For purposes of applying this Section 3, the term “**Control Company**” shall mean the ParticipatingCompany whose stock is subject to the Option. As used herein, “**Participating Company**” shall mean(x) the Company and (y) any present or future parent and/or subsidiary corporation of the Companywhile such corporation is a parent or subsidiary of the Company. For purposes of this OptionAgreement, a parent corporation and a subsidiary corporation shall be as defined in sections 424(e)and 424(f) of the Internal Revenue Code of 1986, as amended (the “**Code**”).4. Time of Exercise. This option may be exercised after the Option Date from time totime in full or in part and shall remain exercisable (subject to the provisions of the Plan) untilthe earlier of (a) the date as of which the Optionee has exercised the option as to all sharessubject hereto, or (b) the expiration of ten (10) years following the Option Date. Notwithstandingthe foregoing, this option shall be exercisable only to the extent it is vested, and shall firstbecome exercisable in any calendar year only to the extent the shares with respect to which thisoption becomes exercisable, together with any shares subject to any other incentive stock optionsthat first become exercisable in such calendar year, would have an aggregate value (determined asof the date of grant of such options) not in excess of One Hundred Thousand Dollars ($100,000).5. Methods of Exercise. This option shall be exercisable by a written notice in theform adopted by the Board or the Committee that specifies the number of shares to be purchased.The notice shall be accompanied by payment of the full amount of the option price (i) by cash orcheck payable to the Company, (ii) if permitted by the Board or the Committee, by the delivery tothe Company of shares of the Company’s stock having a value equal to the exercise price, or (iii)by a combination of the foregoing. Upon receipt of such payment, the Company will thereafterdeliver or cause to be delivered to the Optionee (or if any other individual or individuals areexercising this option, to such individual or individuals) at the office of the Company, acertificate or certificates for the number of shares with respect to which this option is beingexercised, registered in the name or names of the individual or individuals exercising the option;provided, however, that if any law or regulation or order of the Securities and Exchange Commissionor other body having jurisdiction in the premises shall require the Company or Optionee (or otherindividual or individuals exercising this option) to take any action in connection with the sharesbeing purchased, the delivery of the certificate or certificates for such shares shall be delayeduntil such action has been taken.6. Purchase for Investment. This option is granted on the condition that the purchaseof shares of Common Stock hereunder shall be for the account of the Optionee (or other individualor individuals exercising this option) for investment purposes and not with a view to the resale ordistribution thereof, except that such condition shall be inoperative if the offering and sale ofshares subject to the option is registered under the Securities Act of 1933, as amended (the “**1933Act**”), or if in the opinion of counsel for the Company such shares may be resold withoutregistration. At the time of any exercise of the option, the Optionee (or other individual orindividuals exercising this option) will execute such further agreements as the Company may requireto implement the foregoing condition and to acknowledge the Optionee’s (or such other individual’s)familiarity with restrictions on the resale of the shares under applicable securities laws.7. Repurchase of Shares.(a) Share Repurchase Option. If the Optionee ceases to provide services to aParticipating Company for any reason (including, but not limited to, termination by the Companywith or without cause, death, disability and voluntary resignation), or if the Optionee or theOptionee’s legal representative attempts to sell, exchange, transfer, pledge or otherwise disposeof (other than pursuant to a Transfer of Control) any shares acquired upon exercise of the Optionwithout complying with this Agreement, the Company shall have the right to repurchase the sharespurchased pursuant to thisAgreement under the terms and subject to the conditions of this Section 7. The repurchase optiongranted hereby is hereinafter referred to as the “**Share Repurchase Option**”.
 
2

 
(b) Exercise of Share Repurchase Option. The Company may exercise the ShareRepurchase Option by written notice to the Optionee within sixty (60) days after (i) suchtermination of service (or exercise of the Option, if later) or (ii) the Company has receivednotice of an attempted disposition. If the Company fails to give notice within such sixty (60) dayperiod, the Share Repurchase Option shall terminate unless the Company and the Optionee haveextended the time for the exercise of the Share Repurchase Option. The Share Repurchase Optionmust be exercised, if at all, for all of the Shares, except as the Company and the Optioneeotherwise agree.(c) Payment for Shares and Return of Shares. Payment by the Company to the Optioneeshall be made in cash within thirty (30) days after the date of the mailing of the written noticeof exercise of the Share Repurchase Option. For purposes of the foregoing, cancellation of anyindebtedness of the Optionee to any Participating Company shall be treated as payment to theOptionee in cash to the extent of the unpaid principal and any accrued interest canceled. Thepurchase price per share being repurchased by the Company shall be an amount equal to the fairmarket value of the shares as of the last day of the month which ended immediately preceding thedate on which the Share Repurchase Option arose, as determined by the Board in good faith. If theBoard elects to not determine the fair market value of the shares, the fair market value of theshares shall be determined by a duly-qualified appraiser designated by the Company. The sharesbeing repurchased shall be delivered to the Company by the Optionee at the same time as thedelivery of the purchase price to the Optionee.(d) Assignment of Share Repurchase Option. The Company shall have the right to assignthe Share Repurchase Option at any time, whether or not such option is then exercisable, to one (1)or more persons as may be selected by the Company.(e) Transfer of Control. In the event of a Transfer of Control, the Share RepurchaseOption shall continue in full force and effect; provided, however, that “**service to a ParticipatingCompany**” for purposes of this Section 7 shall include all service with any corporation which was aParticipating Company at the time of such service, whether or not the corporation was includedwithin such term both before and after the event constituting the Transfer of Control.8. Right of First Refusal.(a) Right of First Refusal. In the event the Optionee proposes to sell, pledge orotherwise transfer any shares purchased pursuant to this Agreement (the “**Transfer Shares**”) to anyperson or entity, the Company shall have the right to repurchase the Transfer Shares under theterms and subject to the conditions set forth in this Section 8 (the “**Right of First Refusal**”).(b) Notice of Proposed Transfer. Prior to any proposed transfer of the TransferShares, the Optionee shall give a written notice (the “**Transfer Notice**”) to the Company describingfully the proposed transfer, including the number of Transfer Shares, the name and address of theproposed transferee (the “**Proposed Transferee**”) and, if the transfer is voluntary, the proposedtransfer price and containing such information necessary to show the bona fide nature of theproposed transfer. In the event of a transfer which is not both a bona fide and voluntarytransfer, the proposed transfer price shall be deemed to be the lower of (i) the proposed transferprice as contained in the Transfer Notice or (ii) the fair market value of the Transfer Shares asdetermined by the Board of Directors of the Company pursuant to Section 7 hereof. In the event theOptionee proposes to transfer any Transfer Shares to more than one (1) Proposed Transferee, theOptionee shall provide a separate Transfer Notice for the proposed transfer toeach Proposed Transferee. The Transfer Notice shall be signed by both the Optionee and theProposed Transferee and must constitute a binding commitment of the Optionee and the ProposedTransferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to theRight of First Refusal. In the Transfer Notice the Proposed Transferee shall agree that if theTransfer Shares are transferred to the Proposed Transferee, the Transfer Shares shall continue tobe subject to the Right of First Refusal prior to any further transfer by the Proposed Transferee.
 
3

 
(c) Bona Fide Transfer. In the event that the Company shall determine that theinformation provided by the Optionee in the Transfer Notice is insufficient to establish the bonafide nature of a proposed voluntary transfer, the Company shall give the Optionee written notice ofthe Optionee’s failure to comply with the procedure described in this Section 8 and the Optioneeshall have no right to transfer the Transfer Shares without first complying with the proceduresdescribed in this Section 8. The Optionee shall not be permitted to transfer the Transfer Sharesif the proposed transfer is not bona fide.(d) Exercise of the Right of First Refusal. In the event the proposed transfer isdeemed to be bona fide, the Company shall have the right to purchase all, but not less than all, ofthe Transfer Shares at the purchase price and on the terms set forth in the Transfer Notice bydelivery to the Optionee of a notice of exercise of the Right of First Refusal within sixty (60)days after the date the Transfer Notice is delivered to the Company. The Company’s exercise orfailure to exercise the Right of First Refusal with respect to any proposed transfer described in aTransfer Notice shall not affect the Company’s ability to exercise the Right of First Refusal withrespect to any proposed transfer described in any other Transfer Notice, whether or not such otherTransfer Notice is issued by the Optionee or issued by a person other than the Optionee withrespect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Rightof First Refusal, the Company and the Optionee shall thereupon consummate the sale of the TransferShares to the Company on the terms set forth in the Transfer Notice; provided, however, that in theevent that the Transfer Notice provides for the payment for the Transfer Shares other than in cash,the Company shall have the option of paying for the Transfer Shares by the discounted cashequivalent of the consideration described in the Transfer Notice as reasonably determined by theCompany. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to anyParticipating Company shall be treated as payment to the Optionee in cash to the extent of theunpaid principal and any accrued interest canceled.(e) Failure to Exercise the Right of First Refusal. If the Company fails to exercisethe Right of First Refusal in full within the period specified in Section 8(d) above, the Optioneemay conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms andconditions described in the Transfer Notice, provided such transfer occurs not later than thirty(30) days after expiration of the Right of First Refusal. The Company shall have the right todemand further assurances from the Optionee and the Proposed Transferee (in a form satisfactory tothe Company) that the transfer of the Transfer Shares was actually carried out on the terms andconditions described in the Transfer Notice. No Transfer Shares shall be transferred on the booksof the Company until the Company has received such assurances, if so demanded, and has approved theproposed transfer as bona fide. Any proposed transfer on terms and conditions different from thosedescribed in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee,shall again be subject to the Right of First Refusal and shall require compliance by the Optioneewith the procedure described in this Section 8.(f) Transferees of the Transfer Shares. All transferees of the Transfer Shares or anyinterest therein, other than the Company, shall be required as a condition of such transfer toagree in writing (in a form satisfactory to the Company) that such transferee shall receive andhold such Transfer Shares or interests subject to the provisions of this Section 8 providing forthe Right of First Refusal withrespect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise ofthe Option shall be void unless the provisions of this Section 8 are met.
 
4

 
(g) Transfers Not Subject to the Right of First Refusal. The Right of First Refusalshall not apply to any transfer or exchange of the shares acquired pursuant to the exercise of theOption if such transfer is in connection with a Transfer of Control. If the consideration receivedpursuant to such transfer or exchange consists of stock of a Participating Company, suchconsideration shall remain subject to the Right of First Refusal unless the provisions of Section8(i) below result in a termination of the Right of First Refusal.(h) Assignment of the Right of First Refusal. The Company shall have the right toassign the Right of First Refusal at any time, whether or not the Optionee has attempted atransfer, to one (1) or more persons as may be selected by the Company.(i) Early Termination of the Right of First Refusal. The other provisions of thisSection 8 notwithstanding, the Right of First Refusal shall terminate and be of no further forceand effect upon (i) the occurrence of a Transfer of Control, unless the surviving, continuing,successor or purchasing corporation, as the case may be, assumes the Company’s rights andobligations under the Plan or (ii) the existence of a public market for the class of shares subjectto the Right of First Refusal. A “**public market**” shall be deemed to exist if (x) such stock islisted on a national securities exchange (as that term is used in the Securities Exchange Act of1934, as amended) or (y) such stock is traded on the over the counter market and prices thereforare published daily on business days in a recognized financial journal.9. Acknowledgment of Transfer Restrictions under Bylaws. Optionee herebyacknowledges, consents to and agrees to be bound by the provisions of Section 4 of Article VIII ofthe Bylaws of the Company, to the extent applicable in accordance with the terms thereof.10. Stock Dividends Subject to Agreement. If, from time to time, there is any stockdividend, stock split or other change in the character or amount of any of the outstanding stock ofthe Corporation, the stock of which is subject to the provisions of this Agreement, then in suchevent any and all new substituted or additional securities to which the Optionee is entitled byreason of the Optionee’s ownership of the shares acquired upon exercise of the Option shall beimmediately subject to the Share Repurchase Option and the Right of First Refusal with the sameforce and effect as the shares subject to the Share Repurchase Option and the Right of FirstRefusal immediately before such event.11. Notice of Sales Upon Disqualifying Disposition. The Optionee shall dispose of theshares acquired pursuant to the Option only in accordance with the provisions of this Agreement.In addition, the Optionee shall promptly notify the Chief Financial Officer of the Company if theOptionee disposes of any of the shares acquired pursuant to the Option.
 
5

 
12. Legends. The Company may at any time place legends referencing the ShareRepurchase Option set forth in Section 7 above, the Right of First Refusal set forth in Section 8above, the restrictions described in Section 9 above and an applicable federal or state securitieslaw restriction, on all certificates representing shares of stock subject to the provisions of thisAgreement. The Optionee shall, at the request of the Company, promptly present to the Company anyand all certificates representing shares acquired pursuant to the Option in the possession of theOptionee in order to effectuate the provisions of this Section. Unless otherwise specified by theCompany, legends placed on such certificates may include, but shall not be limited to, legendssubstantially similar to the following: **(a)** **THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED ORHYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTCOVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESESECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERYREQUIREMENTS OF SUCH ACT.** **(b)** **THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHARE REPURCHASEOPTION IN FAVOR OF THE COMPANY OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THECOMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OFWHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.** **(c)** **THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRSTREFUSAL OPTION IN FAVOR OF THE COMPANY OR ITS ASSIGNEE SET FORTH IN AN AGREEMENTBETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR ININTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.** **(d)** **THE SHARES REPRESENTED BY THIS CERTIFICATE, AND THE TRANSFER THEREOF, ARESUBJECT TO THE RESTRICTIONS ON TRANSFER PROVISIONS OF THE BYLAWS OF THE COMPANY, A COPYOF WHICH IS ON FILE IN, AND MAY BE EXAMINED AT, THE PRINCIPAL OFFICE OF THE COMPANY.**13. Initial Public Offering.(a) The Optionee hereby agrees that during the “Lock-Up Period” (as hereinafter defined)following the effective date of a registration statement of the Company filed under the 1933 Act,it shall not, to the extent requested by the Company and any underwriter, sell, pledge, transfer,make any short sale of, loan, grant any option for the purchase of, or otherwise transfer ordispose of (other than to donees who agree to be similarly bound) any Common Stock held by it atany time during such period except Common Stock included in such registration; provided, however,that such agreement shall be applicable only to the first such registration statement of theCompany which covers Common Stock (or other securities) to be sold on its behalf to the public inan underwritten offering. Market stand-off agreements for subsequent registration statements, ifany, shall be as agreed to by the Company, the underwriters and any other party thereto.
 
6

 
(b) For purposes of this Section 13, the term “**One Percent Shareholder**” shall mean astockholder of the Company who holds, prior to the effective date of the registration statement, atleast one percent of the issued and outstanding Common Stock of Company on a fully dilutedas-converted basis.(c) For purposes of this Section 13, the “**Lock-Up Period**” shall be the period applicable toall One Percent Shareholders with registration rights, and all officers and directors of Company,who enter into similar agreements but in any event shall be not less than ninety (90) days from theeffective date of the registration statement.(d) The Share Repurchase Option set forth in Section 7 above and the Right of First Refusalset forth in Section 8 above shall terminate upon the close of such an initial public offering.14. Nontransferability of Option. This option shall not be transferable by theOptionee otherwise than by will or the laws of descent or distribution, and this option shall beexercisable during the Optionee’s lifetime only by him.15. Notices. All notices, requests, demands, payments, and other communicationshereunder shall be deemed to have been duly given if in writing and sent by certified mail to theappropriate address indicated below their signatures to this Agreement or to such other address asmay be given in a notice sent to all parties hereto.16. Termination. Except as provided in the Plan, this option shall terminate and mayno longer be exercised if the Optionee ceases for any reason to be an employee of the Company,provided, however, that the provisions of Sections 7, 8, 9, 12, 13, and 15 of this Agreement shallsurvive the termination of this option.17. Waiver. The waiver of the Company or the Optionee of any breach of a provision ofthis Agreement shall not operate or be construed as a waiver of any subsequent breach by theparties.18. Governing Law and Interpretation. This Agreement shall be governed by andconstrued in accordance with the laws of the State of North Carolina. It shall be binding upon andinure to the benefit of the parties hereto and their respective successors, assigns and legalrepresentatives.19. Miscellaneous. The Optionee shall have no rights as a stockholder with respect tothe shares subject to this option until the exercise of the option and the issuance of a stockcertificate for the shares with respect to which the option shall have been exercised. Nothingherein contained shall impose any obligation on the Company or the Optionee with respect to theOptionee’s employment by the Company. Nothing herein contained shall impose any obligation uponthe Optionee to exercise the option. The option is intended to be an “incentive stock option” asdefined in § 422 of the Code; provided, however, the Company makes no representation as to the taxtreatment to the Optionee upon receipt or exercise of the option or sale or other disposition ofthe shares covered by the option.20. Binding. This Agreement shall be binding upon, and shall inure to the benefit of,the parties and their successors and assigns.[THE NEXT PAGE IS THE SIGNATURE PAGE]
 
7

 
IN WITNESS WHEREOF, the Company and the Optionee have caused this Agreement to be executed onthe date first above written.           COMPANY:             PRIMO WATER CORPORATION             By                 Title                        OPTIONEE:                           Address:                                                            
 
8