Exhibit 5
WASHINGTON HOMES, INC.
NONSTATUTORY STOCK OPTION
Optionee: Geaton A. DeCesaris, Jr.
1. GRANT OF STOCK OPTION. As of the GRANT DATE (identified in Section
18 below) Washington Homes, Inc. a Maryland corporation (the "COMPANY"), hereby
grants a Nonstatutory Stock Option (the "OPTION") to the OPTIONEE (identified
above), an employee of the Company to purchase the number of shares of the
Company's common stock $0.01 par value per share (the "COMMON STOCK"),
identified in Section 18 below (the "SHARES"), subject to the terms and
conditions of this agreement (the "AGREEMENT"). The Shares, when issued to
Optionee upon the exercise of the Option, shall be fully paid and nonassessable,
The Option is not an "incentive stock option" as defined in Section 422 of the
Internal Revenue Code.
2. DEFINITIONS. All capitalized terms used herein shall have the
meanings set forth in Exhibit A hereto unless otherwise provided herein. Section
18 below sets forth meanings for various capitalized terms used in this
Agreement.
3. OPTION TERM. The Option shall commence on the Grant Date (identified
in Section 18 below) and terminate on the date immediately prior to the tenth
(10th) anniversary of the Grant Date. The period during which the Option is in
effect and may be exercised is referred to herein as the "Option Period".
4. OPTION PRICE. The Option price per Share is identified in Section 18
below.
5. VESTING. The total number of shares subject to this Option shall
vest in accordance with the VESTING SCHEDULE (identified in Section 18 below).
The Shares may be purchased at any time after they become vested, in whole or in
part, during the Option Period; provided, however, the Option may only be
exercisable to acquire whole Shares. The right of exercise provided herein shall
be cumulative so that if the Option is not exercised to the maximum extent
permissible after vesting, the vested portion of the Option shall be
exercisable, in whole or in part, at any time during the Option Period.
6. METHOD OF EXERCISE. The Option is exercisable by delivery of a
written notice to the Company, signed by the Optionee, specifying the number of
Shares to be acquire don, and the effective date of, such exercise. the Optionee
may withdraw notice of exercise of this Option at any time prior to the close of
business on the business day preceding the proposed exercise date.
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7. METHOD OF PAYMENT. The Option Price upon exercise of the Option
shall be payable to the Company in full either: (i) in cash or its equivalent,
or (ii) subject to prior approval by the Compensation Committee in its
discretion, by tendering previously acquired shares having an aggregate Fair
Market Value (as defined in Exhibit A hereto) at the time of exercise equal to
the total Option Price (provided that the Shares must have been held for at
least six (6) months prior to their tender to satisfy the Option Price), or
(iii) subject to prior approval by the Compensation Committee in its discretion,
by withholding shares which otherwise would be acquired on exercise having an
aggregate Fair Market Value at the time of exercise equal to the total Option
price, or (iv) subject to prior approval by the Compensation Committee in its
discretion, by a combination of (i), (ii), and (iii) above. Any payment in
shares of common stock shall be effected by the delivery of such shares to the
Secretary of the company, duly endorsed in blank or accompanied by stock powers
duly executed in blank, together with any other documents as the Secretary may
require. if the payment of the Option price is remitted partly in shares, the
balance of the payment of the Option price shall be paid in either cash,
certified check, bank cashiers' check, or by wire transfer.
The Compensation Committee, in its discretion, may allow (i) a
"cashless exercise" as permitted under Federal Reserve Board's regulation T, 12
CFR Part 220 (or its successor), and subject to applicable securities law
restrictions and tax withholdings, or (ii) any other means of exercise which the
Compensation Committee, in its discretion, determines to be consistent with the
Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the company shall deliver to or on behalf of the
Optionee, in the name of the Optionee or other appropriate recipient, Share
certificates for the number of shares purchased under the Option. Such delivery
shall be effected for all purposes when a stock transfer agent of the Company
shall have deposited such certificates in the United States mail, addressed to
Optionee or other appropriate recipient.
8. RESTRICTION ON EXERCISE. The Option may not be exercised if the
issuance of such Shares or the method of payment of the consideration for such
Shares would constitute a violation of any applicable federal or state
securities or other laws or regulations, including any rule under part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by
the Federal Reserve board, or any rules or regulations of any stock exchange on
which the Common Stock may be listed.
9. TERMINATION OF EMPLOYMENT. Voluntary or involuntary termination of
employment and the death or Disability of Optionee shall affect Optionee's
rights under the Option as follows:
(a) Termination for Cause. The vested and non-vested portions
of the Option shall terminate immediately and shall not be exercisable
to any extent if Optionee's employment with the company is terminated
for Cause (as defined in Exhibit A hereto at the time of such
termination).
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(b) Other Involuntary Termination or voluntary Termination. If
Optionee's employment with the Company is terminated for any reason
other than for Cause, death or Disability (as defined in Exhibit A
hereto at the time of termination), then (i) the Option will
immediately terminate to the extent it is unvested and (ii) the vested
portion of the Option will terminate to the extent not exercised within
180 calendar days after the date of such termination. In no event may
the Option be exercised by anyone after the earlier of (i) the
expiration of the Option Period or (ii) 180 calendar days after
termination of employment.
(c) Death or Disability. If Optionee's employment with the
Company is terminated by death or disability, then (i) the Option will
immediately terminate to the extent it is unvested and (ii) the vested
portion of the Option will terminate 180 calendar days after the date
of such termination to the extent not exercised by Optionee or, in the
case of death, by the person or persons to whom Optionee's rights under
the Option have passed by will or by the laws of descent and
distribution or, in the case of Disability, by Optionee's legal
representative. In no event may the Option be exercised by anyone after
the earlier of (i) the expiration of the Option Period or (ii) 180 days
after the Optionee's death or termination of employment due to
disability.
10. INDEPENDENT LEGAL AND TAX ADVICE. Optionee acknowledges that the
Company has advised Optionee to obtain independent legal and tax advice
regarding the grant and exercise of the Option and the disposition of any Shares
acquired thereby.
11. REORGANIZATION OF COMPANY. The existence of the Option shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations, reorganizations or other
changes in company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Shares or the rights thereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
In the event of a "Change in Control" of the Company (as defined in
Exhibit A hereto at the time of such event), all of the Option then outstanding
shall become 100% vested and immediately and fully exercisable.
12. ADJUSTMENT OF SHARES. In the event of stock dividends, spin-offs of
assets or other extraordinary dividends, stock splits, combinations of shares,
recapitalizations, mergers, consolidations, reorganizations, liquidations,
issuances of rights or warrants and similar transactions or events involving
company, appropriate adjustments shall be made to the terms and provisions of
this Option as provided in the Plan.
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13. NO RIGHTS IN SHARES. Optionee shall have no rights as a stockholder
in respect of the Shares until the Optionee becomes the record holder of such
Shares.
14. INVESTMENT REPRESENTATION. Optionee will enter into such written
representation, warranties and agreements as Company may reasonably request in
order to comply with any federal or state securities law. Moreover, any stock
certificate for any Shares issued to Optionee hereunder may contain a legend
restricting their transferability as determined by the Company in its
discretion. Optionee agrees that Company shall not be obligated to take any
affirmative action in order to cause the issuance or transfer of Shares
hereunder to comply with any law, rule or regulation that applies to the Shares
subject to the Option.
15. NO GUARANTEE OF EMPLOYMENT. The Option shall not confer upon
Optionee any right to continued employment with the Company.
16. WITHHOLDING OF TAXES. The Company shall have the right to (a) make
deductions from the number of Shares otherwise deliverable upon exercise of the
Option in an amount sufficient to satisfy withholding of any federal, state or
local taxes required by law, or (b) take such other action as may be necessary
or appropriate to satisfy any such tax withholding obligations.
17. GENERAL.
(a) Notices. All notices under this Agreement shall be mailed
or delivered by hand to the parties at their respective addresses set
forth beneath their signatures below or at such other address as may be
designate din writing by either of the parties to one another. notices
shall be effective upon receipt.
(b) Shares Reserved. The Company shall at all times during the
Option period reserve and keep available under the Plan such number of
shares as shall be sufficient to satisfy the requirements of this
Option.
(c) Nontransferability of Option. The Option granted pursuant
to this Agreement is not transferable other than by will, the laws of
descent and distribution or by a qualified domestic relations order (as
defined in Section 414(p) of the Internal Revenue Code). The Option
will be exercisable during Optionee's lifetime only by Optionee or by
Optionee's legal representative in the event of Optionee's Disability.
no right or benefit hereunder shall in any manner be liable for or
subject to any debts, contracts, liabilities, obligations or torts of
Optionee.
(d) Amendment and Termination. No amendment, modification or
termination of the Option or this Agreement shall be made at any time
without the written consent of Optionee and Company.
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(e) No Guarantee of Tax Consequences. the Company and the
Committee make no commitment or guarantee that any federal or state tax
treatment will apply or be available to any person eligible for
benefits under the Option. the Optionee has been advised and been
provided the opportunity to obtain independent legal and tax advice
regarding the grant and exercise of the Option and the disposition of
any Shares acquired thereby.
(f) Severability. In the event that any provision of this
Agreement shall be held illegal, invalid, or unenforceable for any
reason, such provision shall be fully severable, but shall not affect
the remaining provisions of the Agreement, and the Agreement shall be
construed and enforced as if the illegal, invalid, or unenforceable
provision had not been included herein.
(g) Supersedes Prior Agreements. This Agreement shall
supersede and replace all prior agreements and understandings, oral or
written, between the Company and the Optionee regarding the grant of
the Options covered hereby.
(h) Governing Law. The Option shall be construed in accordance
with the laws of the State of Maryland without regard to its conflict
of law provision, to the extent federal law does not supersede and
preempt Maryland law.
18. DEFINITIONS AND OTHER TERMS. The following capitalized terms shall
have those meanings set forth opposite them:
(a) Optionee: Geaton A. DeCesaris, Jr.
(b) Grant Date: June 30, 2000
(c) Shares: Fifty Thousand (50,000) Shares of the Company's
Common Stock
(d) Option Price: Six dollars ($6.00) per Share
(e) Option Period: June 30, 2000 through June 30, 2010 until
11:59 p.m. EDT
(f) Vesting Schedule: Options for 12,500 of the Shares shall
vest on the Grant Date, and Options for an additional one-third of the
Shares shall vest on each subsequent anniversary of the Grant Date
until fully vested, as follows:
Date Options Vesting
---- ---------------
June 30, 2001 12,500
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June 30, 2002 12,500
June 30, 2003 12,500
Total 50,000
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IN WITNESS WHEREOF, the Company has, as of June 30, 2000, caused this
Agreement to be executed on its behalf by its duly authorized officer and
Optionee has hereunto set his hand as of the same date.
WASHINGTON HOMES, INC.
By: /s/ Christopher Spendley
---------------------------------
Christopher Spendley, Senior Vice
President and Secretary
Washington Homes, Inc.
1802 Brightseat Road
Landover, MD 20785-4235
Attention: Christopher Spendley, Senior
Vice president and Secretary
OPTIONEE
/s/ Geaton A. DeCesaris, Jr.
-----------------------------
Geaton A. DeCesaris, Jr.
Address:
5806 Sonny Drive
Lothian, MD 20711
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EXHIBIT A
DEFINITIONS FOR NONSTATUTORY STOCK OPTION AGREEMENT
FOR GEATON DECESARIS, JR.
(a) CAUSE. When used in connection with the termination of a Grantee's
Employment, Cause shall mean the termination of the Grantee's Employment by the
Company by reason of (i) the conviction of the Grantee by a court of competent
jurisdiction as to which no further appeal can be taken of a crime involving
moral turpitude or a felony; (ii) the proven commission by the Grantee of an act
of fraud upon the Company; (iii) the willful and proven theft, embezzlement or
other misappropriation of any funds or property of the Company by the Grantee;
(iv) the willful and continued failure by the Grantee to perform the material
duties assigned to him; (v) the knowing engagement by the Grantee in any direct,
material conflict of interest with the Company without compliance with the
Company's conflict of interest policy, if any, then in effect; (vi) the knowing
engagement by the Grantee, without the written approval of the Board, in any
activity which competes with the business of the Company or which would result
in a material injury to the business, reputation or goodwill of the Company;
(vii) the unauthorized disclosure of trade secrets or proprietary information of
the Company or of a third party who has entrusted such information to the
Company, (viii) the knowing and intentional engagement in any activity which
would constitute a material violation of the provisions of the Company's
policies and procedures manual, if any, then in effect; or (ix) a termination
for cause as defined in any employment agreement with the Grantee. For purposes
of this definition of "Cause", the term "Company" shall also refer to any Parent
or Subsidiary.
(b) DISABILITY. As determined by the Compensation Committee in its
discretion exercised in good faith, a physical or mental condition of the
Employee that would entitle him to payment of disability income payments under
the Company's long term disability insurance policy or plan for employees, as
then effective, if any; or in the event that the Grantee is not covered, for
whatever reason, under the Company's long-term disability insurance policy or
plan, "Disability" means a permanent and total disability as defined in Section
22(e)(3) of the Code. A determination of Disability may be made by a physician
selected or approved by the Compensation Committee and, in this respect, the
Grantee shall submit to an examination by such physician upon request.
(c) FAIR MARKET VALUE. The fair market value of one share of Common
Stock on the date in question, which is deemed to be (i) the closing sales price
on the immediately preceding business day of a share of Common Stock as reported
on the principal securities exchange on which Shares are then listed or admitted
to trading, or (ii) if not so reported, the average of the closing bid and asked
prices for a Share on the immediately preceding business day as quoted n the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), or (iii) if not quoted on NASDAQ, the average of the closing bid and
asked prices for a Share as quoted by the National Quotation Bureau's "Pink
Sheets" or the National Association of Securities Dealers' OTC Bulletin Board
System.
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If the Common Stock is not traded in accordance with clauses (i), (ii)
or (iii) of the preceding paragraph at the time a determination of its Fair
Market Value is required to be made hereunder, the determination of Fair Market
Value for purposes of the Plan shall be made by the Compensation Committee in
its discretion exercised in good faith. In this respect, the Compensation
Committee may rely on such financial data, valuations or experts as it deems
advisable under the circumstances.
(d) For purposes of this Nonstatutory Stock Option Agreement, a "Change
in Control": of the Company shall be deemed to have occurred:
(i) If any person (as defined in Section 3(a)(9) of the
Exchange Act (or any successor provision)), other than the Company,
becomes the beneficial owner directly or indirectly of more than fifty
percent (50%) of the outstanding common Stock of the Company,
determined in accordance with Rule 13d-3 under the Exchange Act (or any
successor provision), or otherwise becomes entitled to vote more than
fifty percent (505) of the voting power entitled to be cast at
elections for directors ("Voting Power") of the company, or in any
event such lower percentage as may at any time be provided for in any
similar provision for any director or officer of the company or of any
Subsidiary approved by the Board; provided, however, that for purposes
of this subsection (i), the following acquisitions shall not constitute
a Change in Control: (A) any acquisition directly from the Company, (B)
any acquisition by Geaton A. DeCesaris, Sr., or Geaton A. DeCesaris,
Jr. or members of their family or (C) any acquisition in which Geaton
A. DeCesaris, Sr., or Geaton A. DeCesaris, Jr. and members of their
family control the acquiring entity following the acquisition of the
Company or hold forty percent (40%) of the seats on the acquiring
entity's Board of Directors;
(ii) If the Company is subject to the reporting requirements
of Section 13 or 15(d) (or any successor provision) of the Exchange
Act, and any person (as defined in section 3(a)(9) of the Exchange
Act), other than the Company, purchases shares pursuant to a tender
offer or exchange offer to acquire common Stock of the company (or
securities convertible into or exchangeable for or exercisable for
Common Stock) for cash, securities or any other consideration, if after
consummation of the offer, the person in question is the beneficial
owner, directly or indirectly, of more than fifty percent (50%) of the
outstanding Common Stock of the company, determined in accordance with
Rule 13d-3 under the Exchange Act (or any successor provision) or such
lower percentages as may at any time be provided for in any similar
provision for any director or officer of the company or of any
subsidiary approved by the Board; provided, however, that for purposes
of this subsection (ii), the following acquisitions shall not
constitute a Change in Control: (A) any acquisition by Geaton A.
DeCesaris, Sr. or Geaton A. DeCesaris, Jr. or members of their family
or (B) any acquisition in which Geaton A. DeCesaris, Sr. or Geaton A.
DeCesaris, Jr. and members of their family control the acquiring entity
following the acquisition of the Company or hold forty percent (40%) of
the seats on the acquiring entity's Board of Directors;
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(iii) If the stockholders or the Board approve any
consolidation or merger of the Company (i) in which the Company is not
the continuing or surviving corporation unless such merger is with a
Subsidiary at least eighty percent (80%) of the voting power of which
is held by the Company or (ii) pursuant to which the holders of the
Company's shares of Common Stock immediately prior to such merger or
consolidation would not be the holders immediately after such merger or
consolidation of at least a majority of the voting power of the Company
or such lower percentage as may at any time be provided for in any
similar provision for any director or officer of the Company or of any
Subsidiary approved by the Board; provided, however, that any merger or
consolidation in which Geaton A. DeCesaris, Sr. or Geaton A. De
Cassowaries, Jr. or members of their family control the acquiring or
resulting entity or forty percent (40%) of the seats on such entity's
Board of Directors shall not be deemed a "Change in Control";
(iv) The stockholders or the Board shall have approved any
sale, lease, exchange or other transfer (in one transaction or a series
of transactions) of all or substantially all of the assets of the
Company; or
(v) Upon the election of one or more new directors of the
Company, a majority of the directors holding office, including the
newly elected directors, were not nominated as candidates by a majority
of the directors in office immediately before such election.
As used in this definition of "Change in Control", "Common Stock" means
the Common Stock, or if changed, the capital stock of the Company as it shall be
constituted from time to time entitling the holders thereof to share generally
in the distribution of all assets available for distribution to the Company's
stockholders after the distribution to any holders of capital stock with
preferential rights.
(e) SUBSIDIARY. Any corporation (whether now or hereafter existing)
which constitutes a "subsidiary" of the Company, as defined in Section 424(f) of
the Internal Revenue Code.
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