EMISSION CONTROLS CORPORATION
STOCK OPTION AGREEMENT
Emission Controls Corporation, an Indiana corporation (the
"Company"), hereby grants to Xxx Xxxxx (the "Employee") on this
1st day of July, 2002 (the "Option Date"), pursuant to the
provisions of the Emission Controls Corporation Incentive Stock
Option Plan (the "Plan"), a non-qualified option to purchase from
the Company (the "Option") 1,500,000 shares of its Class A Common
Stock, $.001 par value ("Stock"), at the price of $4.70 per share
upon and subject to the terms and conditions set forth below.
Capitalized terms not defined herein shall have the meanings
specified in the Plan.
1. Option Subject to Acceptance of Agreement.
The Option shall become null and void unless the Employee
shall accept this Agreement by executing it in the space provided
below and returning it to the Company.
2. Time and Manner of Exercise of Option.
2.1 Exercise of Option. (a) Unless the Option is
canceled earlier pursuant to Section IV.8 of the Plan, the Option
shall become exercisable with respect to all of the stock subject
to the Option on June 15, 2007, (the "Expiration Date"), or
earlier pursuant to Section 2.2(b), (c) or (d) hereof.
(b) If the Employee's employment by the Company
terminates by reason of disability, the Option shall become fully
exercisable and may thereafter be exercised by the Employee or
the Employee's Legal Representative for a period of three (3)
years from the date of the Employee's termination of employment
or until the Expiration Date, whichever period is shorter. For
purposes of the Plan, "disability" means the inability of the
Employee to substantially perform his duties for a continuous
period of at least six (6) months.
(c) If the Employee's employment by the Company
terminates by reason of retirement on or after age 62 after a
minimum of three (3) years of employment with the Company, the
Option shall become fully exercisable and may thereafter be
exercised by the Employee or the Employee's Legal Representative
for a period of three (3) years from the date of the Employee's
termination of employment or until the Expiration Date, whichever
period is shorter.
(d) If the Employee's employment by the Company
terminates by reason of death, the Option shall become fully
exercisable and may thereafter be exercised by the Employee's
Permitted Transferees or Legal Representative, as the case may
be, for a period of three (3) years from the date of the
Employee's death or until the Expiration Date, whichever period
is shorter.
(e) If the Employee's employment by the Company
terminates for any reason other than disability, retirement on or
after age 62 after a minimum of three (3) years of employment
with the Company or death, the Option shall be exercisable only
to the extent that it was exercisable on the date of the
Employee's termination of employment and may thereafter be
exercised for a period of one (1) year from the date of the
Employee's termination of employment or until the Expiration
Date, whichever period is shorter.
(f) Notwithstanding any of the foregoing, if the
Employee's employment by the Company is terminated for cause, the
Option shall terminate automatically on the date of such
termination of employment for cause. Termination of employment
"for cause" shall mean a termination of employment resulting
from, or caused by, the Employee's theft or embezzlement from the
Company, the violation of a material term or condition of the
Employee's employment with the Company, the Employee's disclosure
of confidential information of the Company, the conviction of the
Employee of a crime of moral turpitude or the Employee's
engagement in acts or conduct which, in the opinion of the Board
of directors, is adverse to the interests of the Company.
(g) If the Employee dies following termination of
employment but prior to the termination of the Option, the Option
shall be exercisable only to the extent that the Option was
exercisable on the date of Employee's death and may thereafter be
exercised by the Employee's Permitted Transferees or Legal
Representative, as the case may be, for a period of one (1) year
from the date of Employee's death or until the Expiration Date or
until that date calculated pursuant to Section 2.1(b), 2.1(c) or
2.1(e) hereof, whichever period is shorter.
2.2 Method of Exercise. (a) Subject to the limitations
set forth in this Agreement, the Option may be exercised (i) by
giving written notice to the Company specifying the number of
whole shares of Stock to be purchased and accompanied by payment
therefor in full either (A) in cash, (B) in previously owned
whole shares of Stock (for which the Employee has good title free
and clear of all liens and encumbrances) having a Fair Market
Value determined as of the date of exercise, (C) by authorizing
the Company to retain whole shares of Stock which would otherwise
be issuable upon exercise of the Option having a Fair Market
Value determined as of the date of exercise, (D) in cash by a
broker-dealer acceptable to the Company to whom the Employee has
submitted an irrevocable notice of exercise, or (E) a combination
of (A), (B) and (C), and (ii) by executing such documents as the
Company may reasonably request. No shares of Stock shall be
issued until the full purchase price has been paid.
b) Unless the Committee otherwise determines, if the
Employee is subject to Section 16 of the Securities Exchange Act
of 1934 (the "Exchange Act"), the following provisions shall
apply to any election by the Employee to authorize the Company to
retain whole shares of Stock purchasable upon exercise of the
Option in payment of all or a portion of the option price:
(1) Such election may apply only to the Option or any
options held by the Employee, shall be filed with the
Company at least six months prior to the exercise date of
the Option and may not take effect during the six-month
period beginning on the date of grant of the Option (other
than in the Employee's death) or
(2) such election (i) shall be subject to approval by
the Committee, (ii) may not take effect during the six-month
period beginning on the date of grant of the Option (other
than in the event of the Employee's death), (iii) must be
filed with the Company during (or must be filed with the
Company in advance of, but take effect during) a ten
business day period beginning on the third business day
following the date of release of the Company's quarterly or
annual summary statements of sales and earnings and (iv) the
exercise of the Option must occur during such ten business
day period. Unless the Committee otherwise determines, any
election pursuant to clause (1) may be revoked or changed
only if such revocation or change is made at least six
months prior to the exercise of the Option and any election
pursuant to clause (2) may be revoked or changed prior to
the exercise of the Option during the ten business day
period.
2.3 Termination of Option. (a) in no event may the
Option be exercised after it terminates as set forth in this
Section 2.3. The Option shall terminate pursuant to Section 2.1
hereof or Section IV.8 of the Plan, on the Expiration Date.
(b) In the event that the Employee shall forfeit rights
to purchase all or a portion of the shares of Stock to which this
Option relates, the Employee shall, within 10 days of the date of
the Company's written request, return this Agreement to the
Company for full or partial cancellation, as the case may be. If
after such forfeiture the Employee continues to have rights to
purchase shares of Stock hereunder, the Company shall, within 10
days of the Employee's delivery of this Agreement to the Company,
issue to the Employee a substitute option agreement applicable to
such rights, which agreement shall be substantially similar to
this Agreement in form and substance.
3. Additional Terms and Conditions of Option.
3.1 Nontransferability of Option. The Option may not
be transferred by the Employee other than by will or the laws of
descent and distribution or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986,
as amended (the "Code") or the Employee Retirement Income
Security Act ("ERISA"), or the rules and regulations thereunder.
During the Employee's lifetime the Option is exercisable only by
the Employee or Employee's Legal Representative. Except as
permitted by the foregoing, the Option may not be sold,
transferred, assigned, pledged, hypothecated or otherwise
disposed of (whether by operation of law or otherwise) or be
subject to execution, attachment or similar process. Upon any
attempted sale, transfer, assignment, pledge, hypothecation or
other disposition, the Option and all rights thereunder shall
immediately become null and void.
3.2 Investment Representation. The Employee hereby
represents and covenants that (a) any share of Stock purchased
upon exercise of the Option will be purchased for investment and
not with a view to the distribution thereof within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"),
unless such purchase has ben registered under the Securities Act
and any applicable state securities law; (b) any subsequent sale
of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any
applicable state securities laws, or pursuant to an exemption
from registration under the Securities Act and such state
securities laws; and (c) if requested by the Company, the
Employee shall submit a written statement, in form satisfactory
to the Company, to the effect that such representation (x) is
true and correct as of the date of purchase of any shares
hereunder, or (y) is true and correct as of the date of any sale
of any such shares, as applicable. As a further condition
precedent to any exercise of the Option, the Employee shall
comply with all regulations and requirements of any regulatory
authority having control of or supervision over the issuance of
the shares and, in connection therewith, shall execute any
documents which the Board or any committee authorized by the
Board shall in its sole discretion deem necessary or advisable.
3.3 Withholding Taxes. (a) As a condition precedent to any
exercise of the Option, the Employee shall, upon request by the
Company, pay to the Company in addition to the purchase price of
the shares, such amount of cash as the Company may be required,
under all applicable federal, state, local or other laws or
regulations, to withhold and pay over as income or other
withholding taxes (the "Required Tax Payments") with respect to
such exercise of the Option. If the Employee shall fail to
advance the Required Tax Payments after request by the Company,
the Company may, in its discretion, deduct any Required Tax
Payments from any amount then or thereafter payable by the
Company to the Employee.
(b) The employee may elect to satisfy any obligation to
advance the Required Tax Payments by any of the following means:
(i) a cash payment to the Company pursuant to Section 3.3(a),
(ii) delivery to the Company of previously owned whole shares of
Stock (for which the Employee has good title, free and clear of
all liens and encumbrances) having a Fair Market Value determined
as of the date the obligation to withhold or pay taxes first
arises in connection with the Option (the "Tax Date"), (iii)
authorizing the Company to withhold from the shares of Stock
otherwise issuable to the Employee pursuant to the Option, a
number of whole shares of Stock having a Fair Market Value
determined as of the Tax Date or (iv) any combination of (i),
(ii) and (iii). Shares of Stock to be delivered or withheld may
have an aggregate fair market value in excess of the minimum
amount of the Required Tax Payments, but not in excess of the
amount determined by applying the Employee's maximum marginal tax
rate. Any fraction of a share of Stock which would be required
to satisfy such an obligation shall be disregarded and the
remaining amount due shall be paid in cash by the Employee.
(c) Unless the Committee otherwise determines, if the
Employee is subject to Section 16 of the Exchange Act, the
following provisions shall apply to any election by the employee
in accordance with Section 3.3(b) to authorize the Company to
retain whole shares of Stock issuable upon exercise of the Option
in payment of all or a portion of the Required Tax Payments with
respect to such exercise.
(1) Such election may apply only to the Option or any
options held by the Employee, shall be filed with the
Company at least six months prior to the exercise date of
the Option and may not take effect during the six-month
period beginning on the date of grant of the Option (other
than in the event of the Employee's death) or (2) such
election (i) shall be subject to approval by the Committee,
(ii) may not take effect during the six-month period
beginning on the date of grant of the Option (other than in
the event of the Employee's death), (iii) must be filed with
the Company during (or must be filed with the Company in
advance of, but take effect during) a ten business day
period beginning on the third business day following the
date of release of the Company's quarterly or annual summary
statements of sales and earnings and (iv) the exercise of
the Option must occur during such ten business day period.
Unless the Committee otherwise determines, any election
pursuant to clause (1) may be revoked or changed only if
such revocation or change is made at least six months prior
to the exercise of the Option and any election made pursuant
to clause (2) may be revoked or changed prior to the
exercise of the Option during the ten business day period.
(d) Unless the Committee otherwise determines, if the
Employee is subject to Section 16 of the Exchange Act, an
election by the Employee in accordance with Section 3.3(b) to
deliver previously owned shares of Stock in payment of all or a
portion of the Required Tax Payments with respect to such
exercise can only be made if the Employee has also elected to
deliver previously owned shares of Stock in payment of the
related purchase price.
3.4 Adjustment. In the event of any change in the
outstanding Stock by reason of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization, or any distribution to holders
of Stock other than a cash dividend, the number and class of
shares under the Option and the purchase price per share, shall
be appropriately adjusted by the Committee without a change in
the aggregate purchase price. The decision of the Committee
regarding the amount and timing of any adjustment pursuant to
this Section 3.4 shall be conclusive.
3.5 Additional Options. In the event the Employee
exercises the Option, in whole or in part, by delivering
previously owned shares of Stock in payment of the purchase price
in accordance with the Plan and the Option, the Employee shall be
entitled to receive an additional option (an "Additional
Option"). Any such Additional Option shall be for a number of
shares of Stock equal to the number of delivered shares. The
purchase price of the shares of Stock subject to any such
Additional Option shall be determined by the Committee in
accordance with the Plan. Any such Additional Option shall be
exercisable on the terms and subject to the conditions
established by the Committee at the time of grant of such
Additional Option, and shall be subject to such other terms and
conditions as the Committee shall determine in accordance with
the Plan.
3.6 Compliance with Applicable Law. The Option is
subject to the condition that if the listing, registration or
qualification of the shares subject to the Option upon any
securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with,
the issuance of shares hereunder, such shares shall not be issued
unless such listing, registration, qualification, consent or
approval shall have been effected or obtained, free of any
conditions not acceptable to the Company.
3.7 Delivery of Certificates. Upon the exercise of the
Option, in whole or in part, the Company shall deliver one or
more certificates representing the number of shares purchased
against full payment therefor. Employee acknowledges that such
certificates may bear a legend indicating that the sale, transfer
or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act and the rules and
regulations thereunder.
3.8 Option Confers No Rights as Stockholder. No person
shall be entitled to any privileges of ownership with respect to
shares of Stock subject to the Option unless and until purchased
and delivered upon the exercise of the Option, whole or in part,
and such person becomes a stockholder of record with respect to
such delivered shares; and no person shall be considered a
stockholder of the Company with respect to any such shares not so
purchased and delivered.
3.9 Decisions of Board or Committee. The Board or the
Committee shall have the right to resolve all questions which may
arise in connection with the Option or its exercise. Any
interpretation, determination or other action made or taken by
the Board or the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.
3.10 Acknowledgment of Receipt of the Plan. The
Employee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions
4.1 Designation as Nonqualified Stock Option. The
Option is hereby designated as not constituting an "incentive
stock option" within meaning of section 422 of the Code; this
Agreement shall be interpreted and treated consistently with such
designation.
4.2 Meaning of Certain Terms. (a) As used herein,
employment by the Company shall include employment by a
corporation which is a "subsidiary corporation" of the Company,
as such term is defined in section 424 of the Code. References
in this Agreement to sections of the Code shall be deemed to
refer to any successor section of the Code or any successor
internal revenue law.
(b) As used herein, the term Permitted Transferee shall
include any transferee (i) pursuant to a transfer permitted
under Section IV.4 of the Plan and Section 3.1 hereof or
(ii) designated in accordance with Section IV.12 of the
Plan.
(c) As used herein, the term Legal Representative shall
include a guardian, administrator, executor and other person
acting in a similar capacity.
4.3 Successors. This Agreement shall be binding upon
and inure to the benefit of any successor or successors of the
Company and any person or persons who shall, upon the death of
the Employee, acquire any rights hereunder.
4.4 Notices. All notices, requests or other
communications provided for in this Agreement shall be made in
writing either (a) by actual delivery to the party entitled
thereto, or (b) by mailing in the United States mail to the last
know address of the party entitled thereto, via certified or
registered mail, return receipt requested. The notice shall be
deemed to be received in case of delivery, on the date of its
actual receipt by the party entitled thereto, and in case of
mailing, five days following the date of such mailing.
4.5 Governing Law. This Agreement, to the extent not
otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Indiana and
construed in accordance therewith without giving effect to
principles of conflicts of laws.
4.6 Counterparts. This Agreement may be executed in
two counterparts each of which shall be deemed an original and
both of which together shall constitute one and the same
instrument.
EMISSION CONTROLS CORPORATION
By: Xxx Xxxxxxxx
Xxx Xxxxxxxx, Treasurer
Accepted this 1st day of July, 2002
Xxx Xxxxx
Xxx Xxxxx ("Employee")
