Exhibit 10.6
SONOMAWEST HOLDINGS INC
2002 STOCK OPTION AGREEMENT
R E C I T A L S:
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WHEREAS the Board has adopted the Plan for the purpose of retaining the
services of selected Employees, Officers, members of the Board or of the board
of directors of any Parent or Subsidiary and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary);
WHEREAS the Optionee is to render valuable services to the Corporation (or
a Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee; and
WHEREAS all capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Section 2 hereof at the Exercise Price.
2. Option Term. This Option shall have a maximum term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Sections 5 or 6 hereof.
3. Limited Transferability. This Option shall be neither transferable nor
assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, if this Option is designated a Non-
Statutory Option in the Grant Notice, then this Option may, (i) in connection
with the Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of the Optionee's Immediate Family or
to a trust established for the exclusive benefit of the Optionee and/or one or
more such family members or (ii) be assigned in whole or in part to the
Optionee's former spouse pursuant to a domestic relations order. The assigned
portion shall be exercisable only by the person or persons who acquire a
proprietary interest in the Option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
Option immediately prior to such assignment. Notwithstanding the foregoing, the
Optionee may also designate one or more persons as the beneficiary or
beneficiaries of his or her outstanding options under this Article Two, and
those options shall, in accordance with such designation, automatically be
transferred to such beneficiary or beneficiaries upon the Optionee's death while
holding those options. Such beneficiary or beneficiaries shall take the
transferred option subject to all the terms and conditions of this Agreement,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee's death.
4. Dates of Exercise. This Option shall become exercisable for the Option
Shares in one or more installments as specified in the Grant Notice, subject to
the special vesting acceleration provisions of Paragraph 6. As the Option
becomes exercisable for such installments, those installments shall accumulate
and the Option shall remain exercisable for the accumulated installments until
the Expiration Date or sooner termination of the option term under Sections 5 or
6 hereof.
5. Cessation of Service. The option term specified in Section 2 hereof
shall terminate (and this Option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(a) Should Optionee cease to remain in Service for any reason (other
than death, Permanent Disability or Misconduct) while this Option is
outstanding, then the period for exercising this Option shall be reduced to a
three (3) month period commencing with the date of such cessation of Service,
but in no event shall this Option be exercisable at any time after the
Expiration Date.
(b) Should Optionee die while this Option is outstanding, then the
personal representative of Optionee's estate or the person or persons to whom
the Option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution, or any person or trust to whom all or a
portion of this Option was previously transferred in accordance with Section 3
hereof or the designated beneficiary or beneficiaries of this option shall have
the right to exercise this Option. Such right shall lapse, and this Option shall
cease to be outstanding, upon the earlier of: (i) the expiration of the twelve
(12) month period measured from the date of Optionee's death; or (ii) the
Expiration Date.
(c) Should Optionee cease Service by reason of Permanent Disability
while this Option is outstanding, then the period for exercising this Option
shall be reduced to a twelve (12) month period commencing with the date of such
cessation of Service, but in no event shall this Option be exercisable at any
time after the Expiration Date.
(d) During the limited period of post-Service exercisability, this
Option may not be exercised in the aggregate for more than the number of vested
Option Shares for which the Option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this Option shall terminate and cease to be
outstanding for any otherwise exercisable Option Shares for which the Option has
not been exercised. However, this Option shall, immediately upon Optionee's
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares for which this Option is not otherwise at that time
exercisable.
(e) Except as otherwise determined in the discretion of the Plan
Administrator, either at the time the option is granted or at any time the
option remains outstanding, should Optionee's Service be terminated for
Misconduct or should Optionee otherwise engage in Misconduct while this option
is outstanding, then this Option shall terminate immediately and cease to remain
outstanding.
6. Special Acceleration of Option.
(a) The Option, to the extent outstanding at the time of a Change in
Control transaction but not otherwise fully exercisable, shall automatically
accelerate so that this Option shall, immediately prior to the effective date of
such Change in Control, become exercisable for all of the Option Shares at the
time subject to this option and may be exercised for any or all of those Option
Shares as fully vested shares of Common Stock. Notwithstanding the foregoing,
this Option shall not become exercisable on such an accelerated basis if and to
the extent: (i) this Option is, in connection with the Change in Control, to be
assumed by the successor corporation (or Parent thereof) or otherwise continued
in full force and effect pursuant to the terms of the Change in Control; or (ii)
this Option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing at the time of the Change in
Control on the Option Shares for which this Option is not otherwise at that time
exercisable (the excess of the Fair Market Value of those Option Shares over the
aggregate Exercise Price payable for such shares) and provides for subsequent
payout in accordance with the same option exercise/vesting schedule set forth in
the Grant Notice.
(b) Immediately following the Change in Control, this Option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or Parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction.
(c) If this Option is assumed in connection with a Change in Control
(or otherwise continued in full force and effect), then this Option shall be
appropriately adjusted, immediately after such Change in Control, to apply to
the number and class of securities or other property which would have been
issuable to Optionee in consummation of such Change in Control had the Option
been exercised immediately prior to such Change in Control, and appropriate
adjustments shall also be made to the Exercise Price, provided the aggregate
Exercise Price shall remain the same.
(d) Notwithstanding the foregoing, immediately upon an Involuntary
Termination of Optionee's Service within eighteen (18) months following a Change
in Control transaction, the Option, to the extent outstanding at the time but
not otherwise fully exercisable, shall automatically accelerate so that the
Option shall become immediately exercisable for all the Option Shares at the
time subject to the Option and may be exercised for any or all of those Option
Shares as fully vested shares. The Option as accelerated shall remain so
exercisable until the earlier of: (i) the Expiration Date; or (ii) the
expiration of the one (1) year period measured from the date of the Optionee's
Involuntary Termination.
(e) This Option may also be subject to acceleration in accordance with
the terms of any special Addendum attached to this Agreement.
7. Adjustment in Option Shares. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to: (i) the total number
and/or class of securities subject to this Option; and (ii) the Exercise Price
in order to reflect such change and thereby preclude a dilution or enlargement
of benefits hereunder.
8. Stockholder Rights. The holder of this Option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the Option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this Option with respect to all or any part
of the Option Shares for which this Option is at the time exercisable, Optionee
(or any other person or persons exercising the Option) must take the following
actions:
(i) To the extent the Option is exercised for vested Option
Shares, execute and deliver to the Corporation a Notice of Exercise for the
Option Shares for which the Option is exercised. To the extent the Option is
exercised for unvested Option Shares, execute and deliver to the Corporation a
Purchase Agreement for those unvested Option Shares. In connection with the
Purchase Agreement, any certificate issued upon the exercise of the Option shall
bear legends as set forth in the Purchase Agreement.
(ii) Pay the aggregate Exercise Price for the purchased shares in
one or more of the following forms:
(A) cash or check made payable to the Corporation; or
(B) a promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance with Section 14
hereof; or
(C) shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
(D) through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the option) shall
concurrently provide irrevocable instructions to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and to the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the Option exercise, payment of the Exercise Price
must accompany the Notice of Exercise or Purchase Agreement, as applicable,
delivered to the Corporation in connection with the Option exercise.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the Option (if other than Optionee) have the
right to exercise this Option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all Federal, state and local income and employment tax withholding requirements
applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this Option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this Option be exercised for any fractional
shares.
10. No Impairment of Rights. This Agreement shall not in any way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise make
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets. In
addition, this Agreement shall not in any way be construed or interpreted so as
to affect adversely or otherwise impair the rights of the Corporation (or any
Parent or Subsidiary employing or retaining Optionee) or of Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's Service at
any time for any reason, with or without cause.
11. Compliance with Laws and Regulations.
(a) The exercise of this Option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of the Nasdaq SmallCap Market (or any Stock Exchange, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this Option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. Successors and Assigns. Except to the extent otherwise provided in
Sections 3 and 6 hereof, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
13. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. Financing. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, permit Optionee to pay the Exercise Price for
the purchased Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
15. Construction. This Agreement and the Option evidenced hereby are made
and granted pursuant to the Plan and are in all respects limited by and subject
to the terms of the Plan. All decisions of the Plan Administrator with respect
to any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this Option.
16. Governing Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
17. Excess Shares. If the Option Shares covered by this Agreement exceed,
as of the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this Option shall be void
with respect to those excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan.
18. Optionee Undertaking. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Option Shares
pursuant to the provisions of this Agreement.
19. Representation by Counsel. Each party hereby agrees and acknowledges
that (i) such party has had the opportunity to consult with independent legal,
tax and financial counsel of each party's choice, in order to be advised with
respect to the effect of this Agreement, the Notice of Exercise and the Purchase
Agreement and (ii) neither the Corporation nor its attorneys have provided
legal, tax or financial advice of any nature to Optionee.
20. Additional Terms Applicable to an Incentive Option. In the event this
Option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax treatment as
an Incentive Option if (and to the extent) this Option is exercised for one or
more Option Shares: (i) more than three (3) months after the date Optionee
ceases to be an Employee for any reason other than death or Permanent
Disability; or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of death or Permanent Disability.
(b) No installment under this Option shall qualify for favorable tax
treatment as an Incentive Option if (and to the extent) the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which such
installment first becomes exercisable hereunder would, when added to the
aggregate value (determined as of the respective date or dates of grant) of the
Common Stock or other securities for which this option or any other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000.00) in the aggregate. Should such One Hundred Thousand Dollar
($100,000.00) limitation be exceeded in any calendar year, this Option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.
(c) Should the exercisability of this Option be accelerated upon a
Change in Control transaction, then this Option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this Option
first becomes exercisable in the calendar year in which the Change in Control
occurs does not, when added to the aggregate value (determined as of the
respective date or dates of grant) of the Common Stock or other securities for
which this Option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000.00) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000.00)
limitation be exceeded in the calendar year of such Change in Control, the
Option may nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this Option, one or more
other options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this Option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this 2002 Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved by the
Corporation's stockholders, unless securities representing more than fifty
percent (50%) of the total combined voting power of the successor
corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation's outstanding voting securities
immediately prior to such transaction, or
(ii) a sale, transfer or other disposition of all or substantially all
of the Corporation's assets, or
(iii) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 0000 Xxx) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders which the Board recommends such
stockholders accept;
provided, however, the Plan Administrator shall have the discretionary
authority to determine that a transaction or series of transactions does
not constitute a Change in Control. Such determination by the Plan
Administrator shall govern notwithstanding the fact that the determination
is contrary to paragraphs (i) through (iii) set forth above.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean shares of the Corporation's common stock.
F. Corporation shall mean SonomaWest Holdings, Inc., a California
corporation.
G. Employee shall mean an "employee" of the Corporation (or any Parent or
Subsidiary) within the meaning of Section 3401(c) of the Code and the
regulations thereunder.
H. Exercise Date shall mean the date on which the Option shall have been
exercised in accordance with Section 4 of the Agreement.
I. Exercise Price shall mean the exercise price per Option Share as
specified in the Grant Notice.
J. Expiration Date shall mean the date on which the Option expires as
specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the NASDAQ
SmallCap Market, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the date in
question, as the price is reported by the National Association of
Securities Dealers on the NASDAQ SmallCap Market. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the
closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
X. Xxxxx Date shall mean the date of grant of the Option as specified in
the Grant Notice.
X. Xxxxx Notice shall mean the Notice of Grant of Stock Option accompanying
the Agreement, pursuant to which Optionee has been informed of the basic terms
of the Option evidenced hereby.
N. Immediate Family shall mean any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
O. Incentive Option shall mean an option which satisfies the requirements
of Code Section 422.
P. Involuntary Termination shall mean the termination of Optionee's Service
by reason of:
(i) Optionee's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) Optionee's voluntary resignation following (A) a change in
Optionee's position with the Corporation (or Parent or Subsidiary
employing Optionee) which materially reduces Optionee's duties and
responsibilities or the level of management to which Optionee reports,
(B) a reduction in Optionee's level of compensation (including base
salary, fringe benefits and target bonus under any corporate
performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Optionee's place of employment by
more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without
Optionee's consent.
Q. Misconduct shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any intentional wrongdoing by Optionee, whether by omission or
commission, which adversely affects the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. This shall not limit the
grounds for the dismissal or discharge of Optionee or any other individual in
the Service of the Corporation (or any Parent or Subsidiary).
R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
S. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
T. Notice of Exercise shall mean the notice of exercise in the form
attached hereto as Exhibit I.
U. Officer shall mean any person serving as the president, chief executive
officer, chief financial officer, chief operating officer, treasurer, secretary
or in any other managerial or administrative capacity for the Corporation or a
Parent or Subsidiary of the Corporation, as determined in the Administrator's
discretion.
V. Option shall mean the Option granted pursuant to this Agreement.
W. Option Shares shall mean the number of shares of Common Stock subject to
the Option as specified in the Grant Notice.
X. Optionee shall mean the person to whom the Option is granted as
specified in the Grant Notice.
Y. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Z. Permanent Disability shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or has
lasted or can be expected to last for a continuous period of twelve (12) months
or more.
AA. Plan shall mean the Corporation's 2002 Stock Incentive Plan.
BB. Plan Administrator shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
CC. Service shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, an
Officer, a member of the board of directors or a consultant or independent
advisor.
DD. Stock Exchange shall mean the American Stock Exchange or the New York
Stock Exchange.
EE. Subsidiary shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
