Exhibit 10.3


 


NONQUALIFIED
STOCK OPTION AWARD AGREEMENT

FOR EMPLOYEES


 


Tuesday Morning
Corporation

2008 Long-Term Equity Incentive Plan


 


This NONQUALIFIED STOCK  OPTION
AWARD AGREEMENT (this “Agreement”)
is entered into between Tuesday Morning Corporation, a Delaware corporation
(the “Company”), and                                 
(“Optionee”).  The Board of Directors of the Company has
adopted, and the stockholders of the Company have approved, the Tuesday Morning
Corporation 2008 Long-Term Equity Incentive Plan (the “Plan”), the terms of which are
incorporated by reference herein in their entirety.  The Company has agreed to grant Optionee this
option to purchase shares of common stock of the Company as an inducement for
Optionee’s continued and effective performance of services for the
Company.  Any term used in this Agreement
that is not specifically defined herein shall have the meaning specified in the
Plan.


 


IT
IS AGREED:


 


1.                                       Grant of Option. Subject to the terms of
the Plan, this Agreement and the Notice of Grant of Stock Options and Option
Agreement to which this Agreement is attached (the “Option Notice”), on                             
(the “Grant Date”), the Company
granted to Optionee an option (the “Option”)
to purchase                          shares
of the common stock of the Company, $.01 par value per share (the “Common Stock”), at a price of $            
per share (the “Exercise Price”),
subject to adjustment as provided in the Plan.


 


2.                                       Type of Option.  The Option is a nonqualified stock option
which is not intended to be governed by section 422 of the Code.


 


3.                                       Optionee’s Agreement.  In accepting the Option, Optionee accepts and
agrees to be bound by all the terms and conditions of the Plan which pertain to
nonqualified stock options granted under the Plan.


 


4.                                       Vesting of Option.  Subject to the provisions hereof and the
provisions of the Plan, the Option will vest and become exercisable ratably on
a daily basis commencing on the day following the Grant Date and ending on the
third anniversary of the Grant Date (the “Vesting
Period”) so that on the third anniversary of the Grant Date the
Option shall be exercisable in full, provided that Optionee is and has been
continuously employed by the Company or any Subsidiary (as that term is defined
in Section 21) from the date of this Agreement through such date.  Any reference to “daily” vesting in the
Option Notice shall mean that the Option vests ratably on a daily basis during
the Vesting Period.  To the extent not
exercised, installments shall be cumulative and may be exercised in whole or in
part.  In the event that Optionee’s
employment is terminated by the Company without “Cause” or by Optionee with “Good
Reason”, (a) the portion of the Option which is then vested will continue
to be exercisable until the tenth anniversary of the Grant Date (the “Option General Expiration Date”) and (b) if
the Option is not then fully vested and exercisable an amount of the shares of
Common Stock subject to the Option equal to one more year’s vesting (or such lesser
number of shares as are not then 


 

















 


vested) will vest and become
exercisable upon such termination and will continue to be exercisable until the
Option General Expiration Date.  No
portion of the Option shall be exercisable in any event on or after the Option
General Expiration Date.  An option may
not be exercised for a fraction of a share of Common Stock.


 


5.                                       Manner of Exercise.


 


(a)                                  To the extent
that the Option is vested and exercisable in accordance with Section 4 of
this Agreement, the Option may be exercised by Optionee at any time, or from
time to time, in whole or in part, on or prior to the termination of the Option
(as set forth in Sections 4 and 6 of this Agreement) upon payment of the
Exercise Price for the shares to be acquired in accordance with the terms and
conditions of this Agreement and the Plan.


 


(b)                                 If Optionee is
entitled to exercise the vested and exercisable portion of the Option, and
wishes to do so, in whole or part, Optionee shall (i) deliver to the
Company a fully completed and executed notice of exercise, in the form attached
as Annex A
hereto, or such other form as may hereinafter be designated by the Company in
its sole discretion, specifying the exercise date and the number of shares of
Common Stock to be purchased pursuant to such exercise and (ii) remit to
the Company in a form satisfactory to the Company, in its sole discretion, the
Exercise Price for the shares to be acquired on exercise of the Option, plus an
amount sufficient to satisfy any withholding tax obligations of the Company
that arise in connection with such exercise (as determined by the Company) in
accordance with the provisions of Sections 5.7 and 15.3 of the Plan.


 


(c)                                  The Company’s
obligation to deliver shares of the Common Stock to Optionee under this
Agreement is subject to and conditioned upon Optionee satisfying all tax
obligations associated with Optionee’s receipt, holding and exercise of the
Option.  Unless otherwise approved by the
Committee, all such tax obligations shall be payable in accordance with the
provisions of Section 5.7 of the Plan. 
The Company and its Subsidiaries, as applicable, shall be entitled to
deduct from any compensation otherwise due to Optionee the amount necessary to
satisfy all such taxes.


 


(d)                                 Upon full
payment of the Exercise Price and satisfaction of all applicable tax
obligations, and subject to the applicable terms and conditions of the Plan and
the terms and conditions of this Agreement, the Company shall cause
certificates for the shares purchased hereunder to be delivered to Optionee or
cause an uncertificated book-entry representing the such shares to be made.


 


6.                                       Termination of Option.  Except as otherwise provided in Section 4
of this Agreement, unless the Option terminates earlier as provided in this Section 6
the Option shall terminate and become null and void on the Option General
Expiration Date.  Except as otherwise
provided in Section 4 of this Agreement, if Optionee ceases to be an
employee of the Company for any reason the Option shall not continue to vest
after such cessation of service as an employee.


 


(a)                                  If Optionee
ceases to be an employee of the Company and any Subsidiary due to death or
Disability, (i) the portion of the Option that was exercisable on the date
of such 


 


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cessation shall remain
exercisable for, and shall otherwise terminate and become null and void at the
end of, a period of one year from the date of such death or Disability, but in
no event after the Option General Expiration Date; and (ii) the portion of
the Option that was not exercisable on the date of such cessation shall be
forfeited and become null and void immediately upon such cessation.


 


(b)                                 If Optionee
ceases to be an employee of the Company and any Subsidiary upon the occurrence
of Optionee’s Retirement (as that term is defined in Section 21), (A) the
portion of the Option that was exercisable on the date of Retirement shall
remain exercisable for, and shall otherwise terminate and become null and void
at the end of, a period of up to three years after the date of Retirement, but
in no event after (x) the Option General Expiration Date or (y) the
day before the date Optionee begins engaging in Competition (as that term is
defined in Section 21) during such three-year period unless he or she
receives written consent to do so from the Board or the Committee, and (B) the
portion of the Option that was not exercisable on the date of Retirement shall
be forfeited and become null and void immediately upon such Retirement.


 


(c)                                  If Optionee
ceases to be an employee of the Company or a Subsidiary due to Cause, all of
the Option shall be forfeited and become null and void immediately upon such
cessation, whether or not then exercisable. 
For purposes of this Section 6(c) the term “Cause” means the occurrence of one of the
following events:  (i) the
commission of a felony or a crime involving moral turpitude or the commission
of any other act or omission involving dishonesty, disloyalty or fraud with
respect to the Company or any of its Subsidiaries; (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace
or disrepute; (iii) substantial and repeated failure to perform duties
properly assigned or as reasonably directed, as determined by the Company; (iv) gross
negligence or willful misconduct with respect to the Company or any of its
Subsidiaries; or (v) breach of duty of loyalty to the Company or any of
its Subsidiaries or other act of fraud or dishonesty with respect to the
Company or any of its Subsidiaries.


 


(d)                                 If Optionee
ceases to be an employee of the Company or a Subsidiary for any reason other
than death, Disability, Retirement or Cause, (i) the portion of the Option
that was exercisable on the date of such cessation shall remain exercisable
for, and shall otherwise terminate and become null and void at the end of, a
period of up to 90-days after the date of such cessation, but in no event after
(x) the Option General Expiration Date or (y) the day before the date
Optionee begins engaging in Competition during such 90-day period unless he or
she receives written consent to do so from the Board or the Committee, and (ii) the
portion of the Option that was not exercisable on the date of such cessation
shall be forfeited and become null and void immediately upon such cessation.  In the event Optionee has entered into an
employment contract with the Company, the termination provisions of the
employment contract will supersede the terms stated in section 6(d) herein.


 


(e)                                  Upon the death
of Optionee prior to the expiration of the Option, Optionee’s executors,
administrators or any person or persons to whom the Option may be transferred
by will or by the laws of descent and distribution, shall have the right, at
any time prior to the termination of the Option to exercise the Option with
respect to the number of shares that Optionee would have been entitled to
exercise if he were still alive.


 


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7.                                       Tax Withholding.  To the extent that the receipt of the Option,
this Agreement or the Option Notice, the vesting of the Option or the exercise
of the Option results in income to Optionee for federal, state or local income,
employment or other tax purposes with respect to which the Company or its
Subsidiaries or any Affiliate has a withholding obligation, Optionee shall
deliver to the Company at the time of such receipt, vesting or exercise, as the
case may be, such amount of money as the Company or its Subsidiaries or any
Affiliate may require to meet its obligation under applicable tax laws or
regulations, and, if Optionee fails to do so, the Company or its Subsidiaries
or any Affiliate is authorized to withhold from the shares subject to the
Option (based on the Fair Market Value of such shares as of the date the amount
of tax to be withheld is determined) or from any cash or stock remuneration
then or thereafter payable to Optionee any tax required to be withheld by
reason of such taxable income, sufficient to satisfy the withholding
obligation.


 


8.                                       Capital Adjustments and Reorganizations. The existence
of the Option shall not affect in any way the right or power of the Company or
any company the stock of which is awarded pursuant to this Agreement to make or
authorize any adjustment, recapitalization, reorganization or other change in
its capital structure or its business, engage in any merger or consolidation,
issue any debt or equity securities, dissolve or liquidate, or sell, lease,
exchange or otherwise dispose of all or any part of its assets or business, or
engage in any other corporate act or proceeding.


 


9.                                       Employment Relationship. For purposes
of this Agreement, Optionee shall be considered to be in the employment of the
Company as long as Optionee has an employment relationship with the
Company.  The Committee shall determine
any questions as to whether and when there has been a termination of such
employment relationship, and the cause of such termination, under the Plan and
the Committee’s determination shall be final and binding on all persons.


 


10.                                 Not an Employment Agreement.  This Agreement is not an employment
agreement, and no provision of this Agreement shall be construed or interpreted
to create an employment relationship between Optionee and the Company, its
Subsidiaries or any of its Affiliates or guarantee the right to remain employed
by the Company, its Subsidiaries or any of its Affiliates for any specified
term.


 


11.                                 No Rights As Stockholder.  Optionee shall not have any rights as a
stockholder with respect to any shares covered by the Option until the date of
the issuance of such shares following Optionee’s exercise of the Option
pursuant to its terms and conditions and payment of all amounts for and with
respect to the shares.  No adjustment
shall be made for dividends or other rights for which the record date is prior
to the date a certificate or certificates are issued for such shares or an
uncertificated book-entry representing such shares is made.


 


12.                                 Legend.  Optionee consents to the placing on the
certificate for any shares covered by the Option of an appropriate legend
restricting resale or other transfer of such shares except in accordance with
the Securities Act of 1933 and all applicable rules thereunder.


 


13.                                 Notices.  Any notice, instruction, authorization,
request, demand or other communications required hereunder shall be in writing,
and shall be delivered either by personal 


 


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delivery, by telegram,
telex, telecopy or similar facsimile means, by certified or registered mail,
return receipt requested, or by courier or delivery service, addressed to the
Company at the Company’s principal business office address to the attention of
the Corporate Tax Director and to Optionee at Optionee’s residential address as
it appears on the books and records of the Company, or at such other address
and number as a party shall have previously designated by written notice given
to the other party in the manner hereinabove set forth.  Notices shall be deemed given when received,
if sent by facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by facsimile means);
and when delivered (or upon the date of attempted delivery where delivery is
refused), if hand-delivered, sent by express courier or delivery service, or
sent by certified or registered mail, return receipt requested.


 


14.                                 Amendment and Waiver. Except as otherwise
provided herein or in the Plan or as necessary to implement the provisions of
the Plan, this Agreement may be amended, modified or superseded only by written
instrument executed by the Company and Optionee.  Only a written instrument executed and
delivered by the party waiving compliance hereof shall waive any of the terms
or conditions of this Agreement.  Any
waiver granted by the Company shall be effective only if executed and delivered
by a duly authorized director or officer of the Company other than
Optionee.  The failure of any party at
any time or times to require performance of any provisions hereof shall in no
manner effect the right to enforce the same. 
No waiver by any party of any term or condition, or the breach of any
term or condition contained in this Agreement, in one or more instances, shall
be construed as a continuing waiver of any such condition or breach, a waiver
of any condition, or the breach of any other term of condition.


 


15.                                 Dispute Resolution.  In the event of any difference of opinion
concerning the meaning or effect of the Plan or this Agreement, such difference
shall be resolved by the Committee.


 


16.                                 Governing Law  and Severability. The
validity, construction and performance of this Agreement shall be governed by
the laws of the State of Delaware without regard to its conflicts of law
provisions.  The invalidity of any
provision of this Agreement shall not affect any other provision of this
Agreement, which shall remain in full force and effect.


 


17.                                 Transfer Restrictions. The shares of
Common Stock subject to the Option granted hereby may not be sold or otherwise
disposed of in any manner that would constitute a violation of any applicable
federal or state securities laws. 
Optionee also agrees (a) that the Company may refuse to cause the
transfer of shares of Common Stock subject to the Option to be registered on
the applicable stock transfer records if such proposed transfer would in the
opinion of counsel satisfactory to the Company constitute a violation of any
applicable securities law and (b) that the Company may give related
instructions to the transfer agent, if any, to stop registration of the
transfer of the shares of Common Stock subject to the Option.


 


18.                                 Successors and Assigns.  This Agreement shall, except as herein stated
to the contrary, inure to the benefit of and bind the legal representatives,
successors and assigns of the parties hereto.


 


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19.                                 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original for all purposes but
all of which taken together shall constitute but one and the same instrument.


 


20.                                 Option Transfer Prohibitions.  The Option granted to Optionee under this
Agreement shall not be transferable or assignable by Optionee other than by
will or the laws of descent and distribution, and shall be exercisable during
Optionee’s lifetime only by him.


 


21.                                 Definitions.  The words and phrases defined in this Section 21
shall have the respective meanings set forth below throughout this Agreement,
unless the context in which any such word or phrase appears reasonably requires
a broader, narrower or different meaning.


 


(a)                                  “Competition” means Optionee engaging in,
or otherwise directly or indirectly being employed by or acting as a consultant
or lender to, or being a director, officer, employee, principal, agent,
stockholder, member, owner or partner of, or permitting Optionee’s name to be
used in connection with the activities of any other business or organization
which competes, directly or indirectly, with the business of the Company as the
same shall be constituted at any time during the period Optionee was employed
by or affiliated with the Company.


 


(b)                                 “Retirement” means retirement as defined
under any Company pension plan or retirement program.


 


(c)                                  “Subsidiary” means a corporation or other
entity of which outstanding shares or ownership interests representing 50% or
more of the combined voting power of such corporation or other entity entitled
to elect the management thereof are owned directly or indirectly by the
Company.


 


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IN WITNESS WHEREOF,
this Agreement has been duly executed and delivered to be effective as of the
Grant Date.


 


	
   

  	
  TUESDAY
  MORNING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
				



Accepted:


 


 


	
   

  	
   

  
	
  Name
  of Optionee:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
			



 


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Annex  A


 


[To Be Attached]