Exhibit 99.3
KFX INC.
STOCK OPTION AGREEMENT
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THIS STOCK OPTION AGREEMENT (the "Option Agreement") is effective as of
February 1, 2005 ("Grant Date") between KFx Inc., a Delaware corporation (the
"Company"), and Xxxxxx X. Xxxxxxxx (the "Optionee"). The Company hereby grants
to the Optionee an option (the "Option") to purchase the number of Shares set
forth in the Notice of Stock Option Grant below, at the exercise price per Share
set forth in the Notice of Stock Option Grant (the "Exercise Price"), pursuant
to the terms and conditions of this Option Agreement. This Option is a
nonstatutory stock option.
I. NOTICE OF STOCK OPTION GRANT.
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Total Number of Shares Granted: 400,000
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Exercise Price per Share: $13.81
Vesting Schedule: This Option may be exercised, in
whole or in part, in accordance with
the following schedule:
Provided that the Board did not
elect to terminate this Option on or
before January 2, 2006, 20% of the
Shares subject to the Option shall
vest on January 3, 2006, and each
additional 20% shall vest on January
2, 2007, January 2, 2008, January 2,
2009, and January 5, 2010,
respectively, subject to the
Optionee continuing to be employed
by the Company on such dates.
Term/Expiration Date: This Option shall terminate on or
before January 2, 2006 at the
election of the Board in its sole
discretion and for any reason or no
reason. If the Board does not elect
to terminate this Option on or
before January 2, 2006, then this
Option shall terminate at 5:00 p.m.
Denver time on January 31, 2012.
II. AGREEMENT.
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A. DEFINITIONS. As used herein, the following definitions shall apply:
"Affiliate" shall mean any entity that is directly or
indirectly controlled by the Company or any entity in which the Company has a
significant ownership interest, as determined by the Board.
"Applicable Laws" shall mean the requirements relating to the
administration of stock option agreements under Federal and state laws, any
stock exchange or quotation system on which the Company has listed or submitted
for quotation the Common Stock to the extent provided under the terms of the
Company's agreement with such exchange or quotation system.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean any of the following acts or omissions on
the part of the Optionee: any act of dishonesty, any unauthorized or
inappropriate disclosure of confidential information, negligence or misconduct,
failure to perform duties to the standards required by the Company or neglect of
his duties, as determined in the Board's sole and absolute discretion, any
illegal act, drug, alcohol or other substance abuse, or any act or omission
which has an adverse effect on the Company or any Affiliate's reputation or
business operations.
"Change in Control" shall mean any of the following:
(i) any merger or consolidation in which the Company shall not
be the surviving entity (or survives only as a subsidiary of another
entity whose stockholders did not own all or substantially all of the
Common Stock in substantially the same proportions as immediately prior
to such transaction),
(ii) the sale of all or substantially all of the Company's
assets to any other person or entity (other than a wholly-owned
subsidiary),
(iii) the acquisition of beneficial ownership of a controlling
interest (including, without limitation, power to vote) in the
outstanding shares of Common Stock by any person or entity (including a
"group" as defined by or under Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended),
(iv) the dissolution or liquidation of the Company, or
(v) a contested election of Directors, as a result of which or
in connection with which the persons who were Directors before such
election or their nominees cease to constitute a majority of the Board.
The term "Change in Control" shall not include any underwritten public offering
of Shares registered under the Securities Act.
"Common Stock" shall mean the common stock of the Company.
"Director" shall mean a member of the Board.
"Involuntary Termination" shall mean the Optionee's
Termination of Employment by reason of: (i) the involuntary discharge of the
Optionee by the Company for reasons other than Cause; or (ii) the voluntary
resignation of the Optionee following (A) a material adverse change in his or
her title, stature, authority or responsibilities with the Company, (B) a
material reduction in his base salary or annual bonus opportunity, or (C)
receipt of notice that his principal workplace will be relocated by more than 50
miles.
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"Termination of Employment" shall mean ceasing to be an
employee of the Company.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shares" shall mean the shares of the Common Stock.
B. EXERCISE OF OPTION.
1. VESTING/RIGHT TO EXERCISE. This Option is exercisable
during its term in accordance with the Vesting Schedule set forth in the Notice
of Stock Option Grant above. In addition, this Option becomes exercisable in
full if the Company is subject to a Change in Control before the Optionee's
Termination of Employment, and the Optionee is subject to an Involuntary
Termination in anticipation of or within 12 months after the Change in Control.
This Option may also become exercisable in accordance with Section I below. This
Option will in no event become exercisable for additional Shares, and vesting
shall cease, upon a Termination of Employment for any reason.
2. METHOD OF EXERCISE. This Option is exercisable by
delivering to the Board a fully executed "Exercise Notice" or by any other
method approved by the Board. The Exercise Notice shall provide that the
Optionee is electing to exercise the Option, the number of Shares in respect of
which the Option is being exercised (the "Exercised Shares"), and such other
representations and agreements as may be required by the Board. The Exercise
Notice shall be accompanied by payment of the full aggregate Exercise Price as
to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Board of such fully executed Exercise Notice accompanied by such
aggregate Exercise Price.
C. LIMITATION ON EXERCISE. The grant of this Option and the issuance of
Shares upon exercise of this Option is subject to compliance with all Applicable
Laws. This Option may not be exercised if the issuance of Shares upon exercise
would constitute a violation of any Applicable Laws. In addition, this Option
may not be exercised unless (i) a registration statement under the Securities
Act is in effect at the time of exercise of this Option with respect to the
Shares or (ii) in the opinion of legal counsel to the Company, the Shares
issuable upon exercise of this Option may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO
EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a
condition to the exercise of this Option, the Company may require the Optionee
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company. Any shares
which are issued will be "restricted securities" as that term is defined in Rule
144 under the Securities Act, and will bear an appropriate restrictive legend,
unless they are registered under the Securities Act. The Company is under no
obligation to register the Shares issuable upon exercise of this Option.
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D. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following methods; provided, however, the payment shall be in
strict compliance with all procedures established by the Board:
1. cash;
2. check or wire transfer;
3. subject to any conditions or limitations established by the
Company, other Shares which (i) in the case of Shares acquired upon the exercise
of an option, have been owned by the Optionee for more than six months on the
date of surrender or attestation and (ii) have a fair market value on the date
of surrender or attestation equal to the aggregate Exercise Price;
4. consideration received by the Company under a
broker-assisted sale and remittance program acceptable to the Board (the
Optionee shall not be permitted to use this procedure if this procedure would
violate Section 402 of the Xxxxxxxx-Xxxxx Act of 2002, as amended); or
5. any combination of the foregoing methods of payment.
E. LEAVE OF ABSENCE. The Optionee shall not incur a Termination of
Employment when the Optionee goes on a military leave, a sick leave or another
bona fide leave of absence, if the leave was approved by the Company in writing
and if continued crediting of service is required by the terms of the leave or
by applicable law. However, the Optionee incurs a Termination of Employment when
the approved leave ends, unless the Optionee immediately returns to active work.
F. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the Optionee only by the Optionee. The
terms of this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee. This Option may
not be assigned, pledged or hypothecated by the Optionee whether by operation of
law or otherwise, and is not subject to execution, attachment or similar
process.
G. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Stock Option Grant, above, and may be exercised during
such term only in accordance with this Option Agreement.
H. TAX OBLIGATIONS. The Optionee agrees to make appropriate
arrangements with the Company for the satisfaction of all applicable Federal,
state, local, and foreign income taxes, employment tax, and any other taxes that
are due as a result of the Option exercise. With the Company's consent, these
arrangements may include withholding Shares that otherwise would be issued to
the Optionee pursuant to the exercise of this Option. The Optionee acknowledges
and agrees that the Company may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise.
I. Adjustments upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
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1. CHANGES IN CAPITALIZATION. Subject to any required action
by the stockholders of the Company, (i) the number and kind of Shares covered by
this Option, and (ii) the Exercise Price, shall be proportionately adjusted for
any increase or decrease in the number or kind of issued shares resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to this Option.
2. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
as soon as practicable prior to the effective date of such proposed transaction.
The Board in its discretion may provide for the Option to be fully vested and
exercisable until ten days prior to such transaction. To the extent it has not
been previously exercised, this Option will terminate immediately prior to the
consummation of such proposed transaction.
3. CHANGE IN CONTROL. In the event of a Change in Control
prior to the Optionee's Termination of Employment, this Option will be assumed
or an equivalent option or right substituted by the successor corporation or a
parent or subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option, the
Optionee will fully vest in and have the right to exercise the Option. In
addition, if the Option becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a Change in Control, the Board will
notify the Optionee in writing or electronically that the Option will be fully
vested and exercisable for a period of time determined by the Board in its sole
discretion, and the Option will terminate upon the expiration of such period.
J. AMENDMENT OF OPTION AGREEMENT. The Board may amend the Option
Agreement. No amendment of the Option Agreement shall impair the rights of the
Option, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
K. RESTRICTIONS ON RESALE. The Optionee agrees not to sell any Shares
at a time when Applicable Law, Company policies or an agreement between the
Company and its underwriters prohibit a sale. This restriction shall apply as
long as the Optionee is an employee of the Company and for such period of time
after the Optionee's Termination of Employment, as the Board may reasonably
specify.
L. LOCK-UP AGREEMENT. The Optionee hereby agrees that in connection
with any underwritten public offering of Shares made by the Company pursuant to
a registration statement filed under the Securities Act, the Optionee shall not
offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase
or make any short sale of, or otherwise dispose of any Shares (including but not
limited to Shares subject to this Option) or any rights to acquire Shares of the
Company for such period of time beginning on the date of filing of such
registration statement with the Securities and Exchange Commission and ending at
the time as may be established by the underwriters for such public offering;
provided, however, that such period of time shall end not later than 180 days
from the effective date of such registration statement. The foregoing limitation
shall not apply to shares registered for sale in such public offering.
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M. ENTIRE AGREEMENT; GOVERNING LAW. This Option Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This Option Agreement is governed by the
internal substantive laws, but not the choice of law rules, of Delaware.
N. NO GUARANTEE OF CONTINUED EMPLOYMENT. THE OPTIONEE ACKNOWLEDGES AND
AGREES THAT THE VESTING OF THE OPTION PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS AN EMPLOYEE OF THE COMPANY AT THE WILL OF THE
COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR
PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS
OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING
SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS AN EMPLOYEE OF THE COMPANY FOR THE VESTING PERIOD, FOR
ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS AN EMPLOYEE AT ANY TIME,
WITH OR WITHOUT CAUSE.
By the Optionee's signature and the signature of the Company's
representative below, the Optionee and the Company agree that this Option is
granted under and governed by the terms and conditions of this Option Agreement.
The Optionee has reviewed this Option Agreement in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of this Option Agreement. The
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions relating to this Option
Agreement.
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The Optionee further agrees that the Company may deliver by
email all documents relating to this Option and all other documents that the
Company is required to deliver to its security holders (including, without
limitation, annual reports and proxy statements). The Optionee also agrees that
the Company may deliver these documents by posting them on a web site maintained
by the Company or by a third party under contract with the Company. The Company
agrees to provide Optionee written copies of such documents, at the request of
Optionee.
OPTIONEE: KFx INC.
_________________________ By _________________________________
Signature
XXXXXX X. XXXXXXXX Title ______________________________
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