THE DIRECTV GROUP, INC. NON-QUALIFIED STOCK OPTION AGREEMENT
EXHIBIT
10.3
THE
DIRECTV GROUP, INC.
THIS
NON-QUALIFIED STOCK OPTION
AGREEMENT (“Agreement”), dated as of August 13, 2007
(“Effective Date”), is entered into between The DIRECTV Group,
Inc. a Delaware corporation (“DIRECTV”), and Xxxxx Xxxxx
(“Executive”).
WHEREAS,
at its
meeting on August 8, 2007, the Compensation Committee of DIRECTV’s Board of
Directors (the “Committee”) approved the grant to Executive of
nonqualified stock options to purchase shares of DIRECTV’s common stock, $.01
par value per share (the “Common Stock”), upon the terms and
conditions set forth herein and subject to the terms and conditions of the
Amended and Restated 2004 Stock Plan of DIRECTV (as it may be amended from
time
to time, the “Plan”); and
WHEREAS,
at its
meeting on August 8, 2007, the Board of Directors of DIRECTV
(“Board”) ratified the grant to Executive of the non-qualified
stock options referred to above, upon the terms and conditions set forth herein
and subject to the terms and conditions of the Plan; and
WHEREAS,
the Committee
and the Board each has also approved the terms and conditions of an employment
agreement with Executive effective as of August 9, 2007 (such agreement, as
it
may be amended from time to time, is referred to herein as the
“Employment Agreement”); and
WHEREAS,
both the
Committee and the Board authorized the Chairman of the Committee to execute
this
Agreement on behalf of DIRECTV, in accordance with the resolutions adopted
by
each of the Committee and the Board at their respective meetings on August
8,
2007.
NOW,
THEREFORE, in
consideration of the services rendered and to be rendered by Executive and
the
mutual promises made herein and the mutual benefits to be derived there from,
DIRECTV and Executive agree as follows:
1. Defined
Terms. Any capitalized term used herein and not
otherwise defined shall have the meaning assigned to such term in the
Plan.
2. Grant
of Options. DIRECTV hereby grants to Executive the right
and option to purchase, on the terms and conditions set forth herein, to the
extent exercisable, all or any part of an aggregate of One Million Two
Hundred-Nine Thousand Four Hundred (1,209,400) shares of Common Stock at a
price
(“Xxxxx Xxxxx”) of $22.43 per share of Common Stock, subject to
the provisions of this Agreement and the Plan (the
“Option”).
3. Exercisability
of Option. The Option shall vest and become exercisable
as to one-third (rounded to the nearest whole share) of the aggregate number
of
shares of Common Stock subject to the Option (subject to adjustment as provided
in Section 8 or in accordance with Section 14 of the Plan), on each of December
31, 2008, 2009 and 2010, subject to the applicable provisions of the Plan and
this Agreement. The Option may be exercised only to the extent it
shall have vested and is exercisable, and, during Executive’s lifetime, only by
Executive. In no event may the Executive exercise the Option, in
whole or in part, after the tenth anniversary of the Effective Date (the
“Expiration Date”).
(a) Cumulative
Exercisability. To the extent Executive does not, at the
time of a particular exercise, purchase all the shares of Common Stock that
Executive may then purchase, Executive has the right cumulatively thereafter
to
purchase any of such shares of Common Stock not so purchased until the
Expiration Date or, if applicable, the earlier termination of the
Option.
(b) No
Fractional Shares; Minimum Exercise. Fractional share
interests shall be disregarded, but may be cumulated. No fewer than
100 shares of Common Stock may be purchased at any one time, unless the number
purchased is the total number at the time exercisable under the
Option.
4. Exercise
of Option. To the extent vested and exercisable, the
Option may be exercised by the delivery to DIRECTV of a written exercise notice
stating the number of shares of Common Stock to be purchased pursuant to the
Option accompanied by payment of the Xxxxx Xxxxx multiplied by the aggregate
number of shares of Common Stock to be purchased (such payment to be made in
accordance with Section 5) and the payment or provision for any applicable
employment or other taxes or withholding for taxes thereon. Subject
to Section 7 below, such Option shall be deemed to be exercised upon receipt
and
approval by DIRECTV of such written exercise notice accompanied by the aggregate
Xxxxx Xxxxx and any other payments so required, as permitted pursuant to Section
5.
5. Method
of Payment of Option. Payment of the aggregate Xxxxx
Xxxxx shall be by any of the following, or a combination thereof, at the
election of Executive:
(a) in
cash
or by electronic funds transfer, or by check payable to the order of DIRECTV,
in
the full amount of the purchase price of the shares of Common Stock so purchased
and the amount (if any) required to satisfy any applicable withholding
taxes;
(b) by
delivery of shares of Common Stock that have been held by Executive for at
least
six months, in accordance with Section 7(e) of the Plan, subject to compliance
with applicable law;
(c) payment
may be made in accordance with the cashless exercise program, if any, of DIRECTV
in effect at the time of exercise; or
(d) in
a
combination of payments under clauses (a), (b) and (c).
Other
payment methods may be permitted only if expressly authorized by the Committee
consistent with the terms of the Plan.
6. Continuance
of Employment Required. The vesting schedule requires
continued service through each applicable vesting date as a condition to the
vesting of the applicable Option and rights and benefits under this Agreement
except as otherwise provided in Section 7. Partial service, even if
substantial, during any vesting period will not entitle Executive to any
proportionate vesting or avoid or mitigate a termination of rights and benefits
upon or following a termination of employment or service except as provided
in
Section 7 or 9 below or under the Plan.
7. Effect
of Termination of Employment on Exercise Period. If
Executive’s employment by DIRECTV terminates, the following provisions shall
apply with respect to vesting and exercise of the Option after the date of
such
termination (the “Termination Date”), except that in no event
may any portion of the Option be exercised after the Expiration
Date:
(a) If
DIRECTV terminates Executive’s employment without Cause (as defined in the
Employment Agreement), or if Executive’s employment terminates as a result of
Executive’s death or Disability (as defined in the Employment Agreement) or due
to Executive’s resignation for an Effective Termination (as defined in the
Employment Agreement) or due to Executive’s resignation or retirement at any
time after December 31, 2010, all unvested Options shall vest as of the
Termination Date and Executive (or Executive’s Personal Representative or
Beneficiary, as the case may be) may exercise the Option, in whole or in part,
at any time on or prior to the Expiration Date.
(b) If
DIRECTV terminates Executive’s employment for Cause, or if Executive resigns
prior to December 31, 2010, other than for an Effective Termination, any
unexercised portion of the Option shall terminate as of the Termination
Date.
(c) If,
at
any time after the Termination Date and during the applicable period specified
in Section 4.1.1 (Non-Compete) and 4.1.3 (Non-Solicitation) of the Employment
Agreement, Executive shall have breached any of the covenants set forth in
such
Sections of the Employment Agreement, any unexercised portion of the Option
shall terminate as of the date of any such breach.
8. Adjustments
Upon Specified Events. As provided in Section 14 of the
Plan, upon the occurrence of certain events relating to or affecting the Common
Stock as contemplated by Section 14 of the Plan, the Committee shall, in such
manner, to such extent (if any) and at such times as it deems appropriate and
equitable in the circumstances, make adjustments in the number, amount and
type
of shares of Common Stock (or other securities or property) subject to the
Option, the Xxxxx Xxxxx and the securities deliverable upon exercise of the
Option (or any combination thereof) or provide for a cash payment or the
assumption, substitution or exchange of the Option or the shares or other
securities subject to the Option, based upon the distribution or consideration
payable to holders of Common Stock generally. Without limiting the
generality of the foregoing, in the event DIRECTV declares or distributes
dividends to its shareholders prior to exercise of the Option in full, DIRECTV,
through action of the Committee, shall appropriately adjust the Option or
otherwise appropriately address the effects of any such
dividends. All rights of Executive hereunder are subject to such
adjustments and other provisions of the Plan.
9. Possible
Early Termination of Award. As permitted by Section 14
of the Plan, and without limiting the authority of the Committee under any
of
the provisions of Section 14 of the Plan, the Committee retains the right to
terminate any portion or all of the Option, to the extent such Option has not
vested, upon a dissolution of DIRECTV or a reorganization event or transaction
in which DIRECTV does not survive (or does not survive as a public company
in
respect of its outstanding Common Stock). This Section 9 is not
intended to prevent future vesting (including provision for future vesting)
if
the Option (or a substituted Award) remains outstanding following a transaction
described in Section 14 of the Plan.
10. Leaves
of Absence. Absence from work caused by authorized sick
leave or other leave approved in writing by DIRECTV or the Committee shall
not
be considered a termination of employment by DIRECTV for purposes of Section
7,
unless otherwise determined by the Committee.
11. Limitations
on Acceleration; Reduction in Benefits; Deferral.
(a) Limitation
on Acceleration. Notwithstanding anything contained
herein or in the Plan or any other agreement to the contrary, in no event shall
the vesting of the Option be accelerated pursuant to this Agreement or Section
14 of the Plan to the extent that DIRECTV would be denied a federal income
tax
deduction for such vesting because of Section 280G of the Code and, in such
circumstances, the Option will continue to vest in accordance with and subject
to the other provisions hereof.
(b) Reduction
in Benefits. If Executive would be entitled to benefits,
payments or coverage hereunder and under any other plan, program or agreement
which would constitute “parachute payments”, then notwithstanding any other
provision hereof or of any other existing agreement to the contrary, Executive
may by written notice to the Secretary of DIRECTV designate the order in which
such “parachute payments” shall be reduced or modified so that DIRECTV is not
denied federal income tax deductions for any “parachute payments” because of
Section 280G of the Code.
(c) Determination
of Limitations. The term “parachute payments” shall have
the meaning set forth in and be determined in accordance with Section 280G
of
the Code and regulations issued thereunder. All determinations
required by this Section 11, including without limitation the determination
of
whether any benefit, payment or coverage would constitute a parachute payment,
the calculation of the value of any parachute payment and the determination
of
the extent to which any parachute payment would be nondeductible for federal
income tax purposes because of Section 280G of the Code, shall be made by an
independent accounting firm (other than DIRECTV’s outside auditing firm) having
nationally recognized expertise in such matters selected by the Committee and
reasonably acceptable to Executive. Any such determination by such
accounting firm shall be binding on DIRECTV and Executive.
(d) Section
409A of the Code. Notwithstanding anything herein to the
contrary, (i) if, at the time of Executive’s termination of employment with
DIRECTV, Executive is a “specified employee” as defined in Section 409A of the
Code, and the deferral of the commencement of any payments or benefits otherwise
payable hereunder as a result of such termination of employment is necessary
in
order to prevent the imposition of any accelerated or additional tax under
Section 409A of the Code, then DIRECTV will defer the commencement of the
payment of any such payments or other consideration hereunder (without any
reduction in such payments or other consideration ultimately paid or provided
to
Executive) until the date that is six months following Executive’s termination
of employment with DIRECTV (or the earliest date as is permitted under Section
409A of the Code) and (ii) if any other payments of money or other consideration
due to Executive hereunder would cause the application of an accelerated or
additional tax under Section 409A of the Code, such payments or other
consideration shall be deferred if deferral will make such payment or other
consideration compliant under Section 409A of the Code, or otherwise such
payment or other consideration shall be restructured, to the extent possible,
in
a manner, determined by the Committee or the Board, that does not cause such
an
accelerated or additional tax or result in additional cost to
DIRECTV. DIRECTV shall consult with its legal counsel and tax
accountants in good faith regarding the implementation of the provisions of
this
Section 11(d), which shall be done only in a manner that is reasonably
acceptable to Executive; provided, however, that neither DIRECTV, any
subsidiary or other affiliate of DIRECTV, nor any of their employees or
representatives shall have any liability to the Executive with respect
thereto.
12. Executive
Not a Stockholder. Neither Executive nor any other
person entitled to exercise the Option shall have any of the rights or
privileges of a stockholder of DIRECTV as to any shares of Common Stock subject
to the Option until the issuance and delivery to him or such other person of
a
certificate (or book entry in lieu thereof) evidencing the shares of Common
Stock registered in his or such other person’s name. No adjustment
will be made for dividends or other rights as a stockholder as to which the
record date is prior to such date of delivery, except as otherwise provided
in
Section 8.
13. No
Guarantee of Continued Service. Nothing contained in
this Agreement or the Plan constitutes an employment or service commitment
by
DIRECTV, confers upon Executive any right to remain employed by DIRECTV,
interferes in any way with the right of DIRECTV at any time to terminate such
employment or affects the right of DIRECTV to increase or decrease Executive’s
other compensation or benefits. Nothing in this Section 13, however,
is intended to adversely affect any independent contractual right of Executive
under the Employment Agreement (or any other agreement between DIRECTV and
Executive) without his consent thereto.
14. Non-Transferability
of Option. The Option and any other rights of Executive
under this Agreement or the Plan are nontransferable except as provided in
Section 15(i) of the Plan.
15. Notices. Any
notice to be given under the terms of this Agreement shall be in writing and
addressed: to DIRECTV at its office located at 0000 Xxxx Xxxxxxxx Xxxxxxx,
Xx
Xxxxxxx, Xxxxxxxxxx 00000, to the attention of the Corporate Secretary; and
to
Executive at the address given beneath Executive’s signature hereto, or at such
other address as either party may hereafter designate in writing to the
other.
16. Effect
of Agreement. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of DIRECTV, except to the
extent the Committee determines otherwise.
17. Entire
Agreement; Governing Law. The Plan is incorporated
herein and made a part hereof by this reference. Subject to Section
19 below, the Plan and this Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of DIRECTV and Executive with
respect to the subject matter hereof. The construction,
interpretation, performance and enforcement of this Agreement and the Option
shall be governed by the internal substantive laws, but not the choice of law
rules, of the State of Delaware.
18. Plan. The
Option and all rights of Executive with respect thereto are subject to, and
Executive agrees to be bound by, all of the terms and conditions of the
provisions of the Plan, to the extent such provisions are applicable to Awards
granted to Eligible Persons. Executive acknowledges receipt of a copy
of the Plan and agrees to be bound by the terms thereof. Unless
otherwise expressly provided in other Sections of this Agreement, provisions
of
the Plan that confer discretionary authority on the Committee do not (and shall
not be deemed to) create any rights in Executive unless such rights are
expressly set forth herein or are otherwise in the sole discretion of the
Committee specifically so conferred by appropriate action of the Committee
under
the Plan after the date hereof.
19. Employment
Agreement. If any provision of this Agreement is
inconsistent with any provision of the Employment Agreement, the provisions
of
the Employment Agreement shall control.
20. Amendment. This
Agreement may be amended in accordance with the terms of the
Plan. Any such amendment must be in writing and signed by
DIRECTV. The terms and conditions of this Agreement may not be
restricted or limited by any amendment of this Agreement or the Plan without
Executive’s consent.
21. Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed an original but all of which together shall constitute on and the same
instrument.
22. Section
Headings. The Section headings of this Agreement are for
convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
IN
WITNESS WHEREOF, DIRECTV has caused this Agreement to be executed on
its behalf by the Chairman of its Compensation Committee and Executive has
hereunto set his hand as of the date and year first written above.
THE
DIRECTV GROUP, INC.
By:
/s/ Xxxxxxx X. Xxx
Xxxxxxx
X. Xxx
Chairman
of the Compensation Committee
EXECUTIVE:
/s/
Xxxxx
Xxxxx
Xxxxx
Xxxxx
00
Xxxxxxxxxxx Xxxx
Xxx
Xxxxxx, XX 00000
