Exhibit 10.17
GRANT AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of ____________, is made by and between P&L
COAL HOLDINGS CORPORATION, a Delaware corporation (the "Company"), and the
undersigned employee of the Company or a Subsidiary (as defined below) or
Affiliate (as defined below) of the Company ("Optionee").
WHEREAS, the Company wishes to afford the Optionee the opportunity to
purchase shares of its $.01 par value Common Stock ("Common Stock");
WHEREAS, the Company wishes to carry out the Plan (as hereinafter
defined), the terms of which are hereby incorporated by reference and made a
part of this Agreement; and
WHEREAS, the Committee (as hereinafter defined), appointed to
administer the Plan, has determined that it would be to the advantage and best
interest of the Company and its stockholders to grant the Incentive Stock
Options (within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")) provided for herein to the Optionee as an incentive for
increased efforts during his term of office with the Company or its Subsidiaries
or Affiliates, and has advised the Company thereof and instructed the
undersigned officers to issue said Options;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall
have the meaning specified in the Plan or below unless the context clearly
indicates to the contrary.
Section 1.1 - "Active Trading Market" shall mean, as to the Common Stock, that
the Common Stock is listed or quoted on a national exchange or the NASDAQ
National Market.
Section 1.2 - "Affiliate", as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.
Section 1.3 - "Board of Directors" shall mean the Board of Directors of the
Company.
Section 1.4 - "Cause" shall mean (i) any material and uncorrected breach by
Optionee of the terms of his employment agreement with the Company, if any,
including, but not limited to, engaging in action in violation of any
restrictive covenants therein, (ii) any willful fraud or dishonesty of Optionee
involving the property or business of the Company, (iii) a deliberate or willful
refusal or failure of Optionee to comply with any major corporate policy of the
Company which is communicated to Optionee in writing or (iv) Optionee's
conviction of, or plea of nolo contendere to, any felony if such conviction
shall result in his imprisonment; provided that with respect to clauses (i),
(ii) or (iii) above, Optionee shall have 10 days following written notice of the
conduct which is the basis for the potential termination for Cause within which
to cure such conduct in order to prevent termination for Cause by the Company.
In the event that Optionee is terminated for failure to meet performance goals,
as determined by the initial CEO, such termination shall be considered a
termination for Cause for all purposes relating to his Options.
Section 1.5 - "Change of Control" shall mean an acquisition of all or
substantially all of the direct and indirect assets of the Company and its
Subsidiaries (by merger, consolidation, recapitalization event, stock or asset
sale or otherwise), whereby immediately following any such transaction (i) the
Xxxxxx Fund owns, in the aggregate, less than 50 percent of the Company's
outstanding voting securities that the Xxxxxx Fund owned (excluding the sell
down of approximately $75 million anticipated to occur after the Closing Date)
after the Closing Date or (ii) any Person individually owns more of the
Company's then outstanding voting securities entitled to vote generally than is
owned in the aggregate by the Xxxxxx Fund and its affiliates.
Section 1.6 - "Closing Date" shall mean May 19, 1998.
Section 1.7 - "Committee" shall mean the Compensation Committee of the Company.
Section 1.8 - "Common Stock Ownership Agreement" shall mean that certain Common
Stock Ownership Agreement dated as of the date hereof between the Optionee and
the Company.
Section 1.9 - "Disability" shall mean Optionee's absence from the full-time
performance of Optionee's duties pursuant to a reasonable determination made in
accordance with the Company's disability plan that Optionee is disabled as a
result of incapacity due to physical or mental illness that lasts, or is
reasonably expected to last, for at least six months.
Section 1.10 - "Fiscal Year" shall mean the most recently completed fiscal year
of the Company.
Section 1.11 - "FMV per Share" shall mean: (i) prior to a Public Offering, the
fair market value of the equity of the Company, as determined by the Board of
Directors in good faith, taking into account all relevant factors, including the
Company's historic financial performance, its business prospects and recent
sales or valuations of similar companies; (ii) after a Public Offering, the
average of the closing prices of the shares of Common Stock for the 20 trading
days immediately preceding the determination date; provided, however, at the
time of the Public Offering, the offering price per share of Common Stock; and
(iii) notwithstanding the foregoing, in the event of a Change in Control, the
per share value of equity based on amounts paid in the Change of Control.
2
Section 1.12 - "Good Reason" shall mean (i) a reduction by the Company in
Optionee's Base Salary, (ii) a material reduction in the aggregate program of
employee benefits and perquisites to which Optionee is entitled (other than a
reduction which affects all executives and is approved by the initial CEO;
provided, however; that if the initial CEO terminates without Good Reason,
voluntarily retires, dies or has a Disability or if such reduction is necessary
to maintain the financial viability or solvency of the Company, the reduction
does not require the approval of the initial CEO); or, without the approval of
the initial CEO: (iii) relocation by more than 50 miles from Optionee's
workplace, (iv) any material diminution or material adverse change in Optionee's
duties, responsibilities or reporting relationships, which causes Optionee to
fall below the level of the executive team, or (v) a material decline in
Optionee's Bonus opportunity; provided, however, that after a Change of Control
of the Company or an IPO, clauses (ii) through (v) above shall be replaced by
the following: (ii) a material reduction in the aggregate program of employee
benefits and perquisites to which Optionee is entitled (other than a reduction
which affects all executives), (iii) relocation by more than 50 miles from
Optionee's workplace, (iv) any material diminution or material adverse change in
Optionee's duties, responsibilities or reporting relationships, which causes
Optionee to fall below the level of the executive team, or (v) a material
decline in Optionee's Bonus opportunity.
Section 1.13 - "Xxxxxx Fund" shall mean the initial purchasers listed on the
signature pages to the Stockholders Agreement and any other entity that is owned
or controlled directly or indirectly by Xxxxxx Brothers Holdings, Inc.
Section 1.14 - "Options" shall mean the Incentive Stock Options, within the
meaning of Section 422 of the Code, to purchase Common Stock granted under this
Agreement.
Section 1.15 - "Plan" shall mean the 1998 Stock Purchase and Option Plan for Key
Employees of the Company, as from time to time amended.
Section 1.16 - Pronouns - The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates.
Section 1.17 - "Public Offering" shall mean the sale of shares of any class of
the Company's stock to the public pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8 or any similar
or successor form) filed under the Securities Act of 1933 which results in an
Active Trading Market of the lesser of 25% of the outstanding shares of Common
Stock and an aggregate value of securities that are registered equal to $250
million; provided, however, that the first such Public Offering shall be called
an "IPO".
Section 1.18 - "Recapitalization Event" shall mean a recapitalization,
reorganization, stock dividend or other special corporate restructuring which
results in an extraordinary distribution to the stockholders of cash and/or
securities through the use of leveraging or otherwise but which does not result
in a Change of Control.
Section 1.19 - "Retirement" shall mean normal retirement at age 62, which
retirement occurs more than five years after the Closing Date. Any purported
retirement prior to the fifth
3
anniversary of the Closing Date, shall be treated the same as a Termination of
Employment without Good Reason.
Section 1.20 - "Stockholders Agreement" shall mean the Stockholders Agreement
dated as of the date hereof among the Company, Xxxxxx Brothers Merchant Banking
Partners II L.P., the Optionee and the other parties thereto.
Section 1.21 - "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group of
commonly controlled corporations, other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
Section 1.22 - "Termination of Employment" shall mean a termination of the
Optionee's employment with the Company (regardless of the reason therefor).
ARTICLE II
GRANT OF OPTIONS
Section 2.1 - Grant of Options. For good and valuable consideration, the Company
shall grant to the Optionee an Option to purchase any part or all of an
aggregate of the number of shares set forth with respect to each such Option on
the signature page hereof of its Common Stock upon the terms and conditions set
forth in this Agreement.
Section 2.2 - Exercise Price. The exercise price of the shares of Common Stock
covered by the Option shall be $20.00 per share subject to adjustment pursuant
to Section 2.4 herein without commission or other charge; provided, however,
that if Optionee is a person who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, a Subsidiary
or an Affiliate (a "10% Stockholder"), the exercise price is not less than 110%
of the FMV per Share as of the date hereof, and the exercise price in no event
is less than 100% of the FMV per Share as of the date hereof.
Section 2.3 - No Obligation of Employment. Nothing in this Agreement or in the
Plan shall confer upon the Optionee any right to continue in the employ of the
Company or any Subsidiary or Affiliate or shall interfere with or restrict in
any way the rights of the Company and its Subsidiaries or Affiliates, which are
hereby expressly reserved, to terminate the employment of the Optionee at any
time for any reason whatsoever, with or without Cause.
Section 2.4 - Adjustments in Options.
(a) Subject to Section 9 of the Plan, in the event that the
outstanding shares of the stock subject to an Option are, from time to time,
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of a merger, consolidation,
recapitalization event, reclassification, stock split, stock dividend,
combination of shares, or otherwise, the Committee shall make an appropriate and
equitable
4
adjustment in the number and kind of shares or other consideration as to which
such Option, or portions thereof then unexercised, shall be exercisable and the
exercise price therefor. Any such adjustment made by the Committee shall be
final and binding upon the Optionee, the Company and all other interested
persons.
(b) Upon a Recapitalization Event which is not a Change of
Control, each share of Common Stock subject to an Option shall be entitled to
receive any amounts distributed in connection therewith, as if the Option had
been exercised, and any amounts so distributed shall be applied to Optionee's
outstanding loan balance and thereafter to the exercise price of Options,
commencing with Time Options, until the aggregate amount of such dividend
equivalent has been fully applied.
Section 2.5 - Conditions to Grant of Option. Concurrently with the execution of
this Agreement, Optionee shall execute a Common Stock Ownership Agreement and a
Stockholders Agreement, in forms which are substantially similar to those
attached hereto, which covers the Option granted hereunder.
ARTICLE III
EXERCISABILITY OF OPTIONS
Section 3.1 - Options. Unless otherwise provided in this Agreement, this Option
shall become exercisable as follows:
Date Option Percentage of Common Stock as to which
Becomes Exercisable Option Is Exercisable
-------------------------------- --------------------------------------
After the first Anniversary Date 20%
After the second Anniversary Date 40%
After the third Anniversary Date 60%
After the fourth Anniversary Date 80%
After the fifth Anniversary Date 100%
For purposes hereof, the term "Anniversary Date" shall mean the Closing
Date anniversary date. The first Anniversary Date shall mean the Anniversary
Date immediately following the close of the Fiscal Year during which the Options
were granted hereunder.
Section 3.2 - Acceleration Events. Notwithstanding anything in this Article III
to the contrary, this Option shall become fully exercisable early (but only to
the extent such Option has not otherwise terminated or become exercisable) upon
(i) a Termination of Employment on account of death or Disability, (ii) a Change
of Control or (iii) a Recapitalization Event.
5
Section 3.3 - Effect of Termination of Employment. Except as otherwise provided
in this Article III, no Option shall become exercisable as to any additional
shares of Common Stock following Termination of Employment, and such
unexercisable Option shall terminate immediately.
Section 3.4 - Expiration of Options. This Option may not be exercised to any
extent by Optionee after the first to occur of the following events:
(a) The tenth anniversary of the date hereof or, in the case of a
10% Stockholder, the fifth anniversary of the date hereof; or
(b) The first anniversary of the date of Termination of Employment
(i) by reason of death, Disability, or Retirement or (ii) without Cause or for
Good Reason; or
(c) The date of a Termination of Employment for Cause or without
Good Reason; or
(d) The date of a Termination of Employment for any reason if the
Option exercise price is higher than the FMV per Share subject to such Option;
or
(e) Upon a Change of Control, the Compensation Committee may
terminate this Option, so long as the Optionee is cashed out at the Change of
Control price or is permitted to exercise his Option prior to the Change of
Control.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise. During the lifetime of the Optionee,
only he, or in the event of disability his committee or conservator, may
exercise this Option or any portion thereof. After the death of the Optionee,
any exercisable portion of an Option may, prior to the time when an Option
becomes unexercisable under Section 3.4, be exercised by his beneficiary or
estate.
Section 4.2 - Partial Exercise. Any exercisable portion of this Option or the
entire Option, if then wholly exercisable, may be exercised in whole or in part
at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.4; provided, however, that any partial exercise
shall be for whole shares of Common Stock only.
Section 4.3 - Manner of Exercise. The Option, or any exercisable portion
thereof, may be exercised solely by delivering to the Secretary of the Company
or his office all of the following prior to the time when the Option or such
portion becomes unexercisable under Section 3.4:
(a) Notice in writing signed by the Optionee or the other person
then entitled to exercise the Option or portion thereof, stating that the Option
or portion thereof is thereby exercised, such notice complying with all
applicable rules established by the Committee;
(b) Full payment (in cash, in Shares, by check or by a combination
thereof) for the shares with respect to which such Option or portion thereof is
exercised;
6
(c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Optionee or other person then
entitled to exercise such Option or portion thereof, stating that the shares of
Common Stock are being acquired for his own account, for investment and without
any present intention of distributing or reselling said shares or any of them
except as may be permitted under the Securities Act of 1933, as amended (the
"Act"), and then applicable rules and regulations thereunder, and that the
Optionee or other person then entitled to exercise such Option or portion
thereof will indemnify the Company against and hold it free and harmless from
any loss, damage, expense or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the representation and
agreement referred to above; provided, however, that the Committee may, in its
absolute discretion, take whatever additional actions it deems appropriate to
ensure the observance and performance of such representation and agreement and
to effect compliance with the Act and any other federal or state securities laws
or regulations;
(d) Full payment to the Company of all amounts which, under
federal, state or local law, it is required to withhold upon exercise of the
Option; and
(e) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the option.
Without limiting the generality of the foregoing, the Committee may require an
opinion of counsel acceptable to it to the effect that any subsequent transfer
of shares acquired on exercise of an Option does not violate the Act, and may
issue stop-transfer orders covering such shares. Share certificates evidencing
stock issued on exercise of this Option shall bear an appropriate legend
referring to the provisions of subsection (c) above and the agreements herein.
The written representation and agreement referred to in subsection (c) above
shall, however, not be required if the shares to be issued pursuant to such
exercise have been registered under the Act, and such registration is then
effective in respect of such shares.
Section 4.4 - Conditions to Issuance of Stock Certificates. The shares of Common
Stock deliverable upon the exercise of an Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which have
then been reacquired by the Company. Such shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock purchased upon the
exercise of an Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) The obtaining of approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(b) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.
7
Section 4.5 - Rights as Stockholder. The holder of an Option shall not be, nor
have any of the rights or privileges of, a stockholder of the Company in respect
of any shares purchasable upon the exercise of the Option or any portion thereof
unless and until certificates representing such shares shall have been issued by
the Company to such holder.
ARTICLE V
MISCELLANEOUS
Section 5.1 - Administration. The Committee shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Optionee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options. In
its absolute discretion, the Board of Directors may at any time and from time to
time exercise any and all rights and duties of the Committee under the Plan and
this Agreement.
Section 5.2 - Options Not Transferable. Neither the Option nor any interest or
right therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution.
Section 5.3 - Tax Information and Notice of Disqualifying Disposition. This
Option is intended to be eligible for treatment as an Incentive Stock Option
under Section 422 of the Code. Whether this Option will receive such tax
treatment will depend, in part, on actions by Optionee after exercise of this
Option. Accordingly, the Company makes no representations by way of the Plan,
this Agreement, or otherwise, with respect to the actual tax effect of the grant
or exercise of this Option or the subsequent disposition, including, without
limitation, repurchase by the Company or its nominee, of any of the Option
Shares.
If Optionee sells or makes a disposition (within the meaning of Section
422 of the Code) of any of the shares acquired pursuant to exercise of this
Option prior to the later of (a) one year from the date such shares was
acquired, or (b) two years from the grant of this Option, Optionee shall give
written notice to the Company of such disposition. The notice shall include
Optionee's name, the number, exercise price and exercise date of the shares
disposed of, and the date of disposition.
Section 5.4 - Shares to Be Reserved. The Company shall at all times during the
term of the Option reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of this Agreement.
8
Section 5.5 - Notices. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its Secretary, and
any notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.5, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Optionee shall, if
the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.5. Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.
Section 5.6 - Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.
Section 5.7 - Applicability of Plan, Common Stock Ownership Agreement and
Stockholders Agreement. The Option and the shares of Common Stock issued to the
Optionee upon exercise of the Option shall be subject to all of the terms and
provisions of the Plan, Common Stock Ownership Agreement and the Stockholders
Agreement, to the extent applicable to the Option and such shares. In the event
of any conflict between this Agreement and the Plan, the terms of the Plan shall
control. In the event of any conflict between this Agreement or the Plan and the
Common Stock Ownership Agreement, the terms of the Common Stock Ownership
Agreement shall control. In the event of any conflict between this Agreement,
the Plan or the Common Stock Ownership Agreement and the Stockholders Agreement,
the terms of the Stockholders Agreement shall control.
Section 5.8 - Amendment. This Agreement may be amended only by a writing
executed by the parties hereto which specifically states that it is amending
this Agreement.
Section 5.9 - Dispute Resolution. Any dispute or controversy arising under or in
connection with this Agreement shall be resolved by arbitration. Arbitrators
shall be selected, and arbitration shall be conducted, in accordance with the
rules of the American Arbitration Association. The Company shall pay any legal
fees in connection with such arbitration in the event that the Optionee prevails
on a material element of his claim or defense.
Section 5.10 - Governing Law. The laws of the State of New York shall govern the
interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.
Section 5.11 - Jurisdiction. Any suit, action or proceeding against the Optionee
with respect to this Agreement, or any judgment entered by any court in respect
of any thereof, shall be brought in any court of competent jurisdiction in the
State of New York, as the Company may elect in its sole discretion, and the
Optionee hereby submits to the non-exclusive jurisdiction of such courts for the
purpose of any such suit, action, proceeding or judgment. The Optionee hereby
irrevocably waives any objections which he may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or relating
to this Agreement brought in any court of competent jurisdiction in the State of
New York, and hereby further irrevocably waives any
9
claim that any such suit, action or proceeding brought in any such court has
been brought in any inconvenient forum. No suit, action or proceeding against
the Company with respect to this Agreement may be brought in any court, domestic
or foreign, or before any similar domestic or foreign authority other than in a
court of competent jurisdiction in the State of New York, and the Optionee
hereby irrevocably waives any right which he may otherwise have had to bring
such an action in any other court, domestic or foreign, or before any similar
domestic or foreign authority. The Company hereby submits to the jurisdiction of
such courts for the purpose of any such suit, action or proceeding.
10
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
P&L COAL HOLDINGS CORPORATION
By
_________________________________
Its VP Human Resources
______________________________ Aggregate number of shares of Common
Optionee Stock for which the Time Options
granted hereunder is exercisable:
XX,XXXX
Optionee's Taypayer Identification Number:
