Document:

CALAVO GROWERS FORM S-8

 

EXHIBIT 4.2

2001 STOCK PURCHASE PLAN FOR OFFICERS AND EMPLOYEES

OF

CALAVO GROWERS, INC.

	1.	  	PURPOSE OF THE PLAN.

     Pursuant to this 2001 Stock Purchase Plan for Officers and Employees (the
“Plan”) of Calavo Growers, Inc., a California corporation (the “Company”),
officers and employees of the Company and its subsidiaries are eligible to
receive awards (“Stock Purchase Awards”) that entitle them to purchase shares
of the common stock of the Company, par value $0.001 per share (“Common
Stock”). The purpose of the Plan is to align the interests of the Company’s
officers and employees more closely with those of the Company’s shareholders by
providing stock ownership opportunities to selected officers and employees.
The Company believes that providing its officers and employees with stock
ownership in the Company will enhance the long-term growth of the Company and
enable it to attract and retain qualified officers and employees.

	2.	  	ELIGIBILITY TO RECEIVE STOCK PURCHASE AWARDS.

     The Administrator (as defined below) may, from time to time, make Stock
Purchase Awards to some or all of the officers and employees of the Company and
its subsidiaries. Each Stock Purchase Award will entitle its recipient to
purchase shares of Common Stock on the terms and conditions that are described
in the Plan, in a Stock Purchase Award notice delivered by the Company and in a
stock purchase agreement (the “Stock Purchase Agreement”) between the Company
and the officer or employee. No Stock Purchase Awards shall be made under the
Plan to any person who is not an officer or employee of the Company or a
subsidiary on the date of the Stock Purchase Award. The term “subsidiary” as
used in the Plan means a subsidiary corporation of the Company as defined in
Section 424(f) or any other applicable provision of the Internal Revenue Code
of 1986, as amended (the “Code”). Unless otherwise expressly indicated,
references in the Plan to officers and employees of the Company include
officers and employees of the Company’s subsidiaries.

	3.	  	STOCK SUBJECT TO THE PLAN; MAXIMUM NUMBER OF GRANTS.

     Subject to the adjustment provisions of Section 5.14 of the Plan, the
total number of shares of Common Stock which may be offered under, or issued
under Stock Purchase Awards granted pursuant to, the Plan shall not exceed Two
Million (2,000,000) shares of Common Stock. The shares covered by the portion
of any Stock Purchase Award under the Plan that expires, terminates or is
cancelled unexercised shall become available again for grants under the Plan.
If shares of Common Stock sold under the Plan are repurchased or otherwise
reacquired by the Company, the number of shares so repurchased or reacquired
shall again be available under the Plan.

 

 

	4.	  	ADMINISTRATION.

     4.1 The Plan shall be administered by the Board of Directors of the
Company (the “Board”) or by a committee (the “Committee”) to which
administration of the Plan, or of part of the Plan, is delegated by the Board
(in either case, the “Administrator”). The Board shall appoint and remove
members of the Committee in its discretion in accordance with applicable laws.
If necessary in order to comply with Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), or Section 162(m) of the Code,
the Committee shall, in the Board’s discretion, be comprised solely of
“non-employee directors” within the meaning of Rule 16b-3 under the Exchange
Act or “outside directors” within the meaning of Section 162(m) of the Code.
The foregoing notwithstanding, the Administrator may delegate non-discretionary
administrative duties to such employees of the Company as it deems proper, and
the Board, in its discretion, may at any time and from time to time exercise
any and all rights and duties of the Administrator under the Plan.

     4.2 Subject to the other provisions of the Plan, the Administrator shall
have the authority, in its discretion: (i) to grant Stock Purchase Awards; (ii)
to determine the fair market value of the Common Stock subject to Stock
Purchase Awards; (iii) to determine the purchase price of Common Stock subject
to Stock Purchase Awards; (iv) to determine the persons to whom, and the time
or times at which, Stock Purchase Awards shall be granted and the number of
shares subject to each Stock Purchase Award; (v) to construe and interpret the
terms and conditions of the Plan, of any Stock Purchase Agreement and all Stock
Purchase Awards granted under the Plan; (vi) to prescribe, amend and rescind
rules and regulations relating to the Plan; (vii) to determine all other terms
and conditions of each Stock Purchase Award granted under the Plan (which need
not be identical); (viii) with the consent of the Stock Purchase Award holder,
to rescind any Stock Purchase Award and to amend the terms of any Stock
Purchase Award or Stock Purchase Agreement; (ix) to authorize any person to
execute on behalf of the Company any instrument evidencing the grant of a
Stock Purchase Award; and (x) to make all other determinations deemed necessary
or advisable for the administration of the Plan, any Stock Purchase Award or
Stock Purchase Agreement. The Administrator may delegate non-discretionary
administrative duties to such employees of the Company as it deems proper.

     4.3 All questions of interpretation, implementation and application of the
Plan or any Stock Purchase Award or Stock Purchase Agreement shall be
determined by the Administrator, which determination shall be final and binding
on all persons.

	5.	  	TERMS AND CONDITIONS OF STOCK PURCHASE AWARDS.

     5.1 Selection of Stock Purchase Award Recipients. The Administrator shall
determine the officers and employees who shall receive Stock Purchase Awards
and the date of each Stock Purchase Award. Promptly after selecting an officer
or employee to receive a Stock Purchase Award, the Administrator shall notify
the officer or employee of the principal terms of

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the award. No Stock Purchase Awards may be made more than ten (10) years
after the effective date of the Plan.

     5.2 Number of Shares Covered by Each Stock Purchase Award. The
Administrator shall determine the number of shares of Common Stock to be
covered by each Stock Purchase Award. However, subject to the adjustment
provisions of Section 5.14 of the Plan, no officer or employee shall be granted
Stock Purchase Awards during any twelve-month period covering more than One Hundred
Thousand (100,000) shares of Common Stock.

     5.3 Amount of the Purchase Price. The purchase price of each share of
Common Stock that is subject to a Stock Purchase Award shall be determined by
the Administrator. However, the purchase price shall not be less than the fair
market value of the Common Stock (determined as set forth below in Section
5.16) on the date of the Stock Purchase Award.

     5.4 Method of Paying the Purchase Price. With respect to each Stock
Purchase Award, the Administrator shall determine whether the purchase price of
the shares of Common Stock covered by the award is payable (i) by cash or check
and/or (ii) by the officer’s or employee’s full recourse promissory note for
all or part of the purchase price on such terms and bearing such interest rate
as determined by the Administrator (but in no event less than the minimum
interest rate specified under the Code at which no additional interest or
original issue discount would be imputed), which promissory note may be either
secured or unsecured in such manner as the Administrator shall approve
(including, without limitation, by a security interest in the shares of Common
Stock acquired upon exercise of the Stock Purchase Award).

     5.5 Manner of Stock Purchase Award Exercise. An officer or employee who
desires to purchase shares of Common Stock pursuant to a Stock Purchase Award
must, within thirty (30) days after the date of the Stock Purchase Award or
within such longer period as the Administrator permits in its discretion,
exercise the Stock Purchase Award by giving written notice to the Company at
its principal executive office, to the attention of the Company’s Chief
Financial Officer or other officer of the Company designated by the
Administrator. The notice must specify the number of shares to be purchased by
the officer or employee. If the Administrator elected to provide the officer
or employee with the right to pay part or all of the purchase price with a full
recourse promissory note, the notice must also specify the portion of the
purchase price (if any) that the officer or employee desires to pay with a
promissory note. The notice shall contain any other information required by
the Administrator. Failure to deliver a timely notice to the Company shall
constitute the officer’s or employee’s irrevocable election to purchase none of
the shares of Common Stock that are the subject of the Stock Purchase Award.

     5.6 Delivery of the Purchase Price and Execution of a Stock Purchase
Agreement. Within sixty (60) days after the date of the Stock Purchase Award
(or such longer period as the

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Administrator permits in its discretion), each officer or employee who has
elected to purchase some or all of the shares of Common Stock that are the
subject of a Stock Purchase Award shall deliver to the Company (i) a promissory
note for the portion of the purchase price that the officer or employee has
elected to pay on a deferred basis pursuant to the terms and conditions of the
Stock Purchase Award, (ii) cash or a check for the balance of the purchase
price, (iii) an executed Stock Purchase Agreement, and (iv) any financing
statements and other documents requested by the Administrator in order to
evidence and secure the officer’s or employee’s purchase of the shares of
Common Stock. The Administrator shall determine the form of the promissory
note and the Stock Purchase Agreement, which may contain such terms and
conditions not inconsistent with the Plan as may be determined by the
Administrator. The Stock Purchase Agreement may evidence the officer’s or
employee’s pledge of shares of Common Stock to secure payment of the promissory
note or, if determined by the Administrator, the security agreement may be
contained in the promissory note or in a separate document approved by the
Administrator. In the event of a conflict between the terms or conditions of a
promissory note, Stock Purchase Agreement or other document and the terms and
conditions of the Plan, the terms and conditions of the Plan shall govern.
Failure by an officer or employee to deliver the purchase price, Stock Purchase
Agreement and/or other required documents on a timely basis shall constitute
the officer’s or employee’s irrevocable election to purchase none of the shares
of Common Stock that are the subject of the Stock Purchase Award.

     5.7 Non-Transferability of Stock Purchase Awards. No Stock Purchase Award
granted under the Plan may be assigned or otherwise transferred by an officer
or employee, either voluntarily or by operation of law, except by will or by
the laws of descent and distribution and, during the life of the officer or
employee, a Stock Purchase Award shall be exercisable only by him or her.

     5.8 Withholding Taxes. At the time of the purchase of shares of Common
Stock pursuant to a Stock Purchase Award and as a condition thereto, or at such
other time as the amount of such obligation becomes determinable, the officer
or employee shall remit to the Company by cash or check any and all applicable
federal and state withholding and employment taxes in an amount determined by
the Administrator.

     5.9 Shareholder Rights. The date that the Company receives the purchase
price and the executed Stock Purchase Agreement and other documents described
above in Section 5.6 will be considered as the date the officer or employee
acquired the shares of Common Stock as to which the Stock Purchase Award was
exercised. The officer or employee shall have all of the rights of a
shareholder with respect to such shares, including, without limitation, voting
rights and the right to any dividends that may be declared and paid by the
Company on shares of Common Stock, with respect to such acquired shares,
notwithstanding his or her delivery of a promissory note to the Company with
respect to all or a portion of the purchase price of such shares. However,
until payment in full of any such promissory note, the shares of Common Stock
that are purchased by the officer or employee shall remain subject to all of
the Company’s rights and remedies upon the exercise of its security interest in
the shares if the officer or employee is in default under the promissory note.
Furthermore, any certificate or other

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document that the Company issues to the officer or employee to evidence
his or her ownership of the shares of Common Stock shall refer to the Company’s
security interest until the full amount of the promissory note has been paid.

     5.10 Restrictions on the Transfer of the Shares. Until the officer or
employee has paid all principal and accrued interest on any promissory note
that the officer or employee delivered to the Company pursuant to Section 5.6
above in connection with the purchase of shares of Common Stock, the officer or
employee shall not be entitled to sell, pledge or otherwise transfer any of
such shares, and any such attempted sale, pledge or other transfer shall be
void. Furthermore, (i) the sale, pledge or other transfer of such shares shall
at all times be subject to the restrictions on transfer that are contained in
Article VI of the Company’s Bylaws, and (ii) the Administrator shall have
discretion to place rights of first refusal in favor of the Company in some or
all Stock Purchase Agreements.

     5.11 Termination of Employment. If an officer or employee terminates his
or her employment with the Company (including its subsidiaries) for any reason
or for no stated reason, or if the Company terminates such officer’s or
employee’s employment with or without cause, any promissory note that the
officer or employee delivered to the Company pursuant to Section 5.6 above in
connection with the purchase of shares of Common Stock shall remain payable in
accordance with its terms and conditions. If the employment of the officer or employee
terminates (by reason of death or for any other reason) after receipt of a
Stock Purchase Award but prior to the date that he or she has exercised the
Stock Purchase Award pursuant to Section 5.5 above or delivered the purchase
price pursuant to Section 5.6 above, the Stock Purchase Award shall terminate
effective as of the date of the termination of the officer’s or employee’s
employment unless the Administrator elects in its discretion to permit the
former officer or employee (or his or her heirs) to exercise the Stock Purchase
Award and pay for the shares of Common Stock as described above in Sections 5.5
and 5.6.

     5.12 Securities Act Compliance. Shares of Common Stock shall not be
issued pursuant to the exercise of a Stock Purchase Award unless the
Administrator determines that the exercise of such Stock Purchase Award and the
issuance and delivery of such shares pursuant thereto will comply with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended (the “Securities Act”), applicable state and foreign
securities laws and the requirements of any stock exchange or Nasdaq market
system upon which the Common Stock may be listed. The inability of the Company
to obtain from any applicable regulatory body a permit, order or approval
deemed by the Administrator to be necessary to the lawful issuance and sale of
any shares of Common Stock under the Plan shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which
such requisite permit, order or approval shall not have been obtained. As a
condition to the exercise of any Stock Purchase Award, the Administrator may
require an officer or employee to satisfy

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any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be reasonably requested by the
Administrator.

     5.13 Non-Competition Agreement. As a further condition to the receipt of
Common Stock pursuant to the exercise of a Stock Purchase Award, an officer or
employee may be required not to render services for any organization, or to
engage directly or indirectly in any business, competitive with the Company at
any time during which a Stock Purchase Award is outstanding and for up to two
(2) years after the receipt of Common Stock pursuant to the exercise of a Stock
Purchase Award.

     5.14 Changes in Capital Structure. Subject to Section 5.15 below, if the
stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, recapitalization, combination or reclassification,
appropriate adjustments shall be made by the Administrator, in its discretion,
in (i) the number and class of shares of stock subject to the Plan and each
Stock Purchase Award outstanding under the Plan and (ii) the purchase price of
each outstanding Stock Purchase Award; provided, however, that the Company
shall not be required to issue fractional shares as a result of any such
adjustments. Any adjustment, however, in an outstanding Stock Purchase Award
shall be made without change in the total purchase price applicable to the
Stock Purchase Award but with a corresponding adjustment in the price for each
share covered by the unexercised portion of the Stock Purchase Award.
Adjustments under this Section 5.14 shall be made by the Administrator, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. If an adjustment under this Section
5.14 would result in a fractional share interest under a Stock Purchase Award
or any installment, the Administrator’s decision as to inclusion or exclusion
of that fractional share interest shall be final, but no fractional shares of
stock shall be issued under the Plan on account of any such adjustment.

     5.15 Corporate Transactions. Except as otherwise provided in the
applicable Stock Purchase Agreement, in the event of a Corporate Transaction
(as defined below), the Administrator shall, as promptly as practicable before
the occurrence of the Corporate Transaction, notify each officer or employee
who holds an unexercised Stock Purchase Award or a Stock Purchase Award for
which the purchase price has not been delivered pursuant to Section 5.6 above.
Immediately prior to the consummation of such Corporate Transaction, all
unexercised Stock Purchase Awards shall terminate and all Stock Purchase Awards
for which the purchase price has not been delivered pursuant to Section 5.6
shall terminate, unless the Administrator determines, in its discretion, to
provide that all or certain of the outstanding Stock Purchase Awards shall be
assumed or an equivalent Stock Purchase Award substituted by an applicable
successor corporation or other entity or any affiliate of the successor
corporation or entity. A “Corporate Transaction” means (a) a liquidation or
dissolution of the Company; (b) a merger or consolidation of the Company with
or into another corporation or entity as a result of which the Company is not
the surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary of the Company); (c) a sale of all or substantially all
of the assets of the Company; or (d) a purchase or other acquisition of
beneficial ownership of more than fifty

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percent (50%) of the outstanding capital stock of the Company in a single
transaction or a series of related transactions by one person or more than one
person acting in concert (excluding, however, a purchase of stock by the
Company or by a Company-sponsored employee benefit plan). The occurrence of a
Corporate Transaction shall not relieve an officer or employee of the
obligation to make payments of principal and accrued interest on any promissory
note that has been delivered to the Company pursuant to Section 5.6 above.

     5.16 Determination of Value. For purposes of the Plan, the fair market
value of Common Stock (or of other stock or securities) of the Company shall be
determined as follows:

          5.16.1 If the stock is listed on a securities exchange, the Nasdaq
National Market, the Nasdaq Small Cap Market or is otherwise regularly quoted
by a recognized securities dealer and if closing prices are reported, its fair
market value shall be the closing price of such stock on the last business day
preceding the date on which the fair market value of the stock is to be
determined, but if closing prices are not reported, its fair market value shall
be the average of the high bid and low asked quoted prices for such stock on
the last business day preceding the date on which the fair market value of the
stock is to be determined (or if there are no closing or quoted prices for such
specified business day, then for the last preceding business day on which there
were closing or quoted prices).

          5.16.2 In the absence of an established market for the stock, the fair
market value thereof shall be determined in good faith by the Administrator,
with reference to the Company’s net worth, prospective earning power,
dividend-paying capacity and other relevant factors, including the goodwill of
the Company, the economic outlook in the Company’s industry, the Company’s
position in the industry, the Company’s management and the values of the stock
of other corporations in the same or a similar line of business.

	6.	  	NO GUARANTEE OF CONTINUED EMPLOYMENT; DISCRETIONARY NATURE OF THE PLAN; FINANCIAL STATEMENTS.

     Neither the Plan nor the granting of any Stock Purchase Award shall
interfere with or limit in any way the Company’s right to terminate the
employment of any officer or employee at any time and with or without cause.
The granting of the right to purchase shares of Common Stock under the Plan,
and the terms and conditions of each such grant, shall be entirely
discretionary with the Administrator, and nothing in the Plan shall be deemed
to give any officer or employee any right to participate in the Plan or to
purchase shares of Common Stock unless and until the Administrator elects to
make a Stock Purchase Award to such officer or employee. On an annual basis,
the Company shall deliver copies of its audited financial statements to all
persons who hold shares of Common Stock that they have purchased under the
Plan, or who hold outstanding Stock Purchase Awards, at the time that it
delivers its audited financial statements to its other shareholders in
compliance with applicable provisions of the Exchange Act in connection with
its annual meeting of shareholders.

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	7.	  	NON-EXCLUSIVITY OF THE PLAN.

     The Plan shall not be construed as creating any limitations on the power
of the Company to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and
other stock purchase rights to directors, officers, employees and other persons
other than under the Plan.

	8.	  	AMENDMENT OR TERMINATION OF THE PLAN.

     The Board may at any time amend, suspend or terminate the Plan. If not
earlier terminated, the Plan shall automatically terminate ten (10) years after
the date of its adoption by the Board. Except as provided in Section 5.15 with
respect to a Corporate Transaction, termination of the Plan shall not affect
the terms and conditions of any outstanding Stock Purchase Awards. Without the
consent of the affected officer or employee, no amendment or suspension of the
Plan may adversely affect outstanding Stock Purchase Awards except to conform
the Plan to the requirements of applicable laws. Neither the Plan nor any
amendment, suspension or termination of the Plan shall require shareholder
approval unless (i) shareholder approval is required under other applicable
laws or under the regulations of any stock exchange or Nasdaq market system on
which the Common Stock is listed or (ii) the Board otherwise concludes that
shareholder approval is advisable.

	9.	  	EFFECTIVE DATE OF THE PLAN; GOVERNING LAW.

     The effective date of the Plan is December 17, 2001. The Plan shall be
governed by, and construed and enforced in accordance with, the internal laws
of the State of California without giving effect to conflict-of-law principles.

8<PAGE>
                                                                   EXHIBIT 10.42

                           RESTORATION HARDWARE, INC.
                         NOTICE OF GRANT OF STOCK OPTION

               Notice is hereby given of the following option grant (the
"Option") to purchase shares of Common Stock of Restoration Hardware, Inc. (the
"Corporation"):

        Optionee:

        Grant Date:

        Vesting Commencement Date:

        Exercise Price:

        Number of Option Shares:

        Expiration Date:

        Type of Option:      Non-Statutory Option

               Exercise Schedule: The Option shall become exercisable for
               thirty-three and one-third percent (33 1/3%) of the Option Shares
               upon Optionee's completion of each of the three (3) years of
               Service measured from and after the Vesting Commencement Date,
               with the first such installment to become exercisable on the
               first anniversary of the Vesting Commencement Date. In no event
               shall the Option become exercisable for any additional Option
               Shares after Optionee's cessation of Service.

               Optionee agrees to be bound by the terms of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit A.

               No Employment or Service Contract. Nothing in this notice or in
the attached Stock Option Agreement shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.

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<PAGE>

               Definitions. All capitalized terms in this notice shall have the
meaning assigned to them in this notice or in the attached Stock Option
Agreement.

DATED: ________________________, 2001

                                            RESTORATION HARDWARE, INC.

                                            By:_________________________________

                                            Title:______________________________

                                            ____________________________________
                                            OPTIONEE

                                            Address:____________________________

                                            ____________________________________

                                            ____________________________________

ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT

                                       2
<PAGE>

                           RESTORATION HARDWARE, INC.
                             STOCK OPTION AGREEMENT

        1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice subject to the terms and provisions of this Agreement and the
Grant Notice. The Option Shares shall be purchasable from time to time during
the option term specified in Paragraph 2 below at the Exercise Price. All
capitalized terms in this Agreement shall have the meaning assigned to them in
the attached Appendix.

        2. OPTION TERM. This option shall have a maximum term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6 below.

        3. LIMITED TRANSFERABILITY. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, this option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of the Optionee and/or one or more such
family members. The assigned portion shall be exercisable only by the person or
persons who acquire a proprietary interest in the option pursuant to such
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment.

        4. DATE OF EXERCISE. This option shall become exercisable for the Option
Shares in one or more installments as specified in the Grant Notice. As the
option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6 below.

        5. CESSATION OF SERVICE. The option term specified in Paragraph 2 above
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

           (a) Should Optionee cease to remain in Service for any reason (other
than death, Permanent Disability or Misconduct) while this option is
outstanding, then the period for exercising this option shall be reduced to a
three (3)-month period commencing with the date of such cessation of Service,
but in no event shall this option be exercisable at any time after the
Expiration Date.

           (b) Should Optionee die while holding this option, then the personal
representative of Optionee's estate or the person or persons to whom the option
is transferred pursuant to Optionee's will or in accordance with the laws of
inheritance

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<PAGE>

shall have the right to exercise this option. Such right shall lapse, and this
option shall cease to be outstanding, upon the earlier of (i) the expiration of
the twelve (12)-month period measured from the date of Optionee's death or (ii)
the Expiration Date.

           (c) Should Optionee cease Service by reason of Permanent Disability
while this option is outstanding, then the period for exercising this option
shall be reduced to a twelve (12)-month period commencing with the date of such
cessation of Service, but in no event shall this option be exercisable at any
time after the Expiration Date.

           (d) During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the number of vested
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any otherwise exercisable Option Shares for which the option has
not been exercised. However, this option shall, immediately upon Optionee's
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares for which this option is not otherwise at that time
exercisable.

           (e) Should Optionee's Service be terminated for Misconduct, then this
option shall terminate immediately and cease to remain outstanding.

        6. SPECIAL ACCELERATION OF OPTION.

           (a) This option to the extent outstanding at the time of a Change in
Control transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Change in Control, become exercisable for all of the Option Shares at the
time subject to this option and may be exercised for any or all of those Option
Shares as fully vested shares of Common Stock. However, this option shall not
become exercisable on such an accelerated basis if and to the extent: (i) this
option is, in connection with the Change in Control, to be assumed by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction; or (ii)
this option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing at the time of the Change in
Control on the Option Shares for which this option is not otherwise at that time
exercisable (the excess of the Fair Market Value of those Option Shares over the
aggregate Exercise Price payable for such shares) and provides for subsequent
payout in accordance with the same option exercise/vesting schedule set forth in
the Grant Notice.

           (b) Immediately following the Change in Control, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction.

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<PAGE>

           (c) If this option is assumed in connection with a Change in Control
(or otherwise continued in full force and effect), then this option shall be
appropriately adjusted, immediately after such Change in Control, to apply to
the number and class of securities or other property which would have been
issuable to Optionee in consummation of such Change in Control had the option
been exercised immediately prior to such Change in Control, and appropriate
adjustments shall also be made to the Exercise Price, provided the aggregate
Exercise Price shall remain the same.

           (d) This option may also be subject to acceleration in accordance
with the terms of any special addendum attached to this Agreement.

           (e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

        7. ADJUSTMENT IN OPTION SHARES.

        Should any change be made to Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made to
(i) the total number and/or class of securities subject to this option and (ii)
the Exercise Price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.

        8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

        9. MANNER OF EXERCISING OPTION.

           (a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:

               (i) Execute and deliver to the Corporation a Notice of Exercise
for the Option Shares for which the option is exercised;

               (ii) Pay the aggregate Exercise Price for the purchased shares in
one or more of the following forms:

                    (A) Cash or check made payable to the Corporation; or

                    (B) A promissory note payable to the Corporation, but only
to the extent authorized by the Board in accordance with Paragraph 13 below; or

                                       3
<PAGE>

                    (C) Shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at their Fair Market Value on the Exercise Date; or

                    (D) Through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the option) shall
concurrently provide irrevocable instructions (I) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for the purchased
shares plus all applicable federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (II)
to the Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.

Except to the extent the sale and remittance procedure is utilized in connection
with the option exercise, payment of the Exercise Price must accompany the
Notice of Exercise delivered to the Corporation in connection with the option
exercise;

                (iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee) have the
right to exercise this option; and

                (iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all federal, state and local income and employment tax withholding requirements
applicable to the option exercise.

            (b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends, if any, affixed thereto.

            (c) In no event may this option be exercised for any fractional
shares of Common Stock.

        10. COMPLIANCE WITH LAWS AND REGULATIONS.

            (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock may be listed for trading at the time of such
exercise and issuance.

            (b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the

                                       4
<PAGE>

Corporation of any liability with respect to the non-issuance or sale of Common
Stock as to which such approval shall not have been obtained. The Corporation,
however, shall use its best efforts to obtain all such approvals.

        11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6 above, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.

        12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

        13. FINANCING. The Board may, in its absolute discretion and without any
obligation to do so, permit Optionee to pay the Exercise Price for the purchased
Option Shares by delivering a full-recourse promissory note payable to the
Corporation. The terms of any such promissory note (including the interest rate,
the requirements for collateral and the terms of repayment) shall be established
by the Board in its sole discretion provided, however, that such promissory note
shall bear interest at a market rate based on the rate environment at the date
the Option is exercised and take into account the credit standing of the
Optionee. Further, such market rate shall be determined so as not to (i) be less
than the minimum rate required by the federal tax laws to avoid the imputation
of interest income to the Corporation and compensation income to the Optionee
and (ii) result in an accounting compensation charge to the Corporation.

        14. CONSTRUCTION. All decisions of the Board with respect to any
question or issue arising under this Agreement shall be conclusive and binding
on all persons having an interest in this option. For purposes of this
Agreement, whenever the context requires, the singular number shall include the
plural, and vice versa.

        15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.

                                       5
<PAGE>

                                    EXHIBIT I
                               NOTICE OF EXERCISE

               I hereby notify Restoration Hardware, Inc. (the "Corporation")
that I elect to purchase ____________ shares of the Corporation's common stock
(the "Purchased Shares") at the option exercise price of $___________ per share
(the "Exercise Price") pursuant to that certain option (the "Option") granted to
me on _____________, 200_.

               Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

_____________________, 20__
Date

                                            ____________________________________
                                            Optionee

                                            Address:____________________________

                                            ____________________________________

Print name in exact manner
it is to appear on the
stock certificate:                          ____________________________________

Address to which certificate
is to be sent, if different
from address above:                         ____________________________________

                                            ____________________________________

Social Security Number:                     ____________________________________

Employee Number:                            ____________________________________

<PAGE>

                                    APPENDIX

               The following definitions shall be in effect under the Agreement:

               A. AGREEMENT shall mean this Stock Option Agreement.

               B. BOARD shall mean the Corporation's Board of Directors and,
except with regard to the definition of Change in Control below, shall include
any committee of the Board of Directors or Officer of the Corporation to which
the Board of Directors has delegated its authority under this Agreement.

               C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through any of the following transactions:

                  (i) A merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or

                  (ii) The sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation; or

                  (iii) The acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's stockholders;
or

                  (iv) A change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination.

               D. CODE shall mean the Internal Revenue Code of 1986, as amended.

               E. COMMON STOCK shall mean shares of the Corporation's common
stock.

               F. CORPORATION shall mean Restoration Hardware, Inc., a Delaware
corporation.

                                       1
<PAGE>
               G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

               H. EXERCISE DATE shall mean the date on which the option shall
have been exercised in accordance with Paragraph 9 of the Agreement.

               I. EXERCISE PRICE shall mean the exercise price per Option Share
as specified in the Grant Notice.

               J. EXPIRATION DATE shall mean the date on which the option
expires as specified in the Grant Notice.

               K. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:

                     (i) If Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for Common Stock on the
date in question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which a closing selling price is reported; or

                     (ii) If Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the Stock
Exchange determined by the Board to be the primary market for Common Stock, as
such price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.

               L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.

               M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

               N. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the

                                       2
<PAGE>

dismissal or discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).

               O. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

               P. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Section 422 of the Code.

               Q. NOTICE OF EXERCISE shall mean the notice of exercise in the
form attached hereto as Exhibit I.

               R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.

               S. OPTIONEE shall mean the person to whom the option is granted
as specified in the Grant Notice.

               T. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

               U. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.

               V. SERVICE shall mean the Optionee's performance of services for
the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

               W. STOCK EXCHANGE shall mean the American Stock Exchange or the
New York Stock Exchange.

               X. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

                                       3

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