Exhibit 10.1
PRE-PAID LEGAL SERVICES, INC.
STOCK OPTION AGREEMENT
(Xxxxxxx X. Xxxxxxxxx)
This Stock Option Agreement ("Agreement") is made this 13th day of May,
1997, between Pre-Paid Legal Services, Inc., an Oklahoma corporation (the
"Corporation"), and Xxxxxxx X. Xxxxxxxxx (the "Optionee").
WHEREAS, the Corporation develops, underwrites and markets legal
service plans, in part through commissioned marketing associates;
WHEREAS, Optionee is a director of the Corporation;
WHEREAS, Optionee has agreed to appear and speak at not less than
twelve of the Corporation's marketing rallies during the next twelve months; and
WHEREAS, in consideration for such services in furtherance of the
Corporation's marketing efforts, the Corporation desires to grant to Optionee
options to purchase shares of the Corporation's common stock, par value $.01 per
share ("Common Stock"), on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereby agree as follows:
1. Grant of Stock Option. Subject to the terms and conditions herein
set forth, the Corporation hereby grants to Optionee the right and option
("Option") to purchase all or any part of an aggregate number of One Hundred
Twenty Thousand (120,000) shares of Common Stock (which foregoing number of
shares is subject to adjustment as hereinafter provided). Such Option is not
intended to qualify as an incentive stock option under the Internal Revenue
Code.
2. Purchase Price. Subject to adjustments as hereinafter provided, the
purchase price under the Option for shares of Common Stock shall be $16.75 per
share, which represents the closing sale price of the Common Stock on the date
hereof as reported by the American Stock Exchange. The purchase price of one
share of Common Stock payable from time to time upon exercise of the Option
(whether such price be the price specified above or an adjusted price determined
as hereinafter provided) is referred to herein as the "Option Price."
3. Vesting and Term. The Option may not be exercised, in whole or in
part, until May 13, 1998, at which time the Option shall become fully vested and
immediately exercisable; provided, however, that it shall be a condition to the
vesting of the option that Optionee shall not have voluntarily resigned or have
been removed for cause from the Board of Directors on or prior to such vesting
date. The right to exercise the Option, in whole or in part, shall expire on May
13, 2000.
4. Adjustment of Option Price and Number of Shares. The number and kind
of securities issuable upon the exercise of the Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
4.1 Adjustment for Dividends in Stock. In case at any time or
from time to time on or after the date hereof the holders of all of the
outstanding Common Stock of the Corporation (or any shares of stock or
other securities at the time receivable upon the exercise of the
Option) shall have received or, on or after the record date fixed for
the determination of eligible stockholders, shall have become entitled
to receive, without payment therefore, other or additional stock of the
Corporation by way of dividend, then and in each case, the Optionee
shall, upon the exercise of the Option, be entitled to receive, in
addition to the number of shares of Common Stock receivable thereupon,
and without payment of any additional consideration therefor, the
amount of such other or additional stock of the Corporation which
Optionee would hold on the date of such exercise had he been the holder
of record of such Common Stock on the date hereof and had thereafter,
during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock
receivable by him as aforesaid during such period, giving effect to all
adjustments called for during such period by Sections 4.2 and 4.3.
4.2 Adjustment for Reclassification, Reorganization or Merger.
In the event of any reclassification of the Common Stock or other
capital adjustment of the Corporation effected without receipt of
consideration or in the event of a merger or consolidation of the
Corporation which does not result in a change of control of the
Corporation (as determined in the sole discretion of the Board of
Directors of the Corporation), then upon the exercise of the Option at
any time after the consummation of such reclassification, capital
adjustment, merger or consolidation, the Optionee shall be entitled to
receive, in lieu of the stock or other securities and property
receivable upon the exercise hereof prior to such consummation, the
stock or other securities or property to which the Optionee would have
been entitled upon such consummation if Optionee had exercised the
Option immediately prior thereto, all subject to further adjustment as
provided in Sections 4.1 and 4.3. In the event of a dissolution or
liquidation of the Corporation or a merger or consolidation in which
the Corporation is not the surviving or resulting corporation or which
results in a change in control of the Corporation (as determined in the
sole discretion of the Board of Directors of the Corporation) or a
tender or exchange offer which results in a change in control of the
Corporation (as determined in the sole discretion of the Board of
Directors of the Corporation), the Board of Directors shall determine
(i) whether all or any part of the unexercised portion of the Option
shall terminate or (ii) in the case of such merger or consolidation,
whether the Optionee shall, upon exercise hereof, be entitled to
receive securities of the surviving or resulting corporation on the
same basis as described in the first sentence of this Section.
The existence of the Option shall not affect or restrict in
any way the right or power of the Board of Directors or the
shareholders of the Corporation to make or authorize any adjustment,
recapitalization, reorganization or other change in the Corporation's
capital structure or its business, any merger or consolidation of the
Corporation, any issue of securities ahead of or affecting the Common
Stock or the rights thereof, the dissolution or liquidation of the
Corporation or any sale or transfer of all or any part of its assets or
business or any other corporate act proceeding.
4.3 Stock Splits and Reverse Stock Splits. If at any time on
or after the date hereof the Corporation shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the
Option Price in effect immediately prior to such subdivision shall
thereby be proportionately reduced and the number of shares receivable
upon exercise of the Option shall thereby be proportionately increased;
and, conversely, if at any time on or after the date hereof the
outstanding number of shares of Common Stock shall be combined into a
smaller number of shares, the Option Price in effect immediately prior
to such combination shall thereby be proportionately increased and the
number of shares receivable upon exercise of the Option shall hereby be
proportionately decreased.
4.4 De Minimis Adjustments to Option Price. No adjustment in
the Option Price shall be required unless such adjustment would require
any increase or decrease of at least one percent or more of the Option
Price; provided, however, that any adjustments which by reason of this
Section 4.4 are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 3 shall be made to the nearest cent.
5. Certificate of Adjustment. Whenever the Option Price is adjusted, as
herein provided, the Corporation shall promptly deliver to Optionee a
certificate of an officer of the Corporation setting forth the Option Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
6. No Other Adjustments. Except as provided in Section 4, no adjustment
will be made to the Option Price or the number or type of securities purchasable
upon the exercise hereof.
7. No Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise of the Option and any fractional shares
resulting from any adjustment hereunder shall be eliminated.
8. No Stockholder Rights. The Option shall not entitle Optionee to any
of the rights of a stockholder of the Corporation.
9. Reservation of Stock. The Corporation covenants that during the
period that the Option is exercisable, the Corporation will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the exercise of the Option. The
Corporation agrees that its issuance of the Option shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of the Option.
10. Exercise of Option. The Optionee's ability to exercise the Option
is subject to all applicable laws and to the Corporation having obtained prior
to such exercise all necessary governmental approvals and the approval of any
applicable stock exchange or consolidated trading system upon which the Common
Stock may be listed. The Corporation shall use its best efforts to obtain such
approvals prior to such exercise. Subject to the foregoing and the provisions of
Section 12 below, the Option may be exercised by the Optionee, in whole or in
part, by the surrender of this Agreement at the principal office of the
Corporation, accompanied by payment in full of the Option Price by certified or
cashier's check payable to the Corporation, a completed Subscription Form in the
form attached hereto and any other information, opinions or agreements required
by the Corporation pursuant to the provisions hereof. The Corporation may also
require, as a condition to the exercise of the Option and the issuance of any
shares, that the Optionee remit an amount sufficient, in the Corporation's
opinion, to satisfy applicable federal, state or local withholding tax
requirements, if any. Upon partial exercise hereof, a new option agreement or
agreements containing the same date and provisions as this Agreement shall be
issued by the Corporation to the Optionee for the number of shares of Common
Stock with respect to which the Option shall not have been exercised. The Option
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the holder of such shares of
record as of the close of business on such date. As promptly as practicable on
or after such date, the Corporation shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of full shares of Common Stock issuable upon such exercise.
11. Transfer of Option. The Option and all rights hereunder are not
transferable, in whole or in part, except by will or the laws of descent and may
be exercised during the lifetime of the Optionee only by him. The terms of the
Option shall be binding upon the executors, administrators, heirs and successors
of the Optionee.
12. Compliance with Securities Laws.
12.1 The Optionee represents and agrees that the Option has
been acquired only for investment, for Optionee's own account, and
without any present intention to sell or distribute the Option or the
shares issuable upon exercise thereof. Optionee further acknowledges
that the Option may not be exercised and the shares will not be issued
pursuant to the exercise of the Option unless the exercise of the
Option and the issuance and delivery of such shares shall comply with
all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended (the "Securities Act"), and other
federal and state securities laws and regulations and the requirements
of any stock exchange or consolidated trading system upon which the
Common Stock may then be listed.
12.2 If, at the time of the exercise of the Option, it is, in
the sole opinion of the Corporation, necessary or desirable in order to
comply with any applicable laws or regulations relating to the sale of
the shares, the Optionee shall represent and warrant to, and agree
with, the Corporation that the Optionee will purchase the shares for
which the Option is being exercised for investment and not with any
present intention to resell such shares and without a view to
distribution. The Optionee shall, upon the request of the Corporation,
execute and deliver to the Corporation an agreement to such effect.
12.3 The Optionee acknowledges and agrees that the Option and
the shares issuable upon exercise thereof have not been registered
under the Securities Act and accordingly will not be transferable
except as permitted under the various exemptions contained in the
Securities Act, or upon satisfaction of the registration and prospectus
delivery requirements of the Securities Act. Therefore the Option and
the shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. Optionee understands that any certificate
evidencing the shares issuable upon exercise of the Option will be
imprinted with a legend which prohibits the transfer of the shares
unless they are registered or unless the Corporation receives an
opinion of counsel reasonably satisfactory to the Corporation that such
registration is not required. Optionee is aware of Rule 144 under the
Securities Act and that the Corporation, at the time he wishes to sell
the shares, may not be satisfying the current public information
requirements of Rule 144, and, in such case, Optionee would be
precluded from selling the securities under Rule 144. Optionee
understands that a stop transfer instruction will be in effect with
respect to transfer of shares consistent with the requirements of the
securities laws.
13. Miscellaneous. The Option and the Agreement shall be governed by
the laws of the State of Oklahoma. The headings in this Agreement are for
purposes of convenience and reference only, and shall not be deemed to
constitute a part hereof. Neither the Option nor any term hereof may be changed,
waived, discharged or terminated orally but only by an instrument in writing
signed by the Corporation and the Optionee. All notices and other communications
from the Corporation to the Optionee shall be personally delivered or mailed by
first-class registered or certified mail, postage prepaid, to the address
furnished to the Corporation in writing by the Optionee.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its officer thereunto duly authorized, and Optionee has hereunto set
his hand, all on the day and year first above written.
"CORPORATION"
PRE-PAID LEGAL SERVICES, INC.
By: /s/ XXXXXXX X. XXXXXXXXXXX
------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
-------------------------
Title: Chairman of the Board
------------------------
"OPTIONEE"
/s/ XXXXXXX X. XXXXXXXXX
------------------------------
Xxxxxxx X. Xxxxxxxxx
SUBSCRIPTION FORM
(To be signed only upon exercise of Option)
TO: PRE-PAID LEGAL SERVICES, INC.
The undersigned, __________________________, the holder of the attached
Option, hereby irrevocably elects to exercise the purchase right represented by
that Option for, and to purchase under that Option, ________________* shares of
Common Stock of Pre-Paid Legal Services, Inc. and herewith makes payment of $
___________ for those shares, and requests that the certificates for the shares
be issued in the name of and delivered to, the undersigned at the following
address:
Dated: ________________
(Signature must conform in all respects to
name of holder as specified on the face of
the attached Option)
* Insert here the number of shares called for on the face of the Option
(or, in the case of partial exercise, the portion as to which the
Option is being exercised).
