<PAGE>
EXHIBIT 10.13
SMARTERKIDS.COM,INC.
1999 Incentive Stock Option Agreement
-------------------------------------
SmarterKids.com, Inc. (the "Company") hereby grants the following stock
option pursuant to its 1999 Stock Option and Incentive Plan. The terms and
conditions attached hereto are also a part hereof.
Name of Employee (the "Employee"):
------------------------------------------------------------------------------
Date of this option grant:
------------------------------------------------------------------------------
Number of shares of the Company's Common Stock
subject to this option ("Option Shares"):
------------------------------------------------------------------------------
Option exercise price per share:
------------------------------------------------------------------------------
Number, if any, of Option Shares that may be
purchased on or after grant date:
------------------------------------------------------------------------------
Number of Option Shares subject to vesting schedule:
------------------------------------------------------------------------------
Vesting Start Date:
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Vesting Schedule:
-------------------------------------------------------------------------------------------
<S> <C>
One year anniversary date (the "One Year Anniversary shares
Date") from Vesting Start Date:
-------------------------------------------------------------------------------------------
End of Yearly Calendar Quarter (the "First Calendar shares
Quarter Vesting Period") containing the One Year
Anniversary Date:
-------------------------------------------------------------------------------------------
End of Each Calendar Quarter following the First Calendar shares
Quarter Vesting Period:
-------------------------------------------------------------------------------------------
Four Years from Vesting Start Date: All remaining shares
-------------------------------------------------------------------------------------------
Payment alternatives (specify any or all of Section Section 7(a) (i) through (iii)
7(a)(i) though (iii):
-------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================
SmarterKids.com, Inc.
<S> <C>
------------------------------------
Signature of Employee By:
---------------------------------
------------------------------------ Name of Officer:
Street Address Title:
------------------------------------
City/State/Zip Code
</TABLE>
<PAGE>
SMARTERKIDS.COM, INC.
1999 INCENTIVE STOCK OPTION AGREEMENT -- INCORPORATED TERMS AND CONDITIONS
--------------------------------------------------------------------------
1. Grant Under Plan. This option is granted pursuant to and is governed
by the Company's 1999 Stock Option and Incentive Plan (the "Plan") and, unless
the context otherwise requires, terms used herein shall have the same meaning as
in the Plan.
2. Grant as Incentive Stock Option. This option is intended to qualify as
an incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the "Code").
3. Vesting of Option if Employment Continues. The Employee may exercise
this option on or after the date of this option grant for the number of shares
of Common Stock, if any, indicated on the cover page hereof. If the Employee
has remained continuously employed by the Company through the dates listed on
the vesting schedule set forth on the cover page hereof, the Employee may
exercise this option for the additional number of shares of Common Stock set
opposite the applicable vesting date. In the event of an Acquisition, the final
four calendar quarter vesting installments (or such lesser number which may not
be vested at such time) of the Vesting Schedule shall become immediately vested
immediately prior to the closing of such Acquisition. Notwithstanding the
foregoing, the Board may, in its discretion, accelerate the date that any
installment of this option becomes exercisable. The foregoing rights are
cumulative and (subject to Sections 4 or 5 hereof if the Employee ceases to be
employed by the Company) may be exercised only before the date which is [ten]
years from the date of this option grant.
4. Termination of Employment.
(a) Termination Other Than for Cause. If the Employee ceases to be
employed by the Company, other than by reason of death or disability as
defined in Section 5 or termination for Cause as defined in Section 4(c),
no further installments of this option shall become exercisable, and this
option may no longer be exercised after the passage of three months from
the Employee's last day of employment, but in no event later than the
scheduled expiration date. For purposes hereof, employment shall not be
considered as having terminated during any leave of absence if such leave
of absence has been approved in writing by the Company and if such written
approval contractually obligates the Company to continue the employment of
the Employee after the approved period of absence; in the event of such an
approved leave of absence, vesting of this option shall be suspended (and
the period of the leave of absence shall be added to all vesting dates)
unless otherwise provided in the Company's written approval of the leave of
absence. For purposes hereof, employment shall include a consulting
arrangement between the Employee and the Company that immediately follows
termination of employment, but only if so stated in a written consulting
agreement executed by the Company that specifically refers to this option.
This option shall not be affected by any change of employment within or
among the Company and its Subsidiaries so long as the Employee continuously
remains an employee of the Company or any Subsidiary.
<PAGE>
-2-
(b) Termination for Cause. If the employment of the Employee is
terminated for Cause (as defined in Section 4(c)), this option shall no
longer be exercised from and after the Employee's receipt of written notice
of such termination and shall thereafter not be exercisable to any extent
whatsoever.
(c) Definition of Cause. "Cause" shall mean conduct involving one or
more of the following: (i) the substantial and continuing failure of the
Employee, after notice thereof, to render services to the Company in
accordance with the terms or requirements of his or her employment; (ii)
disloyalty, gross negligence, willful misconduct, dishonesty, fraud or
breach of fiduciary duty to the Company; (iii) deliberate disregard of the
rules or policies of the Company, or breach of an employment or other
agreement with the Company, which results in direct or indirect loss,
damage or injury to the Company; (iv) the unauthorized disclosure of any
trade secret or confidential information of the Company; or (v) the
commission of an act which constitutes unfair competition with the Company
or which induces any customer or supplier to breach a contract with the
Company.
5. Death; Disability.
(a) Death. If the Employee dies while in the employ of the Company,
this option may be exercised, to the extent otherwise exercisable on the
date of his or her death, by the Employee's estate, personal representative
or beneficiary to whom this option has been transferred pursuant to Section
10, only at any time within 180 days after the date of death, but not later
than the scheduled expiration date.
(b) Disability. If the Employee ceases to be employed by the Company
by reason of his or her disability, this option may be exercised, to the
extent otherwise exercisable on the date of cessation of employment, only
at any time within 180 days after such cessation of employment, but not
later than the scheduled expiration date. For purposes hereof,
"disability" means "permanent and total disability" as defined in Section
22(e)(3) of the Code.
6. Partial Exercise. This option may be exercised in part at any time and
from time to time within the above limits, except that this option may not be
exercised for a fraction of a share.
7. Payment of Exercise Price.
(a) Payment Options. The exercise price shall be paid by one or any
combination of the following forms of payment that are applicable to this
option, as indicated on the cover page hereof:
(i) by check payable to the order of the Company; or
<PAGE>
- 3 -
(ii) if the Common Stock is then traded on a national securities
exchange or on the Nasdaq National Market (or successor trading
system), delivery of an irrevocable and unconditional
undertaking, satisfactory in form and substance to the Company,
by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or delivery by the
Employee to the Company of a copy of irrevocable and
unconditional instructions, satisfactory in form and substance
to the Company, to a creditworthy broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise
price; or
(iii) subject to Section 7(b) below, if the Common Stock is then
traded on a national securities exchange or on the Nasdaq
National Market (or successor trading system), by delivery of
shares of Common Stock having a fair market value equal as of
the date of exercise to the option price.
In the case of (iii) above, fair market value as of the date of
exercise shall be determined as of the last business day for which such
prices or quotes are available prior to the date of exercise and shall mean
(i) the last reported sale price (on that date) of the Common Stock on the
principal national securities exchange on which the Common Stock is traded,
if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
Nasdaq National Market (or successor trading system), if the Common Stock
is not then traded on a national securities exchange.
(b) Limitations on Payment by Delivery of Common Stock. If Section
7(a)(iii) is applicable, and if the Employee delivers Common Stock held by
the Employee ("Old Stock") to the Company in full or partial payment of the
exercise price and the Old Stock so delivered is subject to restrictions or
limitations imposed by agreement between the Employee and the Company, an
equivalent number of Option Shares shall be subject to all restrictions and
limitations applicable to the Old Stock to the extent that the Employee
paid for the Option Shares by delivery of Old Stock, in addition to any
restrictions or limitations imposed by this Agreement. Notwithstanding the
foregoing, the Employee may not pay any part of the exercise price hereof
by transferring Common Stock to the Company unless such Common Stock has
been owned by the Employee free of any substantial risk of forfeiture for
at least six months.
8. Securities Laws Restrictions on Resale. Until registered under the
Securities Act of 1933, as amended, or any successor statute (the "Securities
Act"), the Option Shares will be of an illiquid nature and will be deemed to be
"restricted securities" for purposes of the Securities Act. Accordingly, such
shares must be sold in compliance with the registration requirements of the
Securities Act or an exemption therefrom. Unless the Option Shares have been
registered under the Securities Act, each certificate evidencing any of the
Option Shares shall bear a legend substantially as follows:
"The shares represented by this certificate are subject to restrictions on
transfer and may not be sold, exchanged, transferred, pledged, hypothecated
or otherwise
<PAGE>
- 4 -
disposed of except in accordance with and subject to all the terms and
conditions of a certain Incentive Stock Option Agreement, a copy of which
the Company will furnish to the holder of this certificate upon request and
without charge."
9. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, this option may be exercised by written notice to the Company at
its principal executive office, or to such transfer agent as the Company shall
designate. Such notice shall state the election to exercise this option and the
number of Option Shares for which it is being exercised and shall be signed by
the person or persons so exercising this option. Such notice shall be
accompanied by payment of the full purchase price of such shares, and the
Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the notice shall be received. Such certificate or
certificates shall be registered in the name of the person or persons so
exercising this option (or, if this option shall be exercised by the Employee
and if the Employee shall so request in the notice exercising this option, shall
be registered in the name of the Employee and another person jointly, with right
of survivorship). In the event this option shall be exercised, pursuant to
Section 5 hereof, by any person or persons other than the Employee, such notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise this option.
10. Option Not Transferable. This option is not transferable or
assignable except by will or by the laws of descent and distribution. During
the Employee's lifetime only the Employee can exercise this option.
11. No Obligation to Exercise Option. The grant and acceptance of this
option imposes no obligation on the Employee to exercise it.
12. No Obligation to Continue Employment. Neither the Plan, this
Agreement, nor the grant of this option imposes any obligation on the Company to
continue the Employee in employment.
13. Adjustments. Except as is expressly provided in the Plan with respect
to certain changes in the capitalization of the Company, no adjustment shall be
made for dividends or similar rights for which the record date is prior to such
date of exercise.
14. Withholding Taxes. If the Company in its discretion determines that
it is obligated to withhold any tax in connection with the exercise of this
option, or in connection with the transfer of, or the lapse of restrictions on,
any Common Stock or other property acquired pursuant to this option, the
Employee hereby agrees that the Company may withhold from the Employee's wages
or other remuneration the appropriate amount of tax. At the discretion of the
Company, the amount required to be withheld may be withheld in cash from such
wages or other remuneration or in kind from the Common Stock or other property
otherwise deliverable to the Employee on exercise of this option. The Employee
further agrees that, if the Company does not withhold an amount from the
Employee's wages or other remuneration sufficient to satisfy the withholding
obligation of the Company, the Employee will make reimbursement on demand, in
cash, for the amount underwithheld.
<PAGE>
- 5 -
15. Restrictions on Transfer; Company's Right of First Refusal.
(a) Exercise of Right. Option Shares may not be transferred without
the Company's written consent except by will, by the laws of descent and
distribution or in accordance with the further provisions of this Section
15. If the Employee desires to transfer all or any part of the Option
Shares to any person other than the Company (an "Offeror"), the Employee
shall: (i) obtain in writing an irrevocable and unconditional bona fide
offer (the "Offer") for the purchase thereof from the Offeror; and (ii)
give written notice (the "Option Notice") to the Company setting forth the
Employee's desire to transfer such shares, which Option Notice shall be
accompanied by a photocopy of the Offer and shall set forth at least the
name and address of the Offeror and the price and terms of the Offer. Upon
receipt of the Option Notice, the Company shall have an assignable option
to purchase any or all of such Option Shares (the "Company Option Shares")
specified in the Option Notice, such option to be exercisable by giving,
within 15 days after receipt of the Option Notice, a written counter-notice
to the Employee. If the Company elects to purchase any or all of such
Company Option Shares, it shall be obligated to purchase, and the Employee
shall be obligated to sell to the Company, such Company Option Shares at
the price and terms indicated in the Offer within 30 days from the date of
delivery by the Company of such counter-notice.
(b) Sale of Option Shares to Offeror. The Employee may, for 60 days
after the expiration of the 15-day option period as set forth in Section
15(a), sell to the Offeror, pursuant to the terms of the Offer, any or all
of such Company Option Shares not purchased or agreed to be purchased by
the Company or its assignee; provided, however, that the Employee shall not
sell such Option Shares to such Offeror if such Offeror is a competitor of
the Company and the Company gives written notice to the Employee, within 15
days of its receipt of the Option Notice, stating that the Employee shall
not sell his or her Option Shares to such Offeror; and provided, further,
that prior to the sale of such Option Shares to an Offeror, such Offeror
shall execute an agreement with the Company pursuant to which such Offeror
agrees to be subject to the restrictions set forth in this Section 15. If
any or all of such Option Shares are not sold pursuant to an Offer within
the time permitted above, the unsold Option Shares shall remain subject to
the terms of this Section 15.
(c) Failure to Deliver Option Shares. If the Employee fails or
refuses to deliver on a timely basis duly endorsed certificates
representing Company Option Shares to be sold to the Company or its
assignee pursuant to this Section 15, the Company or its assignee shall
have the right to deposit the purchase price for such Company Option Shares
in a special account with any bank or trust company, giving notice of such
deposit to the Employee, whereupon such Company Option Shares shall be
deemed to have been purchased by the Company or its assignee, as the case
may be. All such monies shall be held by the bank or trust company for the
benefit of the Employee. All monies deposited with the bank or trust
company but remaining unclaimed for two years after the date of deposit
shall be repaid by the bank or trust company to the Company on demand, and
the Employee shall thereafter look only to the Company for payment.
<PAGE>
- 6 -
(d) Expiration of Company's Right of First Refusal and Transfer
Restrictions. The first refusal rights of the Company and the transfer
restrictions set forth in this Section 15 shall expire as to Option Shares
on the earliest to occur of (i) the tenth anniversary of the date of this
Agreement, (ii) immediately prior to the closing of a public offering of
Common Stock by the Company pursuant to an effective registration statement
filed under the Securities Act, or (iii) the occurrence of an Acquisition.
16. Early Disposition. The Employee agrees to notify the Company in
writing immediately after the Employee transfers any Option Shares, if such
transfer occurs on or before the later of (a) the date that is two years after
the date of this Agreement or (b) the date that is one year after the date on
which the Employee acquired such Option Shares. The Employee also agrees to
provide the Company with any information concerning any such transfer required
by the Company for tax purposes.
17. Lock-up Agreement. The Employee agrees that in the event that the
Company effects an initial underwritten public offering of Common Stock
registered under the Securities Act, the Option Shares may not be sold, offered
for sale or otherwise disposed of, directly or indirectly, without the prior
written consent of the managing underwriter(s) of the offering, for such period
of time after the execution of an underwriting agreement in connection with such
offering that all of the Company's then directors and executive officers agree
to be similarly bound.
18. Arbitration. Any dispute, controversy, or claim arising out of, in
connection with, or relating to the performance of this Agreement or its
termination shall be settled by arbitration in Massachusetts, pursuant to the
rules then obtaining of the American Arbitration Association. Any award shall
be final, binding and conclusive upon the parties and a judgment rendered
thereon may be entered in any court having jurisdiction thereof.
19. Provision of Documentation to Employee. By signing this Agreement the
Employee acknowledges receipt of a copy of this Agreement and a copy of the
Plan.
20. Miscellaneous.
(a) Notices. All notices hereunder shall be in writing and shall be
deemed given when sent by certified or registered mail, postage prepaid,
return receipt requested, if to the Employee, to the address set forth
below or at the address shown on the records of the Company, and if to the
Company, to the Company's principal executive offices, attention of the
Corporate Secretary.
(b) Entire Agreement; Modification. This Agreement constitutes the
entire agreement between the parties relative to the subject matter hereof,
and supersedes all proposals, written or oral, and all other communications
between the parties relating to the subject matter of this Agreement. This
Agreement may be modified, amended or rescinded only by a written agreement
executed by both parties.
<PAGE>
- 7 -
(c) Fractional Shares. If this option becomes exercisable for a
fraction of a share because of the adjustment provisions contained in the
Plan, such fraction shall be rounded down.
(d) Issuances of Securities; Changes in Capital Structure. Except as
expressly provided herein or in the Plan, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares subject to this
option. No adjustments need be made for dividends paid in cash or in
property other than securities of the Company. If there shall be any change
in the Common Stock of the Company through merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination
or exchange of shares, liquidation, spin-off, split-up or other similar
change in capitalization or event, the restrictions contained in this
Agreement shall apply with equal force to additional and/or substitute
securities, if any, received by the Employee in exchange for, or by virtue
of his or her ownership of, Option Shares, except as otherwise determined
by the Board.
(e) Definition of Good Reason. "Good reason" means, with respect to
any Employee, any of the following actions taken without the Employee's
consent: (i) a reduction by the Company in the Employee's annual base
salary as in effect on the date of the consummation of the Acquisition or
as the same may be increased from time to time; or (ii) the failure by the
Company to pay to the Employee any portion of the Employee's current
compensation within seven (7) days of the date such compensation is due; or
(iii) a substantial reduction in the value of the Employee's benefit
package from the value of the Employee's benefit package on the date of the
consummation of the Acquisition.
(f) Severability. The invalidity, illegality or unenforceability of
any provision of this Agreement shall in no way affect the validity,
legality or enforceability of any other provision.
(g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns, subject to the limitations set forth in Section 10 hereof.
(h) Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of Massachusetts, without giving effect to the
principles of the conflicts of laws thereof.
