Form Of Option Agreement: Definition & Sample

A form of option agreement is a document that allows an option holder to buy or sell the security at a predetermined price, called a strike price. When this agreement is set into place, it's important to note that it gives the contract party the right to buy or sell the security; they are not obligated to do so. However, if the option holder wants to exercise their right to buy or sell, there is an expiration date for these rights listed in the contract terms. However, an addendum or amendment can be added to the agreement to extend the expiration date.

Common Sections in Form Of Option Agreements

Below is a list of common sections included in Form Of Option Agreements. These sections are linked to the below sample agreement for you to explore.

Form Of Option Agreement Sample

THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

FUNKO ACQUISITION HOLDINGS, L.L.C.

_______ _______, ____ 1 _______ $ _______

The Grantee named above has been granted an Option to purchase Units of Funko Acquisition Holdings, L.L.C. (the “Company”) on the terms and subject to the conditions described below, in accordance with the Funko Acquisition Holdings, L.L.C. Option Plan (the “Plan”). Capitalized terms that are used but not defined herein shall have the respective meanings accorded to such terms in the Plan. The Company and Grantee agree as follows:

The Company grants to Grantee the right to purchase, in the aggregate, the number of Units shown above at the Exercise Price Per Unit shown above. The Option is not intended to be treated as an “incentive stock option” within the meaning of Section 422 of the Code. The granting of the Option shall impose no obligation on Grantee to exercise such Option.

The parties agree that the Exercise Price Per Unit is not less than the Fair Market Value of a Unit of the Company as of the date of grant of this Option, as such Fair Market Value and date of grant would be determined under Code Section 409A so as to exempt this Option from that statute. The Company shall not be responsible, or liable to Grantee, for any tax and other consequences if the Option is determined to be subject to Code Section 409A and not in compliance with that statute.

Except as provided in the Plan or in this Option Agreement, and unless the Board establishes otherwise, Grantee is entitled to purchase, in whole or in part, not more than the vested portion of the total number of Units shown above, determined according to the vesting schedule shown below:

The Option shall terminate immediately upon Grantee’s termination of Continuous Service to the extent that it is then unvested and shall be exercisable after the Grantee’s termination of Continuous Service to the extent it is then vested only during the applicable time period as determined below and thereafter shall terminate.

(a) Disability . If Grantee’s Continuous Service terminates because of his or her Disability, the Option, to the extent unexercised and exercisable for vested Units on the date on which the Grantee’s Continuous Service terminated, may be exercised by the Grantee (or the Grantee’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which Grantee’s Continuous Service terminated, but in any event no later than the Expiration Date.

(b) Death . If the Grantee’s Continuous Service terminates because of the death of Grantee, the Option, to the extent unexercised and exercisable for vested Units on the date on which Grantee’s Continuous Service terminated, may be exercised by Grantee’s legal representative or other person who acquired the right to exercise the Option by reason of the Grantee’s death at any time prior to the expiration of twelve (12) months after the date on which the Grantee’s Continuous Service terminated, but in any event no later than the Expiration Date. The Grantee’s Continuous Service shall be deemed to have terminated on account of death if the Grantee dies within three (3) months after the Grantee’s termination of Continuous Service.

(c) Termination for Cause . Notwithstanding any other provision of this Option Agreement, if the Grantee’s Continuous Service is terminated for Cause, the entire Option (both vested and unvested portions) shall terminate and cease to be exercisable immediately upon such termination of Continuous Service.

(d) Other Termination of Service . If Grantee’s Continuous Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested Units on the date on which Grantee’s Continuous Service terminated, may be exercised by Grantee at any time prior to the expiration of three (3) months after the date on which the Grantee’s Continuous Service terminated, but in any event no later than the Expiration Date.

(e) Extension if Exercise Prevented by Law . Notwithstanding the foregoing other than termination of Service for Cause, if the exercise of the Option within the applicable time periods set forth in this Section is prevented by Applicable Laws, the Option shall remain exercisable until the later of (a) thirty (30) days after the date such exercise first would no longer be prevented by such Applicable Laws or (b) the end of the applicable time period under this Section, but in any event no later than the Expiration Date. Nothing contained herein shall limit Company’s rights to terminate the employment or engagement of Grantee at any time for any reason.

Grantee may exercise the Option in accordance with the terms hereof by providing to Company a written notice (the “Exercise Notice”) in the form attached hereto as Exhibit A, specifying the number of vested Units to be purchased and the purchase date, which shall be not less than five (5) nor more than ten (10) days after giving the Exercise Notice unless otherwise agreed to by the Company. On the purchase date, Grantee shall provide to the Company: (i) payment in full of the Exercise Price Per Unit for the Units being acquired through the methods permitted by the Plan (except in the event of a Net Exercise); (ii) execution of a joinder to the Company’s LLC Agreement in the form specified therein; and (iii) any other matters (including income tax withholding arrangements) required in accordance with this Option Agreement and the Plan. This Option will be considered exercised with respect to the number of Units Grantee desires to purchase on the date that Company receives all of the foregoing.

Grantee shall not acquire any rights or privileges as a Unit holder or Member of the Company for any Units issuable upon the exercise of this Option until such Units have been duly issued by the Company. The Company shall have the right to delay the issue or delivery of any Units to be delivered hereunder until (i) the completion of such registration or qualification of such Units under federal or state law, ruling or regulation as Company deems to be necessary or advisable; (ii) completion of tax withholding or payment arrangements satisfactory to the Company, in accordance with Section 9 below; (iii) receipt from Grantee of such documents and information as Company deems necessary or appropriate in connection with such registration or qualification or the issuance of Units hereunder; and (iv) execution and delivery by Grantee of a written joinder to the Company’s LLC Agreement. In the event of Grantee’s death, the Option may be exercised by the representative, administrator or other representative of Grantee’s estate, or the person to whom this Option shall pass by will or beneficiary designation. Any certificate or other evidence of Unit ownership following exercise of this Option may be marked with an appropriate legend giving notice of any transferability, repurchase rights, restrictions and conditions imposed by law, by the Company’s LLC Agreement or by any other agreement among the members of the Company.

This Option, and the rights and privileges conferred by it, is personal to Grantee and may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise), and during Grantee’s lifetime shall be exercisable only by Grantee. Grantee may transfer this Option, and the rights and privileges conferred by it, upon Grantee’s death, either by will or under the laws of descent and distribution, or by beneficiary designation made in such form and subject to such limitation as may from time to time be acceptable to the Committee and delivered to and accepted by the Committee. All such persons shall be subject to all of the terms and conditions of this Agreement to the same extent as would Grantee if still alive. This Option, and the rights and privileges conferred by it, may not be subjected to execution, attachment or similar process.

The Company has the right to repurchase outstanding Options (and Units acquired by exercise of an Option) held by Grantee upon termination of the Grantee’s Continuous Service with the Company for any reason. The Company shall have ninety (90) days after the termination of the Grantee’s Continuous Status to give notice of intent to exercise or assign its repurchase rights with respect to all or part of the outstanding Option. The repurchase shall take place at the Company’s principal executive office within sixty (60) days after such notice. The repurchase price for Units acquired by exercise of an Option shall be the Unit Fair Market Value. The repurchase price for outstanding vested but unexercised Options shall be the Fair Market Value of the underlying Unit reduced by the Exercise Price for the Option as set forth in the Option Agreement. Portions of an outstanding Option may be cancelled in lieu of being repurchased, due to termination of employment for Cause, breach of a restrictive covenant or other negative circumstance. Fair Market Value shall be determined, for purposes of repurchase rights, by the Board in its sole discretion, but shall not be less than the Company’s book value for the Units involved absent clear evidence to the contrary. Payment may be made by a promissory note or in cash, at the Company’s discretion. The provisions of this Section 6 are supplemental to, and not in lieu of, any rights to repurchase Units or any other security held by Company pursuant to the LLC Agreement.

Example: Grantee has an Option to purchase 1,000 Units. Grantee terminates service 36 months after the grant date. As of date of Grantee’s termination of Continuous Service to the Company, Grantee had exercised the Option to acquire 750 of the 1,000 Units (because 75% became

exercisable after 36 months). Grantee may therefore be required at the Company’s election to resell to the Company the 750 Acquired Units and receive payment equal to the Fair Market Value attributable to those Acquired Units. The remaining 250 Units that had not yet vested will be cancelled and forfeited on the date of the termination of Continuous Service because the Option expires.

Any notice to be given to Company under the terms of this Option Agreement shall be addressed to the attention of the Company’s Board, at its principal place of business, and any notice to be given to Grantee may be sent to Grantee’s address as it appears in the payroll records of the Company, or at such other addresses as either party may designate in writing to the other.

(a) The Grantee shall, no later than the date of exercising the Option pay to the Company, make arrangements satisfactory to the Board for payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to the Acquired Units, and the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind, including from Grantee’s payroll, otherwise due to Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to the Acquired Units.

(b) Tax consequences on the Grantee (including without limitation federal, state, local and foreign income tax consequences) with respect to the Units (including without limitation the grant, vesting and/or forfeiture thereof) are the sole responsibility of the Grantee. The Grantee shall consult with his or her own personal accountant(s) and/or tax advisor(s) regarding these matters.