Exhibit 10.1

 

FORM OF

INCENTIVE STOCK OPTION AGREEMENT

UNDER THE

ORCHIDS PAPER PRODUCTS COMPANY STOCK INCENTIVE PLAN

 

THIS AGREEMENT, made this ____ day of _______, 20__, by and between Orchids
Paper Products Company (“Company”), and __________________ (“Optionee”),

WITNESSETH THAT:

WHEREAS, the Board of Directors of the Company (“Board of Directors”) has
adopted the Orchids Paper Products Company Stock Incentive Plan (the “Plan”)
pursuant to which options covering shares of the common stock of the Company may
be granted to employees of the Company; and

WHEREAS, Optionee is now an employee of the Company; and

WHEREAS, the Company desires to grant to Optionee the option to purchase certain
shares of its stock under the terms of the Plan, which option is intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (“Code”);

NOW, THEREFORE, in consideration of the premises and of the mutual agreements
hereinafter set forth, it is covenanted and agreed as follows:

1.        Grant Subject to the Plan. This option is granted under and is
expressly subject to all the terms and provisions of the Plan, and the terms of
the Plan are incorporated herein by reference. Optionee hereby acknowledges
receipt of a copy of the Plan and agrees to be bound by all the terms and
provisions of the Plan. Terms not defined herein shall have the meaning ascribed
thereto in the Plan. The Committee referred to in Section 5 of the Plan
(“Committee”) has been appointed by the Board of Directors, and designated by
it, as the Committee to make grants of options.

2.         Grant and Terms of Option. Pursuant to action of the Committee, the
Company grants to Optionee, effective _________, 20__ (“Date of Grant”), the
option to purchase all or any part of ___________ (________) shares of the
common stock of the Company (“Common Stock”), for a period of ten (10) years
(five (5) years in the case of a 10% shareholder, as described in the Plan) from
the Date of Grant, at the purchase price of _____________ per share, which is
the Fair Market Value of such stock on the Date of Grant (110% of the Fair
Market Value on the Date of Grant in the case of a 10% shareholder, as described
in the Plan) (the “Option”); provided, however, that the right to exercise this
Option shall be, and is hereby, restricted as follows:

(a)       At any time during the term of this Option on or after the Date of
Grant, the Option shall be exercisable for up to __% of the total number of
shares to which this Option relates, and, thereafter, this Option shall become
exercisable for an

 

 

 

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additional __% of the total number of shares to which this Option relates on
each annual anniversary of the Date of Grant on which the Optionee remains
employed with the Company (each, a “Vesting Date”), so that the Option shall be
exercisable for 100% of the total number of shares to which this Option relates
on the _______ annual anniversary of the Date of Grant, provided that the
Optionee continues to be employed with the Company on the Date of Grant and each
such annual anniversary thereof and subject to all terms and conditions of this
Agreement and the Plan. In the event that Optionee’s employment with the Company
is terminated for any reason, whether voluntarily or involuntarily, before any
Vesting Date, the portion of the Option that has not yet vested as of such date
shall not vest and shall be forfeited immediately, except to the extent
otherwise provided herein.

(b)       Notwithstanding the above, in the event of a Change in Control, as
defined in the Plan, Optionee may purchase 100% of the total number of shares to
which this Option relates.

(c)       In no event may the Option or any part thereof be exercised after the
expiration of ten (10) years (five (5) years in the case of a 10% shareholder,
as described in the Plan) from the Date of Grant.

(d)       The purchase price of the shares subject to the Option may be paid for
(i) in cash, (ii) in the discretion of the Committee, by tender of shares of
Common Stock already owned by Optionee, or (iii) in the discretion of the
Committee, by a combination of methods of payment specified in clauses (i) and
(ii), all in accordance with Section 6 of the Plan.

(e)       No shares of Common Stock may be tendered in exercise of this Option
if such shares were acquired by the Optionee through the exercise of an
Incentive Stock Option unless (i) such shares have been held by the Optionee for
at least one year and (ii) at least two years have elapsed since such prior
Incentive Stock Option was granted.

3.         Anti-Dilution Provisions. In the event that, during the term of this
Agreement, there is any change in the number of shares of outstanding Common
Stock of the Company by reason of stock dividends, recapitalizations, mergers,
consolidations, split-ups, combinations or exchanges of shares and the like, the
number of shares covered by this Agreement and the price thereof may be
adjusted, to the same proportionate number of shares and price as in this
original Agreement.

4.         Investment Purpose and Other Restrictions on Transfer. Optionee
represents that, in the event of the exercise by Optionee of the Option hereby
granted, or any part thereof, Optionee intends to purchase the shares acquired
on such exercise for investment and not with a view to resale or other
distribution; except that the Committee, at its election, may waive or release
this condition as it deems advisable or necessary in the event the shares
acquired on exercise of the Option are registered under the Securities Act of
1933, or upon the happening of any other contingency warranting the release of
such condition. Optionee agrees that the

 

 

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certificates evidencing the shares acquired by Optionee on exercise of all or
any part of the Option, may bear a restrictive legend, if appropriate,
indicating any restrictions on the transfer thereof, which legend may be in such
form as the Company shall determine to be proper.

5.         Non-Transferability. Neither the Option hereby granted nor any rights
thereunder or under this Agreement may be assigned, transferred or in any manner
encumbered except by will or the laws of descent and distribution, and any
attempted assignment, transfer, mortgage, pledge or encumbrance except as herein
authorized, shall be void and of no effect. The Option may be exercised during
Optionee’s lifetime only by Optionee or his guardian or legal representative.

6.         Termination of Employment. In the event of the termination of
employment of Optionee other than by death, Optionee may exercise the option, to
the extent he was entitled to exercise it on the date of termination of
employment, at any time within three (3) months after such termination, but not
after ten (10) years (five (5) years, if applicable) from the Date of Grant. If
Optionee terminates employment on account of disability, his Option shall become
fully vested (if not already fully vested) and he may exercise such option at
any time within one year of the termination of his employment, but not after ten
(10) years (five (5) years, if applicable) from the Date of Grant. For this
purpose, Optionee shall be deemed to be disabled if he is permanently and
totally disabled within the meaning of Section 422(c)(6) of the Code, which, as
of the date hereof, shall mean that he is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months. Optionee
shall be considered disabled only if he furnishes such proof of disability as
the Committee may require. To the extent that Optionee was not entitled to
exercise this Option at the date of termination of employment, or to the extent
this Option is not exercised within the time specified herein, this Option shall
terminate.

7.         Death of Optionee. In the event of the death of Optionee during the
term of this Agreement and while he is employed by the Company (or its Parent or
a Subsidiary), or within three (3) months after the termination of his
employment (or one year in the case of the termination of employment of an
Optionee who is disabled as provided in above), this Option shall become fully
vested (if not already fully vested) and may be exercised by a legatee or
legatees of Optionee under his last will, or by his personal representatives or
distributees, at any time within a period of one year after his death, but not
after ten (10) years (five (5) years, if applicable) from the Date of Grant, and
only if he was entitled to exercise the option at the date of his death. To the
extent that the Optionee was not entitled to exercise this Option at the date of
death, or to the extent this Option is not exercised within the time specified
herein, this Option shall terminate.

8.         Shares Issued on Exercise of Option. It is the intention of the
Company that on any exercise of the Option it will transfer to Optionee shares
of its authorized but unissued stock or transfer Treasury shares, or utilize any
combination of Treasury shares and authorized but unissued shares, to satisfy
its obligations to deliver shares on any exercise hereof.

 

 

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9.         Committee Administration. The Option has been granted pursuant to a
determination made by the Committee, and such Committee or any successor or
substitute committee authorized by the Board of Directors or the Board of
Directors itself, subject to the express terms of this option, shall have
plenary authority to interpret any provision of the Option and to make any
determinations necessary or advisable for the administration of the Option and
the exercise of the rights herein granted, and may waive or amend any provisions
hereof in any manner not adversely affecting the rights granted to Optionee by
the express terms hereof.

10.       Option an Incentive Stock Option. It is intended that this Option
shall be treated as an incentive stock option under Section 422 of the Internal
Revenue Code of 1986, as amended.

11.       No Contract of Employment. Nothing contained in this Agreement shall
be considered or construed as creating a contract of employment for any
specified period of time.

12.       Severability. Any word, phrase, clause, sentence or other provision
herein which violates or is prohibited by any applicable law, court decree or
public policy shall be modified as necessary to avoid the violation or
prohibition and so as to make this Agreement enforceable as fully as possible
under applicable law, and if such cannot be so modified, the same shall be
ineffective to the extent of such violation or prohibition without invalidating
or affecting the remaining provisions herein.

13.       Non-Waiver of Rights. The Company’s failure to enforce at any time any
of the provisions of this Agreement or to require at any time performance by
Optionee of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement, or
any part hereof, or the right of the Company thereafter to enforce each and
every provision in accordance with the terms of this Agreement.

14.       Entire Agreement; Amendments. No modification, amendment or waiver of
any of the provisions of this Agreement shall be effective unless in writing
specifically referring hereto, and signed by the parties hereto. This Agreement
supersedes all prior agreements and understandings between Optionee and the
Company to the extent that any such agreements or understandings conflict with
the terms of this Agreement.

15.       Assignment. This Agreement shall be freely assignable by the Company
to and shall inure to the benefit of, and be binding upon, the Company, its
successors and assigns and/or any other entity which shall succeed to the
business presently being conducted by the Company.

16.       Choice of Forum and Governing Law. In light of the Company’s
substantial contacts with the State of Oklahoma, the parties’ interests in
ensuring that disputes regarding the interpretation, validity and enforceability
of this Agreement are resolved on a uniform basis, and the Company’s execution
of, and the making of, this Agreement in Oklahoma, the parties agree that: (i)
any litigation, validity and/or enforceability of the Agreement, shall be filed
and conducted exclusively in the state or federal courts in Mayes County,
Oklahoma; and

 

 

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(ii) the agreement shall be interpreted in accordance with and governed by the
laws of the State of Oklahoma, without regard for any conflict of law
principles.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its
behalf by the undersigned officer pursuant to due authorization, and Optionee
has signed this Agreement to evidence Optionee’s acceptance of the Option herein
granted and of the terms hereof, all as of the date hereof.

 

 

COMPANY

 

 

 

 

 

 

 

By:

 

ATTEST:

 

 

 

 

 

 

 

 

Secretary

 

 

 

 

 

 

 

 

 

 

 

 

Optionee

 

 

 

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