock Option may be exercised during the
Optionee's lifetime only by the Optionee (or by the Optionee's guardian or
personal representative in the event of the Optionee's incapacity). The Optionee
may elect to designate a beneficiary by providing written notice of the name of
such beneficiary to the Company, and may revoke or change such designation at
any time by filing written notice of revocation or change with the Company; such
beneficiary may exercise the Optionee's Stock Option in the event of the
Optionee's death to the extent provided herein. If the Optionee does not
designate a beneficiary, or if the designated beneficiary predeceases the
Optionee, the personal representative of the Optionee may exercise this Stock
Option to the extent provided herein in the event of the Optionee's death.
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5. Adjustment Upon Changes in Capitalization. The shares of stock covered
by this Stock Option are shares of Common Stock of the Company. Subject to
Section 6 hereof, if the shares of Common Stock as a whole are increased,
decreased, changed or converted into or exchanged for a different number or kind
of shares or securities of the Company or any successor entity (or a parent or
subsidiary thereof), whether through merger or consolidation, sale of all or
substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, combination of
shares, exchange of shares, change in corporate structure or the like, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares and in the per share exercise price of shares subject to any unexercised
portion of this Stock Option. In the event of any such adjustment in this Stock
Option, the Optionee thereafter shall have the right, subject to Section 6, to
purchase the number of shares under this Stock Option at the per share price, as
so adjusted, which the Optionee could purchase at the total purchase price
applicable to this Stock Option immediately prior to such adjustment, all
references herein to Common Stock shall be deemed to refer to the security that
is subject to acquisition upon exercise of this Stock Option and all references
to the Company shall be deemed to refer to the issuer of such security.
Adjustments under this Section 5 shall be determined by the Committee, whose
determination as to what adjustment shall be made, and the extent thereof, shall
be conclusive. No fractional shares of Common Stock shall be issued under the
Plan resulting from any such adjustment, but the Company in its discretion may
make a cash payment in lieu of fractional shares.
6. Effect of Certain Transactions. In the case of (a) the dissolution or
liquidation of the Company, (b) the sale of all or substantially all of the
assets of the Company on a
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consolidated basis to an another person or entity, (c) a merger, reorganization
or consolidation in which the holders of the Company's outstanding voting power
immediately prior to such transaction do not own a majority of the outstanding
voting power of the surviving or resulting entity immediately upon completion of
such transaction, (d) the sale of all of the outstanding stock of the Company to
an unrelated person or entity or (e) any other transaction where the owners of
the Company's outstanding voting power prior to such transaction do not own at
least a majority of the outstanding voting power of the relevant entity after
the transaction (in each case, a "Sale Event"), this Stock Option shall
terminate on the effective date of such transaction or event, unless provision
is made in such transaction in the sole discretion of the parties thereto for
the assumption or continuation by the Company of this Stock Option or the
substitution for this Stock Option of a new stock option of the successor person
or entity or a parent or subsidiary thereof, with appropriate adjustment as to
the number and kind of shares and the per share exercise price, as provided in
Section 5 of this Agreement. In the event of any transaction which will result
in such termination, the Company shall give to the Optionee written notice
thereof at least fifteen (15) days prior to the effective date of such
transaction. Until such effective date, the Optionee may exercise any portion of
this Stock Option which is or becomes vested as of such effective date (as
contemplated by Section 1(b)), but after such effective date, the Optionee may
not exercise this Stock Option unless it is assumed or substituted by the
successor entity (or a parent or subsidiary thereof) as provided above.
7. Withholding Taxes. The Optionee shall, not later than the date as of
which the exercise of this Stock Option becomes a taxable event for federal
income tax purposes, pay to the Company or make arrangements satisfactory to the
Committee for payment of any federal,
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state and local taxes required by law to be withheld on account of such taxable
event. Subject to approval by the Committee, the Optionee may elect to have such
tax withholding obligation satisfied, in whole or in part, by authorizing the
Company to withhold from shares of Common Stock to be issued or transferring to
the Company, a number of shares of Common Stock with an aggregate Fair Market
Value that would satisfy the withholding amount due. For purposes of this
Section 7 "Fair Market Value" on any given date means the last reported sale
price at which Common Stock is traded on such date or, if no Common Stock is
traded on such date, the next preceding date on which Common Stock was traded,
as reflected on the principal stock exchange or, if applicable, any other
national stock exchange on which the Common Stock is traded or admitted to
trading. The Optionee acknowledges and agrees that the Company or any subsidiary
of the Company has the right to deduct from payments of any kind otherwise due
to the Optionee, or from the Option Shares to be issued in respect of an
exercise of this Stock Option, any federal, state or local taxes of any kind
required by law to be withheld with respect to the issuance of Option Shares to
the Optionee.
8. Company's Right of Repurchase.
(a) Right of Repurchase. The Company shall have the right (the
"Repurchase Right") to repurchase some or all of the Option Shares which the
Optionee has elected to exercise from the Optionee, upon the occurrence of any
of the events specified in Section 8(b) below (the "Repurchase Event"). The
Repurchase Right may be exercised by the Company within 180 days following the
date of such event (the "Repurchase Period"). The Repurchase Right shall be
exercised by the Company by giving the holder written notice on or before the
last day of the Repurchase Period of its intention to exercise the Repurchase
Right,
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and, together with such notice, tendering to the holder an amount equal to the
greater of the option exercise price or the fair market value of the shares,
determined as provided in Section 8(c). The Company may assign the Repurchase
Right to one or more persons. Upon exercise of the Repurchase Right in the
manner provided in this Section 8(a), the Optionee shall deliver to the Company
the stock certificate or certificates representing the shares being repurchased,
duly endorsed and free and clear of any and all liens, charges and encumbrances.
If Option Shares are not purchased under the Repurchase Right, the
Optionee and his or her successor in interest, if any, will hold any such shares
in his or her possession subject to all of the provisions of this Section 8 and
Section 9 hereof.
(b) Company's Right to Exercise Repurchase Right. The Company shall
have the Repurchase Right in the event that any of the following events shall
occur:
(i) The termination of the Optionee's Service Relationship
with the Company and its subsidiaries for any reason
whatsoever, regardless of the circumstances thereof, and
including without limitation upon death, disability,
retirement, discharge or resignation for any reason,
whether voluntarily or involuntarily; or
(ii) The (x) filing of a voluntary petition under any
bankruptcy or insolvency law, or a petition for the
appointment of a receiver or the making an assignment
for the benefit of creditors, with respect to the
Optionee, or (y) the Optionee being subjected
involuntarily to a petition or assignment or to an
attachment or
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other legal or equitable interest with respect to his or
her assets, which involuntary petition or assignment or
attachment is not discharged within 60 days after its
date and (z) the Optionee being subject to a transfer of
Option Shares by operation of law, except by reason of
death.
(c) Determination of Fair Market Value. The fair market value of the
Option Shares shall be, for purposes of this Section 8, determined as of the
date of the Repurchase Event by an appraiser, investment banker or other entity
reasonably acceptable to both the Company and the Optionee.
(d) Expiration of Company's Repurchase Right. The Repurchase Right
shall remain in effect until the closing of the first public offering of the
Company's equity securities registered under the Securities Act of 1933, as
amended, or any successor statute, or such other event as a result of which
outstanding equity securities of the Company (or any successor entity) shall be
publicly traded (an "Initial Public Offering").
9. Company's Right of First Refusal.
(a) Exercise of Right. If the Company does not elect to purchase any
Option Shares within the period specified in Section 8(a) and thereafter the
Optionee desires to transfer all or any part of the Option Shares to any person
other than the Company (an "Offeror"), the Optionee shall: (i) obtain in writing
an irrevocable and unconditional bona fide offer (the "Offer") for the purchase
thereof from the Offeror; and (ii) give written notice (the "Option Notice") to
the Company setting forth the Optionee's desire to transfer such shares, which
Option Notice shall be accompanied by a photocopy of the Offer and shall set
forth the name
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and address of the Offeror and the price and terms of the Offer. Upon receipt of
the Option Notice, the Company shall have an assignable option to purchase any
or all of such Option Shares (the "Company Option Shares") specified in the
Option Notice, such option to be exercisable by giving, within 10 days after
receipt of the Option Notice, a written counter notice to the optionee. If the
Company elects to purchase any or all of such Company Option Shares, it shall be
obligated to purchase, and the Optionee shall be obligated to sell to the
Company, such Company Option Shares at the price and terms indicated in the
Offer within 30 days from the date of delivery by the Company of such counter
notice.
(b) Sale of Option Shares to Offeror. The Optionee may, for 60 days
after the expiration of the 10-day option period as set forth in Section 9(a),
sell to the Offeror, pursuant to the terms of the Offer, any or all of such
Company Option Shares not purchased or agreed to be purchased by the Company or
its assignee. If any or all of such Company Option Shares are not sold pursuant
to an Offer within the time permitted above, the unsold Company Option Shares
shall remain subject to the terms of this Section 9.
(c) Adjustments for Changes in Capital Structure. If there shall be
any change in the Common Stock of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination or
exchange of shares, or the like, the restrictions contained in this Section 9
shall apply with equal force to additional and/or substitute securities, if any,
received by the Optionee in exchange for, or by virtue of his or her ownership
of, Option Shares.
(d) Failure to Deliver Option Shares. If the Optionee fails or
refuses to deliver on a timely basis duly endorsed certificates representing
Company Option Shares to be
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sold to the Company or its assignee pursuant to this Section 9, the Company
shall have the right to deposit the purchase price for such Company Option
Shares in a special account with any bank or trust company, giving notice of
such deposit to the Optionee, whereupon such Company Option Shares shall be
deemed to have been purchased by the Company. All such monies shall be held by
the bank or trust company for the benefit of the Optionee. All monies deposited
with the bank or trust company but remaining unclaimed for two years after the
date of deposit shall be repaid by the bank or trust company to the Company on
demand, and the Optionee shall thereafter look only to the Company for payment.
The Company may place a legend on any certificate for Option Shares delivered to
the Optionee reflecting the restrictions on transfer provided in this Section 9.
(e) Expiration of Company's Right of First Refusal. The first
refusal rights of the Company set forth above shall remain in effect until the
closing of an Initial Public Offering.
10. Miscellaneous Provisions.
(a) Equitable Relief. The parties hereto agree and declare that
legal remedies may be inadequate to enforce the provisions of this Agreement and
that equitable relief, including specific performance and injunctive relief, may
be used to enforce the provisions of this Agreement.
(b) Change and Modifications. This Agreement may not be orally
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Optionee.
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(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
(d) Headings. The headings are intended only for convenience in
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
(e) Saving Clause. If any provision(s) of this Agreement shall be
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
(f) Notices. All notices, requests, consents and other
communications shall be in writing and be deemed given when delivered
personally, by telex or facsimile transmission or when received if mailed by
first class registered or certified mail, postage prepaid. Notices to the
Company or the Optionee shall be addressed as set forth underneath their
signatures below, or to such other address or addresses as may have been
furnished by such party in writing to the other.
(g) Benefit and Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors, permitted assigns, and legal representatives. The Company has the
right to assign this Agreement, and such assignee shall become entitled to all
the rights of the Company hereunder to the extent of such assignment.
(h) Counterparts. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
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The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned.
Dated: April 8, 1998
NATROL, INC.
By: ---------------------------------
Name: Elliott Balbert
Title: President
Address: Natrol, Inc.
Attention: President
21411 Prairie Street
Chatsworth, CA 91311
The foregoing Agreement is hereby accepted and the terms and conditions
thereof hereby agreed to by the undersigned.
Dated: OPTIONEE:
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SPOUSE'S CONSENT
I acknowledge that I have read the
foregoing Incentive Stock Option Agreement
and understand the contents thereof.
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Optionee's Address:
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DESIGNATED BENEFICIARY:
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Beneficiary's Address:
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Appendix A
STOCK OPTION EXERCISE NOTICE
Natrol, Inc.
Attention: Chief Financial Officer
21411 Prairie Street
Chatsworth, CA 91311
Dear Sirs:
Pursuant to the terms of my stock option agreement dated __________ (the
"Agreement") under the Natrol, Inc. 1996 Stock Option and Grant Plan, I, [Insert
Name] ________________, hereby [Circle One] partially/fully exercise such option
by including herein payment in the amount of $______ representing the purchase
price for [Fill in number of Option Shares] _______ option shares. I have chosen
the following form(s) of payment:
[ ] 1. Cash
[ ] 2. [Certified or Bank] Check payable to Natrol, Inc.
[ ] 3. Other (as described in the Agreement (please describe))
---------.
Sincerely yours,
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Please Print Name: