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JENNIFER CONVERTIBLES INC | Jennifer Convertibles, Inc

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Governing Law: New York     Date: 2/28/2011
Industry: Retail (Specialty)     Sector: Services

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Exhibit 10.16




THIS STAND-ALONE STOCK OPTION AGREEMENT (this “Agreement”) dated as of the 22 nd day of February, 2011 by and between Jennifer Convertibles, Inc. (the “Company), having its principal place of business at 417 Crossways Park Drive, Woodbury, New York 11797 and Rami Abada (the “Optionee”).




WHEREAS , the Optionee and the Company have executed that certain Employment Agreement dated February 22, 2011 (the “Employment Agreement”);


WHEREAS , pursuant to the terms of the Employment Agreement, on the date hereof the Company’s Board of Directors (the “Board”) granted to the Optionee, a nonqualified stock option to purchase all or any part of 50,000 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), subject to and upon the terms and conditions set forth herein;


NOW, THEREFORE , in consideration of the mutual promises and covenants made herein and the mutual benefits to be derived herefrom and for other good and valuable consideration, the receipt of which is hereby acknowledged,1 e parties agree as follows:


1. Grant of Option . This Agreement evidences the Board’s grant to the Optionee of the right and option to purchase, subject to and on the terms and conditions set forth herein, all or any part of 50,000 shares of the Company’s Common Stock (the “Shares”) at an exercise price per Share of $14.44 (the “Option”), exercisable from time to time, subject to the provisions of this Agreement, prior to 5:00 p.m., New York City time, on the Expiration Date. The Expiration Date will be (x) at all times beginning thirty days after the listing of the Company’s common stock on NASDAQ or another national securities exchange, the earlier of three years from the date of Optionee’s final day of employment by the Company and August 31, 2018 or (y) at all other times, the earlier of five years from the date of Optionee’s final day of employment by the Company and August 31, 2018, in either case unless earlier terminated pursuant to Section 8.


2. Exereisability of Option . Subject to Section 1 and Section 8 hereof, the Option will vest and become exercisable in accordance with the following schedule: twenty percent (20%) shall vest on August 27, 2011, twenty percent (20%) shall vest on August 26, 2012, and twenty percent (20%) shall vest on August 31, 2013, subject in each case to the Optionee being employed by the Company on each such respective date. An additional twenty percent (20%) of the Options shall vest on each of August 31, 2012 and August 31, 2013, respectively, provided Optionee is employed by the Company on each of those dates, and provided the Company meets or exceeds 85% of the EBITDA forecasted in the Company’s annual budget approved by the Board in each respective fiscal year 2012 and 2013 as further set forth in the Employment Agreement.


3. Method of Exercise of Option .


3.1 Method of Exercise . The Option to the extent then exercisable may be exercised in whole or in part by giving written notice to the Company specifying the number of Shares to be purchased, accompanied by payment in full of the purchase price, in cash, or by check or such other instrument or form of consideration as may be acceptable to the Board in its sole discretion. Notwithstanding the forgoing, the Optionee may not take any actions that are prohibited by the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the Securities and Exchange Commission or any agency thereunder. The Optionee shall have the right to dividends and other rights of a stockholder with respect to the Shares purchased upon exercise of the Option at such time as the Optionee (a) has given written notice of exercise and has paid in full for such Shares, and (b) has satisfied such conditions that may be imposed by the Company with respect to the withholding of taxes.






3.2 Fair Market Value . “Fair Market Value” means the value as determined by the Board in a manner consistent with the provisions of the United States Internal Revenue Code of 1986, as amended. Anything in this Section 3.2 to the contrary notwithstanding, in no event shall the purchase price of a share of Common Stock be less than the minimum price permitted under the rules and policies of any national securities exchange on which the shares of Common Stock are listed.


4. Tax Withholding Upon any exercise of the Option in whole or in part, the Company shall have the right at its option to (a) require the Optionee (or personal representative or beneficiary, as the case may be) to pay ox provide for payment of the amount of any taxes which the Company may be required to withhold with respect to the Option or (b) deduct from any amount payable in cash the amount of any taxes which the Company may be required to withhold with respect to such cash payment. In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock, the Board may in its sole discretion grant to the Optionee the right to elect, pursuant to such rules and subject to such conditions as the Board may establish, to have the Company reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares valued at their then Fair Market Value to satisfy such withholding obligation.


5. No Transferability; Limited Exception to Transfer Restrictions . The Option is not transferable and may be exercised solely by the Optionee during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution. The Board, in its sole discretion, may permit a transfer of the Option in whole or in part to (a) a trust for the benefit of the Optionee, (b) a member of the Optionee’s immediate family (or a trust for his or her benefit) or (c) pursuant to a qualified domestic relations order. Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject to execution, attachment or similar process, the Option in whole or in part contrary to the provisions hereof shall be void and ineffective and shall give no right to the purported transferee.


6. No Employment Rights .   Nothing contained in this Agreement shall confer upon the Optionee any right to continue in the employ or other service of the Company or any of its subsidiaries, nor constitute any contract or agreement of employment or other service, nor shall interfere in any way with the right of the Company to change the Optionee’s compensation or other benefits or to terminate the employment of the Optionee, with or without cause; provided , however , that nothing contained in this Agreement shall adversely affect any independent contractual right of the Optionee, including but not limited to the Optionee’s rights under the Employment Agreement, without his consent thereto.






7. Regulations .   This Agreement and the grant and exercise of the Option hereunder, and the obligation of the Company to sell and deliver shares under the Option shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies, national securities exchanges and interdealer quotation systems as may be required. Additionally, notwithstanding any other provision in this Agreement, the Option may not be exercised in whole or in part unless and until the Shares to be issued upon the exercise thereof have been registered under the Securities Act of 1933, as amended, and applicable state securities laws, or are, in the opinion of counsel to the Company, exempt from such registration in the United States. The Company shall not be under any obligation to register under applicable federal or state securities laws any Shares to be issued upon the exercise of the Option granted hereunder in order to permit the exercise of the Option in whole or in part and the issuance and sale of the Shares subject to the Option, although the Company may in its sole discretion register such Shares at such time as the Company shall determine. If the Company chooses to comply with such an exemption from registration, the Shares to be issued upon the exercise of the Option may, at the direction of the Board, bear an appropriate restrictive legend restricting the transfer or pledge of the Shares represented thereby, and the Board may also give appropriate stop transfer instructions with respect to the Shares to the Company’s transfer agent. Additionally, the Optionee understands and acknowledges that he is subject to the Company’s rules regarding insider trading contained in the Company’s Code of Conduct or otherwise.


8. Adjustment and Termination upon Certain Events .


8.1 Adjustments . If there shall occur any extraordinary dividend or other extraordinary distribution in respect of the Common Stock (whether in the form of cash, Common Stock, other securities, or other property), or any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, reorganization, merger, combination, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other securities of the Company, or there shall occur any similar, unusual or extraordinary corporate transaction or event in respect of the Common Stock or a sale of substantially all the assets of the Company as an entirety, then the Board shall, in such manner and to such extent (if any) as it, in its sole discretion, deems appropriate and equitable (a) proportionately adjust any or all of (i) the number and type of shares of Common Stock (or other securities) which thereafter may be made the subject of the Option, (ii) the number, amount and type of shares of Common Stock (or other securities or property) subject to the Option, (iii) the grant, purchase, or exercise price of the Option, (iv) the securities, cash or other property deliverable upon exercise of the Option, or (v) the performance standards appropriate to the Option, or (b) in the case of an extraordinary dividend or other distribution, recapitalization, reclassification, merger, reorganization, consolidation, combination, sale of assets, split up, exchange, or spin off, make provision for a cash payment or for the substitution or exchange of the Option for the cash, securities or property deliverable to the Optionee based upon the distribution or consideration payable to holders of the Common Stock of the Company upon or in respect of such event. In any of such events, the Board may take such action sufficiently prior to such event if necessary to permit the Optionee to realize the benefits intended to be conveyed with respect to the underlying shares in the same manner as is available to stockholders generally.






8.2 Change of Control . In the event there is a Change of Control (as defined below) any outstanding unvested Options will automatically vest and become exercisable on the date of such Change of Control. The Company may, in its sole discretion also determine that, upon the occurrence of a Change of Control, each outstanding Option (whether vested or unvested) shall terminate within a specified number of days after notice to the

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