Exhibit 4
WASHINGTON HOMES
EMPLOYEE STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of ___________________ between WASHINGTON
HOMES, INC., a Maryland corporation (the "Company"), and _______________
("Optionee").
W I T N E S S E T H
WHEREAS, pursuant to the Washington Homes Employee Stock Option Plan
adopted on September 17, 1992, as amended (the "Plan"), the Plan Administration
Committee (the "Committee") has granted to Optionee as of __________________
(the "Date of Grant") an option to purchase certain authorized but unissued
shares of Common Stock of the Company upon the terms and conditions hereinafter
set forth;
WHEREAS, the options may be offered only to the management,
administrative and other key employees of the Company or any Subsidiary of the
Company who contract with the Company to be bound by the terms of this Employee
Stock Option Agreement (the "Agreement");
NOW THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and
option to purchase on the terms and conditions hereinafter set forth, all or any
part of an aggregate of _________ shares of Common Stock (voting) of the Company
at the price $______ per share, exercisable subject to the provisions of this
Agreement, at any time after the first anniversary of this Date of Grant until
the close of business on the tenth anniversary of this Date of Grant. The
options shall be considered Incentive Stock Options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended.
2. Method of Exercise of Option. Subject to the limitations contained
in Paragraph 3 of this Agreement, exercise of the options granted hereunder,
whether in whole or in part, shall be by written notice to the Company
designating the number of shares as to which the option is exercised, and shall
be accompanied by payment for the number of shares so designated. Payment shall
be by (a) check payable to the Company or other cash equivalents in the required
amount, (b) with the consent of the Committee, by tendering shares of the
Company's Common Stock with a Fair Market Value on the date of exercise equal to
such amount, or (c) with the consent of the Committee, delivering a properly
executed exercise notice, together with irrevocable instructions to a broker to
promptly deliver to the Company the sale or loan proceeds from a third party
brokerage account equal to such amount.
<PAGE>
3. Limitations on Exercise of this Option. The options granted
hereunder are exercisable as follows: The options may not be exercised in whole
or in part during the first year after the Date of Grant; 25% of the options are
first exercisable during the second year after the Date of Grant; 50% of the
options are first exercisable during the third year after the Date of Grant; and
all options shall be fully exercisable after the third anniversary of the Date
of Grant. This option will expire with respect to any option shares remaining
which have not been exercised prior to the tenth anniversary of the Date of
Grant (the "Expiration Date").
4. Termination of Option. This option shall terminate and no rights
hereunder may be exercised in the following circumstances:
(a) If the Optionee ceases to serve as an employee of the
Company, the option shall terminate or lapse upon the first to occur of (i) the
Expiration Date of the option, or (ii) the date which is ninety (90) days after
the date on which the Optionee's employment with the Company or any present or
future Parent or Subsidiary of the Company is terminated; and
(b) If the Optionee dies while serving as an employee of the
Company or any present or future Parent or Subsidiary of the Company, or within
ninety (90) days, or less, after termination of employment with the Company or
any present or future Parent or Subsidiary of the Company, the holder's option
rights may be exercised by the person or persons to whom such rights under the
option shall pass by will or by the laws of descent and distribution upon the
first to occur of (i) the Expiration Date of the option, or (ii) the date which
is twelve months after the date of the Optionee's death; provided, however, that
an option may be exercised to the extent, and only to the extent, that the
option or portion thereof had become exercisable on the date of death or earlier
termination. In no event may any option be exercised by anyone after the
Expiration Date of the option.
5. Non-Assignability of Option. During the Optionee's lifetime, this
option and any other rights hereunder may be exercised only by the Optionee.
This option and such rights shall not be sold, transferred, assigned, pledged,
hypothecated or otherwise disposed of in any way (whether by operation of law of
otherwise) except by will or the laws of descent and distribution, and shall not
be subject to execution, attachment or similar process.
6. Representations of the Optionee. The Optionee represents and agrees
that if the Optionee exercises this option in whole or in part at a time when
there is not in effect under the Securities Act of 1933, as amended (the "Act"),
a registration statement relating to the shares issuable upon exercise hereof
and available for delivery to him or her a prospectus meeting the requirements
of Sections 5 and 10 of the Act, the Optionee, if requested to do so by the
Company, will acquire the shares issuable upon such exercise for the purpose of
investment and not with a view to their resale or distribution, and upon each
such exercise of this option the Optionee will furnish to the Company a written
statement to such effect, satisfactory in form and substance to the Company and
its counsel.
<PAGE>
Optionee further represents and agrees that if and when Optionee upon
exercise of this option at a time when there is not in effect under the Act a
registration statement relating to the resale of such shares and available for
delivery a prospectus meeting the requirements of Section 5 and 10 of the Act,
and if Optionee is then an officer, director or holder of 10% or more of the
stock of the Company, the Optionee will notify the Company prior to any such
offering or sale and will abide by the opinion of counsel to the Company as to
whether and under what conditions and circumstances, if any, he or she may offer
and sell such shares.
Optionee further agrees that no shares may be acquired hereunder
pursuant to exercise of the option extended hereby unless and until any then
applicable requirements of the Securities and Exchange Commission, the Maryland
State Securities Commission, other regulatory agencies, including any other
state securities law commissioners, having jurisdiction over the Company or such
issuance, or any exchanges upon which common stock of the Company may be listed,
shall have been fully satisfied. Optionee understands that the certificates
representing the shares acquired pursuant to this option may bear a legend
referring to the foregoing matters and any limitations under the Act and state
securities laws with respect to the transfer of such shares, and the Company may
impose stop transfer instructions to implement such limitations, if applicable.
Any person or persons entitled to exercise this option under the provisions of
Paragraph 2 above shall be bound by and obligated under the provisions of this
Paragraph 6 to the same extent as is the Optionee.
7. Adjustment, Acceleration and Other Rights. The rights of Optionee
hereunder are subject to adjustments, acceleration, modifications and
termination in certain circumstances and upon occurrence of certain events,
including reorganization, merger, recapitalization, reclassification, stock
split, stock dividend, and stock consolidation, as set forth in or pursuant to
Section 9 of the Plan.
Optionee is hereby granted any additional rights hereafter granted by
the Committee pursuant to Section 9 of the Plan in the circumstances identified
therein.
8. Limitation of Optionee's Rights. Neither Optionee nor any other
person entitled to exercise this option shall have any of the rights or
privileges of a shareholder of the Company in respect of any shares issuable
upon exercise of this option unless and until a certificate representing such
shares shall have been issued in the name of Optionee or such person.
9. Withholding. The Company shall have the right to deduct any sums
that federal, state or local tax law requires to be withheld with respect to the
exercise of this option, or as otherwise required by such laws. The Company may
require as a condition to issuing or delivering shares upon exercise of the
option, or allowing the transfer of shares subsequent to issuance under an
option, that Optionee or such other person exercising the option pay any sums
that federal, state or local income tax law requires to be withheld with respect
to such exercise or transfer. The Company shall not be obligated to advise
Optionee of the existence of the tax or the amount which the Company will be so
required to withhold.
<PAGE>
10. Issuance of Stock Certificates. Upon payment in full of the
purchase price following the exercise of an option, the Optionee shall be
entitled to one stock certificate evidencing the shares acquired upon such
exercise.
11. Payment of Taxes, Fees and Other Expenses. The Company agrees to
pay any and all original issue taxes and stock transfer taxes that may be
imposed on the issuance of shares acquired pursuant to exercise of this option,
together with any and all other fees and expenses necessarily incurred by the
Company in connection therewith.
12. Notices. Any notice to be given under the terms of this Agreement
shall be in writing and addressed as follows.
If to the Company, at its principal office located:
1802 Brightseat Road
Landover, Maryland 20285
Attn: Corporate Secretary
If to the Optionee, at the address furnished to the Company's payroll
office,
or at such other address as either party may hereafter designate in writing to
the other.
13. Laws Applicable to Construction. This option has been granted,
executed and delivered at Landover, Maryland, and the interpretation,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Maryland.
14. Arbitration of Disputes. Any dispute arising between the Company
and the Optionee regarding the method of computing the value of shares or
regarding any other provision of this Agreement shall be submitted for
resolution by an arbitrator governed by the rules of the American Arbitration
Association and the parties agree to be bound by the decision rendered by said
arbitrator.
15. Continuance of Employment. Nothing contained in this Agreement or
in the Plan shall confer upon the Optionee any right with respect to the
continuation of his or her employment by the Company or constitute any contract
or agreement of employment or interfere with the right of the Company to
increase or decrease the compensation of the Optionee from the rate in existence
at any time or to terminate Optionee, but nothing contained herein or in the
Plan shall affect any contractual right of Optionee.
16. Stock Option Plan. The option is subject to, and the Company and
Optionee agree to be bound by, all of the terms and conditions of the Plan.
Capitalized terms not defined herein shall have the meaning set forth in the
Plan. Optionee acknowledges receipt of a copy of the Plan, which is made a part
hereof by this reference. The decisions of the Committee with respect to the
administration of the Plan shall be conclusive and final.
<PAGE>
17. Covenant Not To Compete. In consideration for the granting of the
option under this Option Agreement, Optionee agrees as follows:
During the Optionee's employment with Washington Homes, Inc. and/or its
subsidiaries (collectively "Washington Homes") and for a period of eighteen (18)
months after Optionee is no longer employed by Washington Homes (this period to
be extended by any period of violation or by any period of time required to
obtain enforcement of this Agreement), Optionee shall not engage directly or
indirectly, either as a proprietor, stockholder, partner, officer, Optionee,
consultant, agent, advisor, or otherwise in any business which provides the same
or similar services to those provided by Washington Homes within any
Metropolitan Statistical Area ("MSA") in which Optionee has had an office or
conducted business on behalf of Washington Homes during the previous three (3)
years. The parties expressly agree that Washington Homes has customers and
contractors throughout those areas and, because of that, the scope of this
restrictive covenant is reasonable.
18. Remedies. Optionee acknowledges that compliance with Section 17 of
this Agreement is necessary to protect the business and goodwill of Washington
Homes and that a breach of that section will irreparably and continually damage
Washington Homes, for which money damages may not be adequate.
A. Consequently, Optionee agrees that, in the event he
breaches or threatens to breach any of the covenants contained in Section 17 of
this Agreement, Washington Homes shall be entitled to both (1) an ex parte,
interlocutory or permanent injunction, as well as other equitable relief in
order to prevent the continuation of such harm, and (2) money damages insofar as
they can be determined. Nothing in this Agreement, however, shall be construed
to prohibit Washington Homes from also pursuing any other remedy, the parties
having agreed that all remedies shall be cumulative.
B. As such money damages for the period of time which Optionee
violates these covenants, Washington Homes shall be entitled to recover the
amount of fees, compensation, profits, or other remuneration earned or generated
by Optionee as a result of any such breach.
C. In the event the Optionee breaches or threatens to breach
any provision of this Agreement and Washington Homes retains counsel to cure the
breach or threatened breach, in addition to whatever damages that Washington
Homes might otherwise be entitled to recover, the Optionee also shall be liable
for all costs incurred by Washington Homes, including reasonable attorneys' fees
incurred in curing said actual or threatened breach.
19. Survival. The obligations contained in this Agreement shall survive
termination of Optionee's employment with Washington Homes and expiration, or
exercise of the option under this Agreement, and further shall be binding upon,
and inure to the benefit of the parties hereto and their heirs, successors,
assigns and personal representatives.
<PAGE>
IN WITNESS WHEREOF, as of the date indicated above, the Company has
caused this Agreement to be executed on its behalf by a duly authorized officer
and Optionee has hereunto set his hand.
WASHINGTON HOMES, INC.
By:
-----------------------------------
Name:
Title:
OPTIONEE:
By:
-----------------------------------
Name:
