1
Exhibit 10(k)
-------------
Form of Stock Option Agreement
Used in Connection with the
Grant of Incentive Stock Options
Pursuant to the X. X. Xxxxx
Corporation 1988 Stock Option Plan
2
STOCK OPTION AGREEMENT
(Incentive Stock Options)
-------------------------
THIS AGREEMENT is made to be effective as of ___________,
199_, by and between X. X. Xxxxx Corporation, an Ohio corporation (the
"COMPANY"), and _____________________________ (the "OPTIONEE").
WITNESSETH:
-----------
WHEREAS, the Board of Directors and the shareholders of the
COMPANY have adopted the X. X. Xxxxx Corporation 1988 Stock Option Plan (the
"PLAN"); and
WHEREAS, pursuant to the provisions of the PLAN, the Board of
Directors of the COMPANY has appointed a Compensation Committee (the
"COMMITTEE") to administer the PLAN and the COMMITTEE has determined that an
option to acquire common shares, $1.00 par value (the "COMMON SHARES"), of the
COMPANY should be granted to the OPTIONEE upon the terms and conditions set
forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the parties
hereto make the following agreement, intending to be legally bound thereby:
(1) GRANT OF OPTION. The COMPANY hereby grants to the
OPTIONEE an option (the "OPTION") to purchase _____ COMMON SHARES of the
COMPANY. The OPTION is intended to qualify as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE").
(2) TERMS AND CONDITIONS OF THE OPTION.
(A) OPTION PRICE. The purchase price (the
"OPTION PRICE") to be paid by the OPTIONEE to the COMPANY upon the exercise of
the OPTION shall be $____________ per share, being 100% of the closing sale
price for the COMMON SHARES of the COMPANY as shown on the New York Stock
Exchange - Composite Transactions on ___________, 199_, subject to adjustment
as provided in Section 3.
(B) EXERCISE OF THE OPTION. The OPTION may not
be exercised until the OPTIONEE shall have completed twelve months of
continuous employment with the COMPANY and/or its subsidiaries immediately
following the date hereof. Thereafter, the OPTION may be exercised as follows:
(i) at any time after such
twelve-month period as to twenty percent (20%) of the COMMON SHARES subject to
the OPTION;
3
(ii) at any time after twenty-four
months from the date of this Agreement as to an additional twenty percent (20%)
of the COMMON SHARES subject to the OPTION;
(iii) at any time after thirty-six
months from the date of this Agreement as to an additional twenty percent (20%)
of the COMMON SHARES subject to the OPTION;
(iv) at any time after forty-eight
months from the date of this Agreement as to an additional twenty percent (20%)
of the COMMON SHARES subject to the OPTION; and
(v) at any time after sixty months
from the date of this Agreement as to the remaining twenty percent (20%) of the
COMMON SHARES subject to the OPTION.
Subject to the other provisions of this Agreement, if the
OPTION becomes exercisable as to certain COMMON SHARES, it shall remain
exercisable as to those COMMON SHARES until the date of expiration of the
OPTION term. The COMMITTEE may, but shall not be required to (unless otherwise
provided in this Agreement), accelerate the schedule of the time or times when
the OPTION may be exercised.
The grant of the OPTION shall not confer upon the OPTIONEE any
right to continue in the employment of the COMPANY nor limit in any way the
right of the COMPANY to terminate the employment of the OPTIONEE at any time in
accordance with law or the COMPANY's governing corporate documents.
(C) OPTION TERM. The OPTION shall in no event
be exercisable after the expiration of ten (10) years from the date of this
Agreement.
(D) METHOD OF EXERCISE. The OPTION may be
exercised by giving written notice of exercise to the COMMITTEE in care of the
Treasurer of the COMPANY stating the number of COMMON SHARES subject to the
OPTION in respect of which it is being exercised. Payment for all such COMMON
SHARES shall be made to the COMPANY at the time the OPTION is exercised in
United States dollars in cash (including check, bank draft or money order). If
permitted by the COMMITTEE, payment for such COMMON SHARES may be made (i) by
delivery of COMMON SHARES of the COMPANY already owned by the OPTIONEE and
having a Fair Market Value (as that term is defined in the PLAN) on the date of
delivery equal to the OPTION PRICE, or (ii) by delivery of a combination of
cash and already owned COMMON SHARES. After payment in full for the COMMON
SHARES purchased under the OPTION has been made, the COMPANY shall take all
such action as is necessary to deliver appropriate share certificates
evidencing the COMMON SHARES purchased upon the exercise of the OPTION as
promptly thereafter as is reasonably practicable.
(E) SATISFACTION OF TAXES AND TAX WITHHOLDING
REQUIREMENTS. The COMMITTEE shall determine the appropriate
-2-
4
arrangements for the satisfaction by the COMPANY and the OPTIONEE of all
federal, state, local or other income, excise or employment taxes or tax
withholding requirements applicable to the exercise of the OPTION or the later
disposition of the COMMON SHARES or other property thereby acquired.
(3) ADJUSTMENTS AND CHANGES IN THE COMMON SHARES.
(A) In the event that the outstanding COMMON
SHARES of the COMPANY shall be changed into or exchanged for a different kind
of shares or other securities of the COMPANY or of another corporation (whether
by reason of merger, consolidation, recapitalization, reclassification,
split-up, combination of shares or otherwise) or if the number of such COMMON
SHARES shall be increased through the payment of a stock dividend, then unless
such change results in the termination of all outstanding options granted
pursuant to the PLAN, there shall be substituted for or added to each COMMON
SHARE of the COMPANY subject to the OPTION, the number and kind of shares or
other securities into which each outstanding COMMON SHARE of the COMPANY shall
be changed, or for which each such COMMON SHARE shall be exchanged, or to which
the holder of each such COMMON SHARE shall be entitled, as the case may be.
The OPTION shall also be appropriately amended as to the OPTION PRICE and other
terms as may be necessary to reflect the foregoing events. In the event there
shall be any other change in the number or kind of the outstanding shares of
the COMPANY, or of any shares or other securities into which such shares shall
have been changed, or for which they shall have been exchanged, then if the
COMMITTEE shall, in its sole discretion, determine that such change equitably
requires an adjustment in the OPTION, such adjustment shall be made by the
COMMITTEE in accordance with such determination. Fractional shares resulting
from any adjustment in the OPTION pursuant to this Section 3(A) shall be
rounded down to the nearest whole number of shares.
(B) Notwithstanding the foregoing, any and all
adjustments in connection with the OPTION shall comply in all respects with
Section 422 of the CODE, and the regulations promulgated thereunder.
(C) Notice of any adjustment pursuant to this
Section 3 shall be given by the COMPANY to the OPTIONEE.
(4) ACCELERATION OF OPTIONS.
(A) In the event that the COMPANY or its
shareholders enter into one or more agreements to dispose of all or
substantially all of the assets or fifty percent (50%) or more of the
outstanding capital stock of the COMPANY by means of sale (whether as a result
of a tender offer or otherwise), merger, reorganization or liquidation in one
or a series of related transactions (each, an "ACCELERATION EVENT"), then the
OPTION shall become exercisable during the fifteen (15) days immediately prior
to the scheduled consummation of the ACCELERATION EVENT with
-3-
5
respect to the full number of COMMON SHARES subject to the OPTION; provided,
however, that no such ACCELERATION EVENT will occur in the event that (i) the
primary purpose of the transaction is to change the COMPANY's domicile solely
within the United States, (ii) the terms of the agreement(s) require as a
prerequisite for the consummation of the transaction that each option granted
by the COMPANY pursuant to the PLAN either be assumed by the successor
corporation or parent thereof or be replaced with a comparable option to
purchase shares of capital stock of the successor corporation or parent
thereof, or (iii) the transaction is approved by a majority of the members of
the Board of Directors of the COMPANY who had either been in office for more
than twelve (12) months prior to such transaction or had been elected, or
nominated for election by the COMPANY's shareholders, by the vote of
three-fourths of the directors then still in office who were directors at the
beginning of such twelve-month period; and provided further that any exercise
of the OPTION during such fifteen (15) day period shall be conditioned upon the
consummation of such transaction and shall be effective only immediately before
such consummation, except to the extent that the OPTIONEE may indicate, in
writing, that such exercise is unconditional with regard to all or part of the
unaccelerated portion of the OPTION. Upon consummation of the ACCELERATION
EVENT, the OPTION, whether or not accelerated, will terminate and cease to be
exercisable, unless assumed by the successor corporation or parent thereof.
(B) The grant of this OPTION shall not affect
in any way the right of the COMPANY to adjust, reclassify, reorganize, or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
(5) NON-ASSIGNABILITY OF OPTION. The OPTION shall not
be assignable or otherwise transferable by the OPTIONEE except by will or by
the laws of descent and distribution. The OPTION may not be exercised during
the lifetime of the OPTIONEE except by him, his guardian or legal
representative.
(6) SUBSTITUTION FOR OPTION. The COMMITTEE shall have
the authority to effect, at any time and from time to time, with the consent of
the OPTIONEE, the cancellation of the OPTION and the grant in substitution
therefor of one or more new options under the PLAN covering the same or a
different number of COMMON SHARES at an option price per share in all events
not less than 100% of the closing sale price for the COMMON SHARES of the
COMPANY as shown on the New York Stock Exchange - Composite Transactions on the
new grant date.
(7) EXERCISE AFTER TERMINATION OF EMPLOYMENT.
(A) Except as otherwise provided in this
Agreement, the OPTION shall be exercisable only by the OPTIONEE, shall be
exercisable only while the OPTIONEE is in the employment of the COMPANY and
then only if the OPTION has become exercisable by its terms, and if not
exercisable
-4-
6
by its terms at the time the OPTIONEE ceases to be in the employment of the
COMPANY, shall immediately expire on the date of termination of employment.
(B) If the OPTION is exercisable by its terms
at the time the OPTIONEE ceases to be in the employment of the COMPANY other
than by reason of the death, permanent disability or normal retirement of the
OPTIONEE, it must be exercised on or before the earlier of three (3) months
after the date of the termination of employment of the OPTIONEE or the fixed
expiration date of the OPTION after which period the OPTION shall expire.
Notwithstanding the foregoing, if the OPTIONEE's employment is terminated for
willful, deliberate or gross misconduct (such as, for example, dishonesty), the
OPTION shall, to the extent not previously exercised, expire immediately upon
such termination.
(C) In the event of the death of the OPTIONEE
(i) while in the employment of the COMPANY or (ii) within three (3) months
after his termination of employment other than for willful, deliberate or gross
misconduct, the unexercised portion of the OPTION (whether or not then
exercisable by its terms) shall become immediately exercisable by his estate
for a period ending on the earlier of the fixed expiration date of the OPTION
or twelve (12) months after the date of death, after which period the OPTION
shall expire. For purposes hereof, the estate of an OPTIONEE shall be defined
to include the legal representatives thereof or any person who has acquired the
right to exercise the OPTION by reason of the death of the OPTIONEE.
(D) In the event of the termination of
employment of the OPTIONEE by reason of the "permanent disability" or "normal
retirement" of the OPTIONEE, the OPTION shall become exercisable and terminate
on the earlier of the period ending three (3) months after the termination of
employment or the fixed expiration date of the OPTION; provided, however, that
if such termination of employment occurs by reason of "disability" within the
meaning of Section 22(e)(3) of the CODE, said three-month period shall be
extended to twelve months. For purposes hereof, "permanent disability" shall
be deemed to be the inability of the OPTIONEE to perform the duties of his job
with the COMPANY because of a physical or mental disability as evidenced by the
opinion of a COMPANY-approved doctor of medicine licensed to practice medicine
in the United States of America and "retirement" shall be deemed to be "normal
retirement" if the OPTIONEE is at least 65 years of age and has completed at
least five (5) consecutive years of employment with the COMPANY at the date of
retirement.
(8) RESTRICTIONS ON TRANSFERS OF COMMON SHARES.
Anything contained in this Agreement or elsewhere to the contrary
notwithstanding, the COMPANY may postpone the issuance and delivery of COMMON
SHARES upon any exercise of the OPTION until completion of any stock exchange
listing or registration or other qualification of such COMMON SHARES under any
state or federal law, rule or regulation as the COMPANY may consider
appropriate; and may require
-5-
7
the OPTIONEE when exercising the OPTION to make such representations and
furnish such information as the COMPANY may consider appropriate in connection
with the issuance of the COMMON SHARES in compliance with applicable law.
COMMON SHARES issued and delivered upon exercise of the OPTION
shall be subject to such restrictions on trading, including appropriate
legending of certificates to that effect, as the COMPANY, in its discretion,
shall determine are necessary to satisfy applicable legal requirements and
obligations.
(9) RIGHTS OF OPTIONEE. The OPTIONEE shall have no
rights as a shareholder of the COMPANY with respect to any COMMON SHARES of the
COMPANY covered by the OPTION until the date of issuance of a certificate to
him evidencing such COMMON SHARES.
(10) PLAN AS CONTROLLING. All terms and conditions of
the PLAN applicable to the OPTION which are not set forth in this Agreement
shall be deemed incorporated herein by reference. In the event that any term
or condition of this Agreement is inconsistent with the terms and conditions of
the PLAN, the PLAN shall be deemed controlling.
(11) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio.
(12) RIGHTS AND REMEDIES CUMULATIVE. All rights and
remedies of the COMPANY and of the OPTIONEE enumerated in this Agreement shall
be cumulative and, except as expressly provided otherwise in this Agreement,
none shall exclude any other rights or remedies allowed by law or in equity,
and each of said rights or remedies may be exercised and enforced concurrently.
(13) CAPTIONS. The captions contained in this Agreement
are included only for convenience of reference and do not define, limit,
explain or modify this Agreement or its interpretation, construction or meaning
and are in no way to be construed as a part of this Agreement.
(14) SEVERABILITY. If any provision of this Agreement or
the application of any provision hereof to any person or any circumstance shall
be determined to be invalid or unenforceable, then such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of each party to
this Agreement that if any provision of this Agreement is susceptible of two or
more constructions, one of which would render the provision enforceable and the
other or others of which would render the provision unenforceable, then the
provision shall have the meaning which renders it enforceable.
(15) NUMBER AND GENDER. When used in this Agreement, the
number and gender of each pronoun shall be construed to be such
-6-
8
number and gender as the context, circumstances or its antecedent may required.
(16) ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the COMPANY and the OPTIONEE in respect of the subject
matter of this Agreement, and this Agreement supersedes all prior and
contemporaneous agreements between the parties hereto in connection with the
subject matter of this Agreement. No officer, employee or other servant or
agent of the COMPANY, and no servant or agent of the OPTIONEE is authorized to
make any representation, warranty or other promise not contained in this
Agreement. No change, termination or attempted waiver of any of the provisions
of this Agreement shall be binding upon any party hereto unless contained in a
writing signed by the party to be charged.
(17) SUCCESSORS AND ASSIGNS. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns (including
successive, as well as immediate, successors and assigns) of the COMPANY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the date first above written.
COMPANY:
--------
X. X. XXXXX CORPORATION
By:______________________________
Its:__________________________
-7-
9
OPTIONEE:
_________________________________
Signature of Optionee
_________________________________
Street Address
_________________________________
City State Zip Code
_________________________________
Telephone Number
_________________________________
Social Security Number
-8-
