XXXXXX XXXXXXX INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of the 15th
day of July, 2002, between Xxxxxx Xxxxxxx Inc., a Delaware corporation, located
at Perryville Corporate Park, Clinton, New Jersey (the "Company") and Xxxxxx X.
Xxxxx ("Optionee").
WHEREAS, the Company is an indirect, wholly-owned subsidiary of
Xxxxxx Xxxxxxx Ltd. ("Parent"),
WHEREAS, the Company wishes to grant to the Optionee an option to
purchase common shares of Parent as a material inducement to enter into an
employment agreement with Parent and to encourage Optionee to remain in the
employ of Parent and/or its direct or indirect subsidiaries or affiliates, and
WHEREAS, the Optionee is simultaneously herewith entering into an
employment agreement with Parent (the "Employment Agreement").
NOW, THEREFORE, it is agreed as follows:
1. OPTION. Pursuant to this Agreement and subject to the terms and
conditions hereof, the Company hereby grants to Optionee this non-qualified
stock option ("Option") to purchase 300,000 common shares of Parent at $1.87 per
share, which is the mean of the high and low sale prices of the Common Shares of
Parent on the New York Stock Exchange on the date of grant of this Option.
2. EXERCISE OF OPTION. This Option shall become exercisable ("vest"),
in stages. Except as provided in Section 4 hereof, a portion of the Option
representing 60,000 shares shall vest on each date immediately preceding each of
the first through fifth anniversaries of July 15, 2002. This Option expires ten
(10) years from the date hereof.
This Option may be exercised, to the extent exercisable in accordance
with this Agreement, in whole or part, by written notice to the Company, except
that this Option shall not be exercisable if, in the opinion of counsel for the
Company, exercise of this Option or delivery of shares pursuant thereto might
(i) result in a violation of any law or regulation of an agency of government or
(ii) have an adverse effect on the listing status or qualification of Parent
shares on any securities exchange.
3. PAYMENT OF PURCHASE PRICE. Payment for shares as to which this
Option is exercised shall be made at the time written notice of exercise is
given. The option price shall be paid upon exercise (i) in cash in U.S. dollars,
or (ii) in common shares of Parent owned of record by the Optionee and purchased
or held for the requisite period of time as necessary to avoid a charge to the
Company's, Parent's or any of their affiliate's earnings for financial
reporting. Such common shares shall be valued at the mean of the high and low
sale prices of such shares on the
New York Stock Exchange on the day of exercise. At the time of receipt of common
shares upon exercise of the Option, the Optionee shall be required to pay to, or
as directed by, the Company in cash any taxes of any kind required by law to be
withheld with respect to such shares, or make arrangements satisfactory to the
Board of Directors of the Company (the "Board") regarding payment of such taxes,
and the Company and Parent shall have the right to deduct any such taxes from
any payment of any kind otherwise due to the Optionee.
4. TERMINATION OF EMPLOYMENT. If the Optionee's employment is
terminated without Cause (as defined in the Employment Agreement) or by the
Optionee for Good Reason (as defined in the Employment Agreement), the Optionee
shall have two years from the Termination Date (as defined in the Employment
Agreement) to exercise then-vested Options. All unvested Options shall expire.
In the event the Optionee's employment is terminated as set forth in
the preceding paragraph within one year of the termination or retirement of Xx.
Xxxxxxx X. Xxxxxxxxxx, Chief Executive Officer of Xxxxxx Xxxxxxx Ltd., all
unvested Options shall vest and be exercisable for a period of two years
following the Termination Date.
If the Optionee's employment is terminated due to death or
disability, or the Optionee dies following termination of his employment while
the Option may be exercised in accordance with the preceding paragraphs of this
Section 4 or while disabled, the then-vested Option may be exercised by the
Optionee or by a legatee or legatees of the Optionee under his last will, or by
the Optionee's personal representative, as applicable, at any time after one
year from the date of grant, but prior to the expiration date of the Option. All
unvested Options shall expire.
In the event that the Optionee's employment is terminated for Cause
(as defined in the Employment Agreement) or the Optionee terminates his
employment other than for Good Reason (as defined in the Employment Agreement),
this Option, to the extent unvested, shall be immediately forfeited and the
remainder of this Option, to the extent unexercised on the date which is ninety
(90) days after such termination, shall be forfeited.
Notwithstanding the foregoing provisions of this Section 4, under no
circumstances shall this Option be exercised after the expiration date stated in
Section 2 hereof.
5. INVESTMENT REPRESENTATIONS. If at the time of exercise of all or
part of the Option the common shares of Parent are not registered under the
Securities Act and/or there is no current prospectus in effect under the
Securities Act with respect to the common shares, the Optionee shall execute,
prior to the issuance of any such shares to the Optionee, an agreement (in such
form as the Board may specify) in which the Optionee, among other things,
represents, warrants and agrees that the Optionee is purchasing or acquiring the
shares acquired under this Agreement for the Optionee's own account, for
investment only and not with a view to the resale or distribution thereof, that
the Optionee has knowledge and experience in financial and business matters,
that the Optionee is capable of evaluating the merits and risks of owning any
such shares purchased or acquired under this Agreement, that the Optionee is a
person who is able to bear the economic risk of such ownership and that any
subsequent offer for sale or distribution of any such shares shall be made only
pursuant to (a) a registration statement on an appropriate form
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under the Securities Act, which registration statement has become effective and
is current with regard to the shares being offered or sold, or (b) a specific
exemption from the registration requirements of the Securities Act, it being
understood that to the extent any such exemption is claimed, the Optionee shall,
prior to any offer for sale or sale of such shares, obtain a prior favorable
written opinion, in the form and substance satisfactory to the Board, from
counsel acceptable to the Board, as to the applicability of such exemption
thereto.
6. RECAPITALIZATION. In the event of changes in Parent common shares
by reason of share dividends, split-ups or combination of shares,
reclassifications, recapitalizations, mergers, consolidations, reorganizations
or liquidations, appropriate adjustments shall be made by the Board in (a) the
number and class of shares to which Optionee shall thenceforth be entitled upon
exercise of this Option, and (b) the price which the Optionee shall be required
to pay upon exercise. Whether any adjustment or modification is required as a
result of the occurrence of any of the events heretofore specified, and the
amount thereof, shall be determined, in good faith, by the Board, which
determination shall be final, binding and conclusive.
7. CONTINUED EMPLOYMENT. So long as the Optionee shall continue to be
an employee of Parent, the Company or a subsidiary or affiliate of Parent, the
Option shall not be affected by (i) any change of duties or position, or (ii)
any temporary leave of absence approved by each employing corporation and by the
Board. Nothing in this Agreement shall confer upon the Optionee any right to
continue in the employ of Parent, the Company or a subsidiary or affiliate of
Parent or interfere in any way with the right of Parent, the Company or each
such subsidiary or affiliate to terminate the Optionee's employment at any time,
with or without cause.
8. TRANSFERABILITY. This Option is not transferable by Optionee
except by will or by the laws of descent and distribution and is exercisable
during Optionee's lifetime only by him or a court appointed guardian. No
assignment or transfer by Optionee of this Option, or of the rights represented
thereby, whether voluntary or involuntary, by operation of law or otherwise,
except by will or by the laws of descent and distribution, shall vest in the
assignee or transferee any interest or right herein whatsoever. Upon any attempt
to assign or transfer this Option, the Option shall forthwith terminate.
9. RIGHTS AS A SHAREHOLDER. Optionee shall not be deemed for any
purpose to be a shareholder of Parent except to the extent that this Option
shall have been exercised in accordance with this Agreement.
10. CORPORATE ACTION BY PARENT. Existence of this Option shall not
impair the right of Parent or its shareholders to make adjustments,
recapitalizations, reorganizations or other changes in its capital structure or
business, to consummate any merger or consolidation of Parent, to issue bonds,
debentures, preferred or prior preference stocks ahead of or affecting the
common shares or the rights thereof, to dissolve or liquidate Parent, to sell or
transfer all or any part of its assets or business, or to do or take any other
corporate act or proceeding it or they might have done or taken if this Option
was not in existence.
11. CHANGE OF CONTROL. During the 60-day period from and after a
Change of Control as defined in this Section 11 (the "Exercise Period"), the
Optionee shall have the right, whether or
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not this Option is fully exercisable and in lieu of the payment of the exercise
price for the common shares being purchased under the Option and by giving
written notice to the Company, to elect (within the Exercise Period) to
surrender all or part of this Option to the Company and to receive cash, within
30 days of such written notice, in an amount equal to the amount by which the
Change of Control Price per common share, as defined in this Section 11, on the
date of such election shall exceed the exercise price per common share under the
Option (the "Spread") multiplied by the number of common shares subject to the
Option as to which the right granted under this Section 11 shall have been
exercised.
Notwithstanding any other provision of the Plan to the contrary, in
the event of a Change of Control, the Option outstanding as of the date such
Change of Control is determined to have occurred and not then exercisable and
vested shall become fully exercisable and vested to the full extent of the
Option.
A "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of voting
securities of Parent where such acquisition causes such Person to own 20% or
more of the combined voting power of the then outstanding voting securities of
Parent entitled to vote generally in the election of directors (the "Outstanding
Parent Voting Securities"); PROVIDED, HOWEVER, that for purposes of this
subsection (a), the following acquisitions shall not be deemed to result in a
Change of Control: (i) any acquisition directly from Parent or any corporation
or other legal entity controlled, directly or indirectly, by Parent, (ii) any
acquisition by Parent or any corporation or other legal entity controlled,
directly or indirectly, by Parent, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by Parent or any corporation or
other legal entity controlled, directly or indirectly, by Parent or (iv) any
acquisition by any corporation pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of subsection (c) below; and PROVIDED, FURTHER, that
if any Person's beneficial ownership of the Outstanding Parent Voting Securities
reaches or exceeds 20% as a result of a transaction described in clause (i) or
(ii) above, and such Person subsequently acquires beneficial ownership of
additional voting securities of Parent, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 20% or more of the
Outstanding Parent Voting Securities; or
(b) individuals who, as of May 25, 2001, constitute the Board of
Directors of Parent (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board of Directors of Parent; PROVIDED, HOWEVER, that
any individual becoming a director subsequent to such date whose election, or
nomination for election by Parent's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board of Directors of Parent; or
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(c) the approval by the shareholders of Parent of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of Parent ("Business Combination") or, if consummation of such
Business Combination is subject, at the time of such approval by shareholders,
to the consent of any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly by consummation); excluding, however,
such a Business Combination pursuant to which (i) all or substantially all of
the individuals and entities who were the beneficial owners of the Outstanding
Parent Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that as a result of
such transaction owns Parent or all or substantially all of Parent's assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Parent Voting Securities, (ii) no Person (excluding any (x)
corporation owned, directly or indirectly, by the beneficial owners of the
Outstanding Parent Voting Securities as described in clause (i) immediately
preceding or (y) employee benefit plan (or related trust) of Parent or such
corporation resulting from such Business Combination, or any of their respective
subsidiaries) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board of
Directors of Parent, providing for such Business Combination; or
(d) approval by the shareholders of Parent of a complete liquidation
or dissolution of Parent.
For purposes of this Agreement, "Change of Control Price" means the
higher of (i) the highest reported sales price, regular way, of a common share
of Parent in any transaction reported on the New York Stock Exchange Composite
Tape or other national exchange on which such shares are listed during the
60-day period prior to and including the date of a Change of Control, or (ii) if
the Change of Control is the result of a tender or exchange offer or a Business
Combination, the highest price per Common Share paid in such tender or exchange
offer or Business Combination; PROVIDED, HOWEVER, that if the Optionee is an
officer or director of the Company or Parent and is subject to Section 16(b) of
the Exchange Act and the Option was granted within 240 days of the Change of
Control, the Change of Control Price for the Option shall be the fair market
value of the common shares on the date the Option is exercised or deemed
exercised. To the extent that the consideration paid in any such transaction
described above consists in whole or in part of securities or other non-cash
consideration, the value of such securities or other non-cash consideration
shall be determined in the sole discretion of the Board.
12. ADMINISTRATION DISPUTES. This Agreement and the Option shall be
administered and interpreted exclusively by the Compensation Committee of the
Board of Parent, which shall have
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discretionary authority concerning all matters relating to the Option, and whose
actions and decisions shall be final and conclusive. Any controversy, claim or
dispute issues arising out of or relating to this Option shall be resolved in
accordance with the Dispute Resolution Procedure set forth in Section 10 of the
Employment Agreement.
13. TERMS AND CONDITIONS. This Agreement is subject to all terms and
conditions of the Employment Agreement.
14. GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereto shall be governed by the laws of the State of New Jersey
without regard to the principles of conflicts of law which might otherwise
apply.
15. NOTICE. Any notice which either party hereto may be required or
permitted to give to the other shall be in writing, and may be delivered
personally or by mail to the Company at the office of the Secretary of Xxxxxx
Xxxxxxx Inc., Xxxxxxxxxx Xxxxxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000-0000, and to
the Optionee at his principal residence as reflected in the records of Parent.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized Officers and Optionee has hereunto set his hand,
as of the day and year first above written.
XXXXXX XXXXXXX INC.
By:________________________________
Xxxxxxx X. Xxxxxxxxxx
Chairman, President and CEO
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Xxxxxx X. Xxxxx
Optionee
ATTEST:
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Secretary
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