EXHIBIT 10.65
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XXXX NATIONAL CORPORATION
Nonqualified Stock Option Agreement
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(1998 Plan/Time Vesting/Senior Executive)
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This Nonqualified Stock Option Agreement (this "AGREEMENT") is
entered into between Xxxxxxx X. Xxxx (the "OPTIONEE") and Xxxx National
Corporation, a Delaware corporation (the "COMPANY"), as of the Grant Date.
Certain capitalized terms used herein are defined in Paragraph 8.
WHEREAS, the Board of Directors of the Company has authorized
a grant of stock options on the terms hereof to the Optionee, who is employed in
the capacity shown on the signature page; and
NOW, THEREFORE, the Company hereby grants to the Optionee
options (the "OPTIONS") pursuant to the Company's 1998 Equity Performance and
Incentive Plan, amended and restated effective June 10, 1999 (the "PLAN") to
purchase the number of shares of Common Stock, par value $.001 per share, of the
Company ("COMMON STOCK") shown as the Original Award on the signature page
hereof; and agrees to cause certificates for any shares purchased hereunder to
be delivered to the Optionee upon payment of the purchase price in full, all
subject, however, to the terms and conditions of the Plan and the terms and
conditions hereinafter set forth.
1. EXERCISE.
(a) Except as otherwise provided herein, the Options (until
terminated as hereinafter provided) will become vested and exercisable as
follows:
Amount Vested Date Exercisable
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1/5 of the Original Award The first anniversary of the Grant Date; and
1/5 of the Original Award The second anniversary of the Grant Date; and
1/5 of the Original Award The third anniversary of the Grant Date; and
1/5 of the Original Award The fourth anniversary of the Grant Date; and
All Unvested Shares The fifth anniversary of the Grant Date
for so long as the Optionee remains in the continued employment of the Company,
except as provided below.
To the extent exercisable, the Options may be exercised in whole or in
part from time to time.
(b) If, prior to the fifth anniversary of the Grant Date,
any of the following occurs: (i) a Change in Control, (ii) a Termination Event,
(iii) a Constructive Termination, (iv) the Optionee voluntarily ceases to be an
employee of the Company or a Subsidiary or retires under a retirement plan of
the Company or any Subsidiary, in either case with the consent of the
Compensation Committee, or (v) the Optionee dies or becomes permanently disabled
while in the employ of the Company or any Subsidiary, the Options will, in
addition to any vesting pursuant to Paragraph 1(a) above, immediately become
exercisable in full.
(c) If, prior to the fifth anniversary of the Grant Date,
the Optionee voluntarily ceases to be an employee of the Company or a Subsidiary
or retires under a retirement plan of the Company or any Subsidiary, in either
case without the consent of the Compensation Committee, the Options will, in
addition to any vesting pursuant to Paragraph l(a) above, immediately become
exercisable in full with respect to those Unvested Shares that would have vested
on the next succeeding anniversary of the Grant Date (if the event occurs on an
anniversary of the Grant Date, no additional Options will become exercisable
besides those that became exercisable as of that anniversary). Thereupon, all
remaining Unvested Options will be forfeited and cancelled.
(d) Any exercise of the Options must be made in writing by
the Optionee delivered to the Secretary of the Company.
2. EXERCISE PRICE AND PAYMENT; RELOAD OPTIONS.
(a) The Options will be exercisable for Vested Shares
(whether such vesting occurs pursuant to Paragraph 1(a), 1(b), or 1(c)) at the
Exercise Price shown on the signature page hereof.
(b) The Exercise Price for any shares may be paid (i) in
cash or by check, (ii) if approved by the Compensation Committee prior to such
exercise, by delivery to the Company of a promissory note or notes of the
Optionee; PROVIDED, HOWEVER, that the principal amount of such notes for all
optionees outstanding at any one time pursuant to the Plan, the Company's 1996
Management Stock Option Plan, the Company's 1993 Management Stock Option Plan
and the Company's 1992 Management Stock Option Plan shall not in the aggregate
exceed $3,000,000, (iii) by actual or constructive transfer to the Company of
Mature Shares, or (iv) by a combination of such methods of payment.
(c) If, at the date of exercise the Optionee is an employee
of the Company, and the Optionee pays the Exercise Price of shares by delivery
of Mature Shares, additional option rights ("Reload Option Rights") shall,
subject to the provisions hereinafter set forth, be automatically granted to the
Optionee equal to the sum of (i) the number of Mature Shares transferred to the
Company with respect to such Exercise Price and (ii) the number of shares of
Common Stock surrendered to the Company in payment of the Withholding Amount
associated with the Options exercised through the delivery of Mature Shares.
Reload Option
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Rights shall be granted as set forth in this Paragraph 2(c) with respect to
Optionee's exercise of Options prior to their termination pursuant to Paragraph
3. In no event, however, shall Reload Option Rights be granted unless the
remainder of the original ten (10) year term of the option being exercised is
greater than six (6) months at the time of such exercise. Reload Option Rights
will not be granted with respect to any Options that have been transferred by
the original Optionee. Reload Option Rights shall not be exercisable during the
six (6) month period immediately following the date of grant of such Reload
Option Rights. The Exercise Price of such Reload Option Rights shall be one
hundred percent (100%) of the Stock Price per share on the day of the exercise
of the Options to which such Reload Option Rights relate. Such Reload Option
Rights shall terminate at such time as the Options being exercised would have
terminated had they not been exercised. Such Reload Option Rights will be
evidenced by an agreement in form substantially the same as this Agreement, with
appropriate changes.
3. TERMINATION. The Options will terminate and all Unvested
and Vested Options then outstanding will be forfeited on the earliest of the
following dates:
(a) On the date on which the Optionee ceases to be an
employee of the Company or a Subsidiary by reason of termination of employment
for Cause;
(b) Subject to possible extension pursuant to Paragraph
3(c) below, five (5) years after either (i) the date on which the Optionee
ceases to be an employee of the Company or a Subsidiary with eligibility for
retirement under a retirement plan of the Company or a Subsidiary or (ii) the
date of permanent disability of the Optionee if the Optionee becomes permanently
disabled while an employee of the Company or a Subsidiary;
(c) Five (5) years after the date of the death of the
Optionee if the Optionee dies while an employee of the Company or a Subsidiary
or one (1) year after the date of death of the Optionee if the Optionee dies
during the fifth year of the five (5) year period referred to in Paragraph 3(b)
above;
(d) Five (5) years after the date of a Termination Event or
Constructive Termination;
(e) Immediately (x) upon the Optionee accepting employment
with a Competitor without the prior written approval of the Company's Board or
(y) upon a material breach by the Optionee of any applicable agreement with the
Company or a Subsidiary relating to non-competition, non-solicitation or
maintaining of Company confidences; or
(f) Ten (10) years from the Grant Date.
4. TRANSFERABILITY. Unless otherwise approved by the
Compensation Committee following a request from the Optionee or the Optionee's
guardian or legal representative, the Options are not transferable by the
Optionee otherwise than by will or the laws of descent and distribution. If
another type of transfer is approved by the Compensation Committee, a transfer
will only be effective when the transferee of the Options enters into an
agreement with the Company (in form and substance acceptable to the Company)
agreeing to be bound by the provisions of this Agreement as if such transferee
were the Optionee. If exercised during the lifetime of the Optionee, the Options
are exercisable only by the Optionee or by the
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Optionee's guardian or legal representative, or by a transferee authorized as
provided in this Paragraph.
5. SECURITIES LAWS. The Options are not exercisable if such
exercise would involve a violation of any applicable federal, state or other
securities law, and the Company hereby agrees to make reasonable efforts to
comply with such securities laws. The Options are not exercisable unless under
said laws at the time of exercise the shares of Common Stock or other securities
purchasable hereunder are exempt, are the subject matter of an exempt
transaction, or are registered in accordance with such laws.
6. ADJUSTMENTS.
(a) The Board of Directors or the Compensation Committee
shall make such adjustment in the option price and in the number or kind of
shares of Common Stock or other securities covered by the Options as such Board
or Committee may in good faith determine is equitably required to prevent
dilution or enlargement of the rights of the Optionee that otherwise would
result from (i) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or
(ii) any merger, consolidation, spin-off, split-off, spin-out, split up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights to purchase securities, or (iii) any distribution to the
holders of the Common Stock of rights or warrant to purchase equity interests of
the Company, or (iv) any other corporate transaction or event having an effect
similar to any of the foregoing. Moreover, in the event of any such transaction
or event, the Board of Directors or the Compensation Committee, in its
discretion, may provide in substitution for any or all outstanding awards under
the Options such alternative consideration as it, in good faith, may determine
to be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced.
(b) In the event that any provision of this Agreement would
result in a calculation of a number of shares in amounts other than a whole
number, the number of shares so calculated will be reduced or increased to the
nearest whole number (rounding 0.50 up), with the effect of any such rounding
deemed to attach to the last group of shares to be so calculated (with
calculations to be conducted in alphabetical or numerical order, as applicable).
7. WITHHOLDING. If the Company is required to withhold any
federal, state, local or foreign tax in connection with the exercise of the
Options, it will be a condition to such exercise that the Optionee make
provision satisfactory to the Company for payment of all such taxes. Upon
exercise of any Options, Optionee shall surrender to the Company, by the Company
withholding from the shares of Common Stock to be issued upon such exercise to
the Optionee, in satisfaction of the Withholding Amount, shares of Common Stock
that have value in the aggregate that is equal to such Withholding Amount. In
the event that the Optionee desires to have an amount greater than the
Withholding Amount withheld, the excess over the Withholding Amount must be paid
to the Company in cash.
8. DEFINITIONS. The following capitalized terms have meanings
as set forth below.
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"CHANGE IN CONTROL" means if at any time any of the following
events shall have occurred:
(a) the Company merges into itself, or is merged or
consolidated with, another corporation and as a result of such
merger or consolidation less than 51% of the voting power of
the then-outstanding voting securities of the surviving or
resulting corporation immediately after such transaction are
directly or indirectly beneficially owned in the aggregate by
the former stockholders of the Company immediately prior to
such transaction;
(b) all or substantially all the assets accounted for
on the consolidated balance sheet of the Company are sold or
transferred to one or more corporations or persons, and as a
result of such sale or transfer less than 51% of the voting
power of the then-outstanding voting securities of such
corporation or person immediately after such sale or transfer
is directly or indirectly beneficially held in the aggregate
by the former stockholders of the Company immediately prior to
such transaction or series of transactions;
(c) A person, within the meaning of Section 3(a)(9)
or 13(d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, becomes the beneficial owner
(as defined in Rule 13d-3 of the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934) of
(i) 15% or more but less than 35% of the voting power of the
then-outstanding voting securities of the Company without the
prior approval by the Board, or (ii) 35% or more of the voting
power of the then-outstanding voting securities of the
Company; PROVIDED, HOWEVER, that the foregoing does not apply
to any such acquisition that is made by (w) any subsidiary of
the Company; (x) any employee benefit plan of the Company or
of any Subsidiary or (y) any person or group of which
employees of the Company or of any Subsidiary control a
greater than 25% interest unless the Board of Directors of the
Company determines that such person or group is making a
"hostile acquisition;"
(d) A majority of the members of the Board of
Directors of the Company or of any Subsidiary are not
Continuing Directors, where a "Continuing Director" is any
member of the Board of Directors of the Company or, with
respect to a Subsidiary, of such Subsidiary who (x) was a
member of the Board of Directors of the Company or, with
respect to a Subsidiary, of such Subsidiary on the date hereof
or (y) was nominated for election or elected to such Board of
Directors with the affirmative vote of a majority of the
Continuing Directors who were members of such Board at the
time of such nomination or election.
"COMPETITOR" means any Person that competes with any
then-existing business of the Company or any Subsidiary.
"CONSTRUCTIVE TERMINATION" means either (i) a substantial,
nonconsensual adverse change in the Optionee's employment duties (which will,
however, not include the relinquishment of the Optionee's status as Chief
Executive Officer if he remains the Chairman of
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the Board of the Company), or (ii) the moving of the Company's executive
headquarters more than 50 miles from its present location without the Optionee's
consent.
"EXERCISE PRICE" means the exercise price per share indicated
as the Exercise Price per share on the signature page hereof.
"FOR CAUSE" means that there is a final, non-appealable order
in a proceeding before a court of competent jurisdiction or a final order in an
administrative proceeding before the Securities and Exchange Commission finding
that the Optionee (i) committed any willful misconduct, fraud or criminal
activity (excluding traffic violations or other minor offenses) which commission
is materially inimical to the interests of any of the Subsidiaries or the
Company, whether for his personal benefit or in connection with his duties for
the Company or the Subsidiaries or (ii) intentionally or knowingly violated any
antifraud provision of the federal or state securities laws.
"GRANT DATE" means the date of the Board or Compensation
Committee action awarding the Options to the Optionee as indicated on the
signature page hereof.
"MATURE SHARES" means (x) nonforfeitable, unrestricted shares
of Common Stock that have been owned by the Optionee for more than six (6)
months prior to the date of exercise, or (y) shares of restricted stock or other
shares of Common Stock that are forfeitable or subject to restrictions on
transfer, including, without limitation, shares of Common Stock issued pursuant
to the earn out of performance shares or performance units, which shares have
been owned by the Optionee for more than six (6) months and that the Company
agrees to accept as consideration, or (z) such other Company securities as the
Company's chief accounting officer, upon consultation with the Company's
independent accountants, determines will not adversely affect the Company's tax
or accounting position by accepting.
"ORIGINAL AWARD" means the number of shares of Common Stock
indicated as the Original Award on the signature page hereof.
"PERSON" means any corporation, partnership, limited liability
company, association, firm, other entity or individual(s).
"STOCK PRICE" means the closing price of the Common Stock on
the principal exchange on which the Common Stock is traded.
"SUBSIDIARY" means Xxxx National Group, Inc., Xxxx Vision
Corporation, Pearle, Inc., and Things Remembered, Inc.
"TERMINATION EVENT" means the Optionee's ceasing to be an
employee of the Company or its Subsidiaries by reason of termination by the
employer of the Optionee's employment without Cause.
"UNVESTED SHARES" means, as of any given time, those shares of
Common Stock relating to the Options that are not, at the time in question,
otherwise permitted, under the terms of this Agreement, to be acquired pursuant
to the exercise of the Options.
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"VESTED SHARES" means, as of any given time, those shares of
Common Stock relating to the Options that are, at the time in question,
otherwise permitted, under the terms of this Agreement, to be acquired pursuant
to the exercise of the Options.
"WITHHOLDING AMOUNT" means the minimum amount of withholding
taxes including Federal, state and local income taxes and social security and
Medicare taxes required to be withheld by the Company by the applicable taxing
authorities, as the result of the exercise of an Option.
9. ACKNOWLEDGMENT. The undersigned Optionee hereby
acknowledges receipt of an executed original of this Agreement and accepts the
Options granted hereunder.
EXECUTED at Cleveland, Ohio as of the date first set forth
above.
XXXX NATIONAL CORPORATION
By: /s/ Xxxxxx X. Xxxx
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Title: Senior Vice President
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/s/ Xxxxxxx X. Xxxx
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OPTIONEE
Name of Optionee: Xxxxxxx X. Xxxx
Name of Employer: Xxxx National Corporation
Position: Chairman and Chief Executive
Officer of the Company and
Chairman of the Board of the
Company and each of the
Subsidiaries
Number of Shares
in the Original Award: 250,000
Date of Board Resolution
authorizing this Option
(Grant Date): January 25, 2002
Exercise Price per Share: $15.15
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