Exhibit 10.(g)-5

 

STOCK OPTION AGREEMENT

GRANTS TO EMPLOYEES

 

 

THIS AGREEMENT, made as of the ___ day of _________, 20__ (“Grant Date”) by and
between Ethan Allen Interiors Inc. (the "Company") and the undersigned (the
"Participant").

 

WHEREAS, the Company maintains the Amended and Restated 1992 Stock Option Plan,
as amended from time to time, (the "Plan"); and

 

WHEREAS, the Participant has been selected by the Compensation Committee of the
Board of Directors of the Company (the “Committee”) to receive an award under
the Plan; and

 

WHEREAS, to the extent not specified in the Plan, the terms of the award have
been determined by the Committee and are set forth in this Agreement;

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and the Participant agree as
follows:

 

1. Award; Option Price. The Participant is hereby awarded, as of the Grant Date,
the Option to purchase            shares of Common Stock (the “Award”). The
Option Price of each share of Common Stock subject to the Stock Option shall be
$_____.

 

2. Vesting; Forfeitures.

(a)     The Stock Option shall fully vest and become exercisable based upon the
successful and complete satisfaction of two consecutive partial triggering
conditions, both of which must be satisfied prior to full vesting; (1) a first
level Performance Based Vesting and (2) a second level Time Based Vesting.

 

 

1.

Condition 1: Performance Based Vesting. The Award will performance vest ratably
in ___tranches over fiscal years 20__, 20__, and 20__ for each fiscal year and
effective as of the end of each such fiscal year where the Adjusted Operating
Income when compared to the immediately prior fiscal year reflects a __ or
greater growth rate (“Performance Vested”). In the event the minimum ___ growth
rate objective is not met for any fiscal year 20__, 20__ and 20__, the tranche
for that fiscal year performance shall be forfeited; provided however, in the
event that the three year cumulative growth rate is ___ or greater at the end of
fiscal year 20__ the total Award shall be Performance Vested.

 

 

2.

Condition 2: Time Based Vesting. The Performance Vested stock options shall then
fully vest ratably in three tranches effective as of the third, fourth and fifth
year anniversary of the Grant Date.

Anniversary

Date

Vesting

Year __

 

 

Year __

 

 

Year __

 

 

 

 
 

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(b)     The Stock Option shall be forfeited as of the date of the Participant's
employment with the Company and its subsidiaries terminates for any reason to
the extent that such Options have not fully performance and time vested and are
not then exercisable pursuant to the foregoing schedule.

 

(c)     For purposes of computing the Performance Based Vesting, the Company’s
Operating Income for each fiscal year shall be as set forth in the Company’s
financial statements, adjusted by adding thereto the charges, expenses or
accruals, if any, charged against such operating income for (1) nonrecurring or
extraordinary items, (2) annual incentive bonuses paid in respect of the
immediately prior fiscal year under this Agreement, (3) the issuance to the
Company’s executives, managers, employees, dealers and other business associates
of capital stock of the Company, or the issuance or exercise to or by such
persons of options, warrants or other rights to acquire capital stock of the
Company, or stock appreciation rights of the Company or similar equity
equivalents, including in respect of the Stock Options contemplated by this
Agreement, and (4) any increased depreciation, amortization or other charges
resulting from purchase accounting adjustments; provided, however, that no such
adjustments shall be made under this clause “4” with respect to acquisitions
occurring prior to the Grant Date (collectively the “Adjusted Operating Income”
or “AOI”) . The calculation of Operating Income will be confirmed by the
Company’s independent public accountants or any other independent, recognized
financial or accounting expert retained by the Committee. The Committee shall
not exercise any discretion in determining the Company’s Operating Income
pursuant to this Section 2.

 

(d)     Notwithstanding the foregoing provisions of this Section 2, if the
Company effects a major acquisition which acquisition constitutes a change of
ownership or control of the Company within the meaning of Treas. Reg. Section
1.162-27(e)(2)(v) during any fiscal year, the Committee may make an appropriate
revision to the threshold amount set forth in this Section 2 to implement the
purpose of the Performance Based Vesting such that the options may be vested
even if the threshold amount is not achieved with respect to such fiscal year.
However, in no event shall an acquisition or change in control be a Change in
Control, unless the change in control is also a Change in Control pursuant to
the Amended and Restated 1992 Stock Option Plan. In the event of a Change of
Control pursuant to the Amended and Restated 1992 Stock Option Plan, then,
effective as of the closing of the Change of Control, this option will be fully
performance and time vested in accordance with the Plan.

 

(e)     As soon as practicable after the end of each fiscal year but before the
Performance Based Vesting is determined in respect of such fiscal year, the
Committee shall certify in writing (i) whether (and to the extent that) the
performance goals described in Condition 1 of Section 2(a)1 of this Agreement
have been attained and (ii) the amount of the options Performance Vested in
respect of the fiscal year. Under no circumstance may the Performance Vested
Options be greater than the amount described in this Section 2(a). The
Performance Vested Options become exercisable upon expiration of the Time Based
Vesting periods set forth in this Section 2(a)2.

 

3. Exercise. Subject to the terms of this Agreement and the Plan, the Stock
Option may be exercised in accordance with the following:

 

(a)     To the extent that it is exercisable, the Stock Option may be exercised
in whole or in part at any time prior to the Expiration Date (as defined in
paragraph 4); provided, however, that the Stock Option may only be exercised
with respect to whole shares of Common Stock.

 

(b)     The Stock Option may be exercised with respect to no less than 100
shares of Common Stock, or if less than 100 shares are then exercisable, the
number of whole shares then exercisable.

 

 
 

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(c)     Payment of the Option Price (and the amount of any required taxes) may
be made by cash or check or by the delivery of shares of Common Stock having a
Fair Market Value equal to the aggregate Option Price (and the amount of any
required taxes).

 

4. Expiration Date. For purposes of this Agreement, the "Expiration Date" shall
be the close of business on the earlier of the following dates (or if such date
is not a business day, the last business day preceding such date, unless either
such date is within a restricted trading period in which the employee is not
permitted to trade in company securities under the Company’s governance policies
for in such case the date shall be nine days after the end of the restricted
trading period):

 

(a)     the date which is 10 years from the Grant Date; or ________ __, ____.

 

(b)     the date which is 90 days after the Participant's employment with the
Company and its subsidiaries is terminated for any reason)     

 

5. Stock Retention.     “Named Executive Officers” of the Company for purposes
of its public reporting and other executives of the Company expressly subject to
the Company’s Statement of Policy Concerning Trading in the Company’s Securities
will hold any Company stock acquired upon the exercise of stock options issued
to them for one year following their exercise except to the extent necessary to
(a) pay income and other taxes assessed upon exercise of the options or (b) to
provide for funds for the exercise of the options (including any “cashless”
exercise of the options).

 

6. Defined Terms; Terms of Plan. Unless the context clearly indicates otherwise,
defined terms as used in this Agreement shall have the same meaning as ascribed
to those terms under the Plan. Notwithstanding any other provision of this
Agreement, the terms of the Plan shall govern and the Stock Option shall be
subject, in all respects, to the terms and conditions of the Plan.

 

7. Counterparts. This Agreement may be exercised in counterparts.

 

IN WITNESS WHEREOF, the Participant has hereunto set his hand and the Company
has caused these presents to be executed in its name and on its behalf, all as
of the date first above written.

  

 

PARTICIPANT

 

_________________________ 

Employee Name

 

 

ETHAN ALLEN INTERIORS INC.

 

 

By_________________________ 

              Its President and CEO