EXHIBIT 10.15
STOCK OPTION AGREEMENT dated as of August 1, 1997 between DICTAPHONE
CORPORATION, a Delaware corporation (the "Company"), and XXXX X. XXXXXXX (the
"Participant").
WHEREAS, the Participant is currently President and Chief Executive Officer
of the Company and, pursuant to the Company's Management Stock Option Plan, as
amended (the "Plan"), and upon the terms and subject to the conditions
hereinafter set forth, the Company desires to provide the Participant with an
incentive to remain in its employ or the employ of one of its Subsidiaries and
to increase his interest in the success of the Company by granting to the
Participant nonqualified stock options (the "Options") to purchase shares of
Common Stock, par value $0.01, of the Company (the "Common Stock");
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. DEFINITIONS; INCORPORATION OF PLAN TERMS. Capitalized terms used
herein without definition shall have the meanings assigned to them in the Plan,
a copy of which is attached hereto. This Agreement, the Options and the shares
of Common Stock issued pursuant to the exercise of Options (the "Option Shares")
shall be subject to the Plan, the terms of which are hereby incorporated herein
by reference, and in the event of any conflict or inconsistency between the Plan
and this Agreement, the Plan shall govern. The Date of Grant with respect to the
Options shall be the date specified at the foot of the signature page hereof.
2. STOCKHOLDERS AGREEMENT; CERTAIN RESTRICTIONS. In accordance with
Section 6(f) of the Plan, the Participant and the Company hereby confirm that,
effective as of the date hereof, the Participant shall, for purposes of the
Stockholders Agreement, be deemed to be a "Stockholder" with respect to the
Options and the Option Shares and the Participant agrees to be bound by all the
terms of the Stockholders Agreement applicable to such a Stockholder. None of
the Option Shares may be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of to any third party other than the Company except as
provided in the Stockholders Agreement or the Plan. None of the Options may be
sold, transferred, assigned, pledged, or otherwise encumbered or disposed of,
except by will or the laws of descent and distribution. During the Participant's
lifetime, an Option shall be exercisable only by the Participant. Each Permitted
Transferee (other than the Company) of any Option or Option Share shall, as a
condition to the transfer thereof, execute an agreement pursuant to which it
shall become a party to the Stockholders Agreement and this Agreement.
3. GRANT OF OPTIONS. Subject to the terms and conditions contained
herein and in the Plan, the Company hereby grants to the Participant, effective
as of the Date of Grant, 325,000 Service Options. Each such Option shall entitle
the Participant to purchase, upon payment of the Option Price specified at the
foot of the signature page hereof, one share of Common Stock. The Options shall
be exercisable as hereinafter provided.
4. TERMS AND CONDITIONS OF OPTIONS. The Options evidenced hereby are
subject to the following terms and conditions:
(a) DURATION OF OPTIONS. The period for which these Options are
effective shall commence upon the Date of Grant and shall continue until
these Options are terminated as hereinafter provided (the "Option Period").
Except as otherwise expressly provided in Section 4(a) hereof, the Options
(whether or not exercisable) shall terminate immediately upon the
Participant's ceasing to be an employee. The Option Period of these Options
shall terminate upon the earliest to occur of (1) the tenth anniversary of
the date hereof; (2) the close of business on the date on which the Company
acquires any shares of any class of Common Stock owned by the Participant
or his Permitted Transferees (as defined in the Stockholders Agreement
dated August 11, 1995, by and among the Company, the Management Investors
(as defined in the Stockholders Agreement), the Stonington Investor (as
defined in the Stockholders Agreement) and the Institutional Investors (as
defined in the Stockholders Agreement)(as in effect from time to time, the
"Stockholders Agreement")) or any Option held by him or his estate, in each
case in connection with a Put Event (as defined in the Stockholders
Agreement); (3) the close of business on the date on which the Company
acquires all shares of Common Stock owned by the Participant or his
Permitted Transferee and Options held by him or his estate, in each case in
connection with a Call Event (as defined in the Stockholders Agreement);
and (4) the following dates:
(i) the six-month anniversary of the date upon which the
Participant holding such Option ceases to be an employee of the
Company or its subsidiaries by reason of death;
(ii) unless otherwise specifically provided in any agreement
between the Participant and the Company or one of its subsidiaries,
the thirty-day anniversary of the date of the Retirement or Disability
(as such terms are defined in the Stockholders Agreement) of the
Participant if the Participant retires or is disabled while an
employee of the Company or any of its subsidiaries, or the thirty-day
anniversary of the date of Involuntary Termination (as defined in the
Stockholders Agreement) of the Participant; or
(iii) immediately upon a Participant's Voluntary Resignation (as
defined in the Stockholders Agreement) or termination of employment
with the Company or any of its subsidiaries for Cause (as defined in
the Stockholders Agreement); provided, however, that notwithstanding
anything to the contrary contained in clauses (i), (ii) or (iii) of
this Section 4(a), in the event that prior to the time that any Option
would otherwise cease to be exercisable pursuant to such clauses (i),
(ii), or (iii), the Participant (A) exercises a "Put Right" with
respect to such "Put Options" (as such terms are described in Section
3.1 of the Stockholders Agreement) and (B) withdraws all of his Put
Options as provided in the last sentence of Section 3.1(b) of the
Stockholders Agreement because a Restriction (as defined in the
Stockholders Agreement) prevents payment by the Company in cash in
respect of such Put Options, then such Options shall not expire, and
shall continue to be exercisable until the earlier of (x) the
acquisition by the Company for cash of such Put Options pursuant to
Section 3.1(e) or 3.2(d) (or by the Company's designee pursuant to
Section 3.1(f) or 3.2(c)) of the Stockholders Agreement; (y) the later
of (1) the thirtieth day after the expiration of any applicable
"holdback" or similar arrangement that the Participant has entered
into with one or more underwriters in connection with an IPO (as
defined in the Stockholders Agreement), (2) if no such agreement is
entered into, the thirtieth day after an IPO or (3) the thirtieth day
following the effectiveness of a registration statement on Form S-8
with respect to the Option Shares; and (z) the tenth anniversary of
the date hereof. In addition, in the event that the Participant has
delivered to the Company a Put Notice (as defined in the Stockholders
Agreement) with respect to Put Options, and has not withdrawn such Put
Notice pursuant to Section 3.1(b) of the Stockholders Agreement, the
related Option shall not expire until it has been acquired by the
Company (or a designee of the Company) pursuant to Section 3.1 or 3.2
of the Stockholders Agreement.
(b) EXERCISABILITY AND VESTING OF OPTIONS. Options granted
hereunder shall become exercisable pursuant to the following terms and
(except as otherwise expressly provided for hereunder or in any
agreement between the Company and the Participant) only if the
Participant is employed by the Company or any of its subsidiaries (as
determined pursuant to Section 10 of the Plan) on the date on which
such Option becomes exercisable. An Option (or portion thereof) which
becomes exercisable pursuant to the terms of this Section 4(b) is
referred to as a "Vested Option." The Options granted hereunder shall
vest and become exercisable on a cumulative basis in three
installments of 108,334, 108,333 and 108,333 Options on, respectively,
the first, second and third anniversaries of the Date of Grant;
provided that the Participant remains in the employ of the Company (as
determined pursuant to Section 10 of the Plan); and provided, further,
that in the event of a Sale (as defined in the Plan) or an IPO (as
defined in the Plan) of the Company (x) all outstanding unvested
Options held by the Participant shall become fully vested immediately
prior to the Effective Date of such Sale or IPO, and (y) appropriate
provisions shall be made by the Company to permit the Participant to
realize the value of his Options in connection with such Sale to the
same extent as if he had exercised in full immediately prior to the
effective date of such Sale and participated therein (which, with
respect to consideration other than cash, shall be determined in good
faith by the Board of Directors).
(c) PROCEDURE FOR EXERCISE AND PAYMENT FOR SHARES. Exercise of
these Options shall be made by the Participant's giving written notice
to the Company. Such written notice shall be deemed sufficient for
this purpose only if it (i) is delivered to the Company at its
principal offices, (ii) states the number of Option Shares with
respect to which the Option is being exercised, and (iii) states the
date, no earlier than the fifth business day after, and no later than
the tenth business day after, the date of such notice, upon which the
Option Shares shall be purchased and payment therefor shall be made.
The payments for Option Shares purchased pursuant to exercise of these
Options shall be made at the principal offices of the Company. Upon
(x) the exercise of any Option, in compliance with the provisions of
this Section 4(c), (y) receipt by the Company of the payment for the
Option Shares so purchased together with cash in the amount of (or the
making of arrangements referred to in Section 13 of the Plan with
respect to) any taxes required to be collected or withheld as a result
of the exercise of this Option, and (z) receipt by the Company of an
executed copy of the Stockholders Agreement (unless such Participant
is already a party thereto or the Company receives such other evidence
as the Company may reasonably require to ensure that the Option Shares
issuable upon exercise of the Option will be subject to the
Stockholders Agreement), the Company shall deliver or cause to be
delivered to the Participant so exercising an Option a certificate or
certificates for the number of Option Shares with respect to which
these Options are exercised and payment is made. The Option Shares
shall be registered in the name of the exercising Participant;
provided that in no event shall any Option Shares be issued pursuant
to exercise of an Option until full payment therefor shall have been
made in one of the manners set forth below; and provided, further,
that until such payment has been made, the exercising Participant
shall have no rights of a shareholder. For purposes of this paragraph,
the date of issuance shall be the date upon which payment in full has
been received by the Company as provided herein. Notwithstanding the
foregoing, if a Put Right has been exercised by the Participant or a
Call Right has been exercised by the Company pursuant to the
Stockholders Agreement, with respect to the Option, such Option shall
be cancelled, effective upon receipt by the Participant of the
consideration provided for in the Stockholders Agreement. The exercise
price shall be payable at the election of the Participant, in whole or
in part, in any one or a combination of cash or Mature Common Stock
valued at the Fair Value Price (as defined below) as of the date the
notice of exercise is given. Mature Common Stock is defined as shares
of Common Stock held by such Participant for more than six months.
(d) CASH-OUT OF CERTAIN OPTIONS.
(i) Without limiting any rights of the Company under the
Stockholders Agreement, the Committee or the Board of Directors
may in its sole discretion cancel the vested portion of any
Option or Options held by a person who is at such time no longer
an employee or director of the Company or its subsidiaries in
exchange for a cash payment equal to the excess of (x) the Fair
Value Price (as defined in the Plan) of the Option Shares subject
to such Vested Option, over (y) the Option Price for such Option
Shares, multiplied by the number of Option Shares subject to such
cancelled Options; PROVIDED, HOWEVER, that the exercise of the
right of the Committee or Board of Directors hereunder shall not
be made in contemplation of a Sale or an IPO.
(ii) Without limiting any rights of the Company under the
Stockholders Agreement, the Committee or the Board of Directors
may cancel any outstanding Options in exchange for a cash
payment, or in the discretion of the Committee or the Board of
Directors payment of other property, to the Participant equal to
the excess of (x) the fair market value (as determined in good
faith by the Board of Directors of the Company) of the
consideration received per Stonington Share by the Stonington
Investor in any sale (by merger, stock purchase or otherwise) to
a Person which is not an Affiliate of the Company or any
Stonington Investor of all the then issued and outstanding
Stonington Shares (as defined in the Stockholders Agreement) (a
"TRANSFER EVENT"), over (y) the Option Price for such Option
Shares, multiplied by the number of Option Shares subject to such
cancelled Options, in each case effective upon the consummation
of the Transfer Event.
(e) STOCKHOLDER RIGHTS. The Participant shall have no rights
as a stockholder with respect to any Option Shares until such
Participant shall have exercised the related Options and until a
certificate or certificates evidencing such shares shall have
been issued to the Participant, and no adjustment shall be made
for dividends or distributions or other rights in respect of any
share for which the record date is prior to the date upon which
the Participant shall become the holder of record thereof.
(f) DIVIDENDS AND DISTRIBUTIONS. Any shares of Common Stock
or other securities of the Company received by the Participant as
a result of a stock distribution to holders of Option Shares, as
a stock dividend on Option Shares or pursuant to a similar
transaction shall be subject to the same restrictions as such
Option Shares, and all references to Option Shares hereunder
shall be deemed to include such shares of Common Stock or other
securities.
5. REQUIREMENTS OF LAW AND OF CERTAIN AGREEMENTS. If any law or any
regulation of any commission or agency of competent jurisdiction shall require
the Company or the exercising Participant to take any action with respect to any
Option Shares, then the date upon which the Company shall issue or cause to be
issued the certificate or certificates for such Option Shares shall be postponed
until full compliance has been made with all such requirements of law or
regulation; provided that the Company shall use reasonable efforts to take all
necessary action to comply with such requirements of law or regulation. Further,
if requested by the Company, at or before the time of the issuance of such
Option Shares, the Participant shall deliver to the Company his written
statements satisfactory in form and content to the Company, that he intends to
hold the Option Shares so acquired by him for investment and not with a view to
resale or other distribution thereof to the public in violation of the
Securities Act or any applicable state securities or "blue sky" law. Moreover,
in the event that the Company shall determine in its sole discretion that, in
compliance with the Securities Act or any applicable state securities or "blue
sky" law, it is necessary to register any of the Option Shares, or to qualify
any such Option Shares for exemption from any of the requirements of the
Securities Act or any other applicable statute or regulation, no Options may be
exercised until the required action has been completed; provided that the
Company shall use reasonable efforts to take all necessary action to comply with
such requirements of law or regulation. All Option Shares shall bear the legends
provided for in the Stockholders Agreement.
6. MISCELLANEOUS.
(a) NO RIGHTS TO GRANTS OR CONTINUED EMPLOYMENT. The Participant
shall not have any claim or right to receive grants of Options under
the Plan. Neither the Plan nor this Agreement nor any action taken or
omitted to be taken hereunder or thereunder shall be deemed to create
or confer on the Participant any right to be retained in the employ of
the Company or any Subsidiary or other affiliate thereof, or to
interfere with or to limit in any way the right of the Company or any
Subsidiary or other affiliate thereof to terminate the employment of
the Participant at any time.
(b) TAX WITHHOLDING. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for
Federal income tax purposes with respect to Option Shares acquired
pursuant to the exercise of any Option hereunder, such Participant
shall pay to the Company, or make arrangements reasonably satisfactory
to the Company regarding the payment of, any Federal, state, local or
foreign taxes of any kind required by law to be withheld with respect
to such amount; PROVIDED, HOWEVER, that such arrangements need not
involve the advancement by the Company of any funds to, for or on
behalf of any Participant or the incurrence or payment by the Company
of any costs or expenses. The obligations of the Company hereunder
shall be conditional on such payment or arrangements, and the Company
shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the Participant.
(c) NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CORPORATE
CHANGES. Neither the Plan nor this Agreement shall 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 the capital structure or business of the Company,
or any merger or consolidation of the Company, or any issue of stock
or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which
are convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the Company, or any sale or transfer of
all or any part of the assets or business of the Company, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
(d) 1934 ACT. Notwithstanding anything contained in the Plan or
this Agreement to the contrary, if the consummation of any transaction
under the Plan or this Agreement would result in the possible
imposition of liability to the Participant pursuant to Section 16(b)
of the 1934 Act, the Board of Directors or the Committee shall have
the right, in its sole discretion, but shall not be obligated, to
defer such transaction to the extent necessary to avoid such
liability, but in no event for a period in excess of 180 days.
7. SURVIVAL; ASSIGNMENT.
(a) All agreements, representations and warranties made herein
and in any certificates delivered pursuant hereto shall survive the
issuance to the Participant of the Options and the Option Shares and,
notwithstanding any investigation heretofore or hereafter made by the
Participant or the Company or on the Participant's or the Company's
behalf, shall continue in full force and effect. Without the prior
written consent of the Company, the Participant may not assign any of
his rights hereunder except by will or the laws of descent and
distribution. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the heirs and
permitted successors and assigns of such party; and all agreements
herein by or on behalf of the Company, or by or on behalf of the
Participant, shall bind and inure to the benefit of the heirs and
permitted successors and assigns of such parties hereto.
(b) The Company shall have the right to assign to any of its
affiliates any of its rights, or to delegate to any of its affiliates
any of its obligations, under this Agreement.
8. CERTAIN REMEDIES. Without intending to limit the remedies available
to the Company, the Participant agrees that damages at law will be an
insufficient remedy in the event the Participant violates the terms of this
Agreement. The Participant agrees that the Company may apply for and have
injunctive or other equitable relief in any court of competent jurisdiction to
restrain the breach or threatened breach of, or otherwise specifically to
enforce, any of the provisions hereof.
9. NOTICES. All notices and other communications provided for herein
shall be in writing and shall be delivered by hand or sent by certified or
registered mail, return receipt requested, postage prepaid, addressed, if to the
Participant, to his attention at the mailing address set forth at the foot of
this Agreement (or to such other address as the Participant shall have specified
to the Company in writing) and, if to the Company, c/o Stonington Partners,
Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx X. Xxxx,
Principal. All such notices shall be conclusively deemed to be received and
shall be effective, if sent by hand delivery, upon receipt, or if sent by
registered or certified mail, on the fifth day after the day on which such
notice is mailed.
10. WAIVER. The waiver by either party of compliance with any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any other provision of this Agreement, or of any subsequent
breach by such party of a provision of this Agreement.
11. ENTIRE AGREEMENT; GOVERNING LAW. This Agreement and the other
related agreements expressly referred to herein set forth the entire agreement
and understanding between the parties hereto and supersede all prior agreements
and understandings relating to the subject matter hereof. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
agreement. The headings of sections and subsections herein are included solely
for convenience of reference and shall not affect the meaning of any of the
provisions of this Agreement. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Participant has executed this
Agreement, both as of the day and year first written above.
DICTAPHONE CORPORATION
By: /S/ XXXXXX X. XXXX
______________________________________
Name: Xxxxxx X. Xxxx
Title: Vice President, Business
Development and General Counsel
PARTICIPANT
/S/ XXXX X. XXXXXXX
_________________________________________
Name: Xxxx X. Xxxxxxx
Address:
Option Price: $10.00
Date of Grant: August 1, 1997
