EXHIBIT 4.5
E. KHASHOGGI INDUSTRIES, LLC
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement ("Agreement") is made and entered
into as of the Date of Grant indicated below by and between E. Khashoggi
Industries, LLC, a Delaware limited liability company (the "Company"), and the
person named below as Participant.
R E C I T A L S
A. Participant is an employee or consultant of the Company; and
B. Pursuant to the Company's Equity Incentive Plan (the "Plan"), the
Managers of the Company, acting through its Compensation Committee (the
"Committee"), has approved the grant to Participant of an option to purchase
shares of the common stock (the "Common Stock") of EarthShell Corporation, a
Delaware corporation ("EarthShell"), on the terms and conditions set forth
herein. The Common Stock subject to the option is presently owned by the
Company.
A G R E E M E N T
In consideration of the foregoing recitals and the covenants set forth
herein, the parties hereto hereby agree as follows:
1. GRANT OF OPTION; CERTAIN TERMS AND CONDITIONS. The Company hereby
grants to Participant, and Participant hereby accepts, as of the Date
of Grant, an option to purchase the number of shares of Common Stock
indicated below (the "Option Shares") at the Exercise Price Per Share
indicated below, which option shall expire at 5:00 o'clock p.m.,
California time, on the Expiration Date indicated below (unless
terminated earlier as provided herein), and shall be subject to all of
the terms and conditions set forth in this Agreement (the "Option").
On the first anniversary of the Date of Grant, the Option shall become
exercisable to purchase, and shall vest with respect to, 25% of the
Option Shares. On each successive anniversary of the Date of Grant,
the Option shall become exercisable to purchase, and shall vest with
respect to, an additional 25% of the Option Shares, such that, on the
fourth anniversary of the Date of Grant, the Option shall become
exercisable to purchase, and shall vest with respect to, 100% of the
Option Shares.
2. No. _____________________________
Participant:
Date of Grant: July 1, 1998
Number of Option Shares:
Exercise Price Per Share: $21.00
Expiration Date: June 30, 2008
The Option does not qualify as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
2. TERMINATION OR ACCELERATION OF OPTION.
(a) TERMINATION OF EMPLOYMENT. The Option may terminate prior to the
Expiration Date in the event that Participant shall cease to render services as
an employee of, or consultant to, the Company and its subsidiaries (such event
shall be referred to herein as the "Termination" of Participant's "Employment").
The term "subsidiaries" shall mean any corporation, partnership or limited
liability company in which the Company owns, directly or indirectly, more than
50% of the voting and economic interests.
(i) TERMINATION FOR CAUSE.
A. In the event Participant's Employment is
Terminated by the Company or any of its subsidiaries for "cause" (as defined
below), then (x) the portion of the Option that has not vested on or prior to
the date of such Termination of Employment shall terminate on such date, and
(y) the remaining vested portion of the Option shall terminate upon the earlier
of the Expiration Date or thirty (30) days following the date of such
Termination of Employment.
B. "Cause" means the occurrence of any of the
following events: (x) failure (excluding any failure due to death or Permanent
Disability (as defined in Section 2(a)(ii) below)) by the Participant to
substantially perform his or her duties with the Company or its subsidiaries;
provided, however, that the Participant must be notified by the Company or the
subsidiaries, as applicable, of any such failure to perform his or her duties
and shall have thirty (30) days from the date of such notice to cure such
failure; (y) any act by the Participant of fraud, misappropriation, dishonesty,
embezzlement or similar conduct against the Company or its subsidiaries; or
(z) indictment or conviction of the Participant for a felony or any other crime
involving moral turpitude. Any determination by the Committee that
Participant's Employment has been Terminated for "cause" shall be considered
binding on Participant provided that such determination is not unreasonable
based on all the facts and circumstances relevant to such Termination.
(ii) TERMINATION BY REASON OF DEATH OR PERMANENT DISABILITY.
A. If Participant's Employment is Terminated by
reason of the death or Permanent Disability (as defined below) of Participant,
then (A) the portion of the Option that has not vested on or prior to the date
of such Termination of Employment shall terminate on such date, and (B) the
remaining vested portion of the Option shall terminate upon the earlier of the
Expiration Date or the first anniversary of the date of such Termination of
Employment.
B. "Permanent Disability" shall mean the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than ninety (90) days. Participant shall not be deemed to have a
Permanent Disability until proof of the existence thereof shall have been
furnished to the Committee in such form and manner, and at such times, as the
Committee may require. Any determination by the Committee that Participant does
or does not have a Permanent Disability shall be final and binding upon the
Company and Participant.
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(iii) TERMINATION BY PARTICIPANT'S VOLUNTARY ACTIONS. If
Participant's Employment is Terminated voluntarily by Participant, whether by
retirement, resignation or other action taken by Participant, and not as a
result of Participant's death or Permanent Disability, then (A) the portion of
the Option that has not vested on or prior to the date of such Termination of
Employment shall terminate on such date, and (B) the remaining vested portion of
the Option shall terminate upon the earlier of the Expiration Date or thirty
(30) days following the date of such Termination of Employment.
(iv) OTHER TERMINATION BY THE COMPANY. If Participant's
Employment is Terminated by the Company or its subsidiaries for no reason, or
for any reason other than for "cause" (as defined in Section 2(a)(i)(B) above),
Participant's death or Participant's Permanent Disability (as defined in Section
2(a)(ii)(B) above), then (A) the portion of the Option that has not vested on or
prior to the date of such Termination of Employment shall terminate on such
date, and (B) the remaining vested portion of the Option shall terminate upon
the earlier of the Expiration Date or the first anniversary of such Termination
of Employment.
(b) EVENTS CAUSING ACCELERATION OF OPTION. The Committee, in its
sole discretion, may accelerate the exercisability of the Option at any time and
for any reason.
(c) OTHER EVENTS CAUSING TERMINATION OF OPTION. Notwithstanding
anything to the contrary in this Agreement, the Option shall terminate upon the
consummation of any of the following events:
(i) the dissolution or liquidation of the Company or
EarthShell; or
(ii) a sale of substantially all of the property and assets of
the Company or EarthShell; or
(iii) a merger or consolidation of the Company or EarthShell
with another entity or any other form of reorganization in which the Company or
EarthShell, as applicable, dissolves or ceases to exist.
3. ADJUSTMENTS. In the event that the outstanding securities of the
class then subject to the Option are increased, decreased or exchanged for or
converted into cash, property and/or a different number or kind of securities,
or cash, property and/or securities are distributed in respect of such
outstanding securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, reclassification, stock split, reverse stock
split or the like, then, unless such event shall cause the Option to terminate
pursuant to Section 2(c) hereof, the Committee shall, in accordance with and
subject to the relevant provisions of the Plan, make appropriate and
proportionate adjustments in the number and type of shares or other securities
or cash or other property that may thereafter be acquired upon the exercise of
the Option; PROVIDED, HOWEVER, no such adjustment shall be made to the extent
the Committee determines that such adjustment would result in the disallowance
of a federal income tax deduction for compensation attributable to the Option by
causing such compensation to be other than "performance-based compensation"
under Section 162(m) of the Code; and PROVIDED, FURTHER, that any such
adjustments in the Option shall be made without changing the aggregate Exercise
Price Per Share of the then unexercised portion of the Option.
4. EXERCISE. The Option shall be exercisable during Participant's
lifetime only by Participant or by his or her guardian or legal representative,
and after Participant's death only by the person or entity entitled to do so
under Participant's last will and testament or applicable intestate law. The
Option may only be exercised by the delivery to the Company of a written notice
of such
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exercise, which notice shall specify the number of Option Shares to be
purchased (the "Purchased Shares") and the aggregate Exercise Price Per Share
for such shares (the "Exercise Notice"), together with payment in full of
such aggregate Exercise Price Per Share in cash or by cashier's check payable
to the Company; PROVIDED, HOWEVER, that, in the sole discretion of the
Committee, payment for such aggregate Exercise Price Per Share may instead be
made, in whole or in part, by the delivery to the Company of a fully recourse
promissory note, having such terms as the Committee determines in its sole
discretion. The Option may not be exercised for a fraction of a share.
5. PAYMENT OF WITHHOLDING TAXES. If the Company becomes obligated to
withhold an amount on account of any tax imposed as a result of the exercise of
the Option, including, without limitation, any federal, state, local or other
income tax, or any F.I.C.A., state disability insurance tax or other employment
tax, then Participant shall, on the first day upon which the Company becomes
obligated to pay such amount to the appropriate taxing authority, pay such
amount to the Company in cash or by cashier's check payable to the Company. The
Company may, in its sole discretion, offset any amounts owed by the Company to
Participant in order to satisfy Participant's obligations under this Section 5.
6. NOTICES. All notices and other communications required or permitted
to be given pursuant to this Agreement shall be in writing and shall be deemed
given on the day delivered if delivered personally or by facsimile transmission
(provided a copy of the facsimile transmission is mailed promptly thereafter to
the recipient in the manner set forth herein), or one day after mailing by
reputable overnight courier, or five days after mailing by certified or
registered mail, postage prepaid, return receipt requested, to the Company at
000 Xxxxxxxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxx 00000, Attention: Chairman of
the Board, or to Participant at the address set forth beneath his or her
signature on the signature page hereto, or at such other addresses as they may
designate by written notice in the manner aforesaid.
7. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS. Notwithstanding
anything to the contrary in this Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered if (a) such shares have not been admitted
to listing upon official notice of issuance on each stock exchange upon which
shares of that class are then listed or (b) in the opinion of counsel to the
Company, such issuance or delivery would cause the Company to be in violation of
or to incur liability under any federal, state or other securities law, or any
requirement of any stock exchange listing agreement to which the Company is a
party, or any other requirement of law or of any administrative or regulatory
body having jurisdiction over the Company. Participant agrees to execute and
deliver to the Company such representations, covenants and agreements, including
representations as to Participant's investment intent, as the Company or its
counsel may require to ensure that the Participant's exercise of the Option and
the transfer of the Option Shares to Participant complies with the requirements
of this Section 7.
8. NONTRANSFERABILITY. Neither the Option nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner by Participant other than by will or the laws of
descent and distribution.
9. PLAN. The Option is granted pursuant to the Plan, as in effect on the
date this Agreement is delivered to Participant, and is subject to all the terms
and conditions of the Plan, as the same may be amended from time to time;
PROVIDED, HOWEVER, that no such amendment shall deprive Participant, without his
or her consent, of the Option or of any of Participant's material rights under
this Agreement. The interpretation and construction by the Committee of the
Plan, this Agreement, the Option and such rules and regulations as may be
adopted by the Committee for the
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purpose of administering the Plan shall be final and binding upon
Participant. Until the Option shall expire, terminate or be exercised in
full, the Company shall, upon written request therefor, send a copy of the
Plan, in its then current form, to Participant or any other person or entity
then entitled to exercise the Option.
10. STOCKHOLDER RIGHTS. No person or entity shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of any Option Shares
until the Option shall have been duly exercised to purchase such Option Shares
in accordance with the provisions of this Agreement, and such Option Shares
shall have been delivered to Participant.
11. EMPLOYMENT OR CONTRACT RIGHTS. No provision of this Agreement or of
the Option granted hereunder shall (a) confer upon Participant any right to
continue in the employ of or contract with the Company or any of its
subsidiaries, (b) affect the right of the Company and each of its subsidiaries
to terminate the employment or contract of Participant, with or without cause,
or (c) confer upon Participant any right to participate in any employee welfare
or benefit plan or other program of the Company or any of its subsidiaries other
than the Plan. PARTICIPANT HEREBY ACKNOWLEDGES AND AGREES THAT THE COMPANY AND
EACH OF ITS SUBSIDIARIES MAY TERMINATE THE EMPLOYMENT OR CONTRACT OF PARTICIPANT
AT ANY TIME AND FOR ANY REASON, OR FOR NO REASON, UNLESS PARTICIPANT AND THE
COMPANY OR SUCH SUBSIDIARY ARE PARTIES TO A WRITTEN EMPLOYMENT AGREEMENT THAT
EXPRESSLY PROVIDES OTHERWISE.
12. GOVERNING LAW. This Agreement and the Option granted hereunder shall
be governed by and construed and enforced in accordance with the laws of the
State of California without reference to choice or conflict of law principles.
13. ACCEPTANCE OF OPTION. Participant hereby accepts this Option subject
to all of the terms and provisions thereof. Participant has reviewed this
Option in its entirety, has had an opportunity to obtain the advice of counsel
prior to executing this Option and fully understands all provisions of the
Option. Participant hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Committee upon any questions arising
under this Option. Participant understands that he or she may recognize taxable
income upon the exercise of the Option and that he or she may recognize a
taxable gain or loss upon the subsequent disposition of the Option Shares.
Participant further acknowledges that he or she is not relying on the Company or
its counsel for tax advice in connection with this Option and that Participant
will rely on the advice of his or her personal tax advisors in connection with
all matters associated with the grant and exercise of this Option and the
disposition of the Option Shares.
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IN WITNESS WHEREOF, the Company and Participant have duly executed this
Agreement as of the Date of Grant.
E. KHASHOGGI INDUSTRIES, LLC PARTICIPANT:
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Signature
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By: Street Address
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Title: Chairman and CEO -----------------------------
City, State and Zip Code
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Social Security Number
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