STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made as of July 12, 2002, by
and between Xxxxxx Natural Corporation, a Delaware corporation (the "Company"),
and Hilton X. Xxxxxxxxxx ("Holder").
Preliminary Recitals
A. Holder is an employee of the Company or one of its subsidiaries or
affiliates.
B. Pursuant to the Xxxxxx Natural Corporation 2001 Stock Option Plan (the
"Plan"), the Company desires to xxxxx Xxxxxx an incentive stock option to
purchase shares of the Company's common stock, par value $.005 per share (the
"Common Stock"), subject to the terms and conditions of the Plan and subject
further to the terms and conditions set forth below.
NOW, THEREFORE, the Company and Holder agree as follows:
1. Grant of Incentive Stock Option. The Company hereby grants to Holder,
subject to the terms and conditions set forth herein, the incentive stock option
("ISO") to purchase up to 150,000 shares of Common Stock, at the purchase price
of $3.57 per share, such ISO to be exercisable and exercised as hereinafter
provided.
2. Exercise Period. The ISO shall expire three months after the termination
of the Holder's employment with the Company and its subsidiaries and affiliates
(the "Xxxxxx Group") unless the employment is terminated by a member of the
Xxxxxx Group for Cause (as defined below) or unless the employment is terminated
by reason of the death or Total Disability (as defined below) of Holder. If the
Holder's employment is terminated by a member of the Xxxxxx Group for Cause, the
ISO shall expire as of the date employment terminates. If the Holder's
employment terminates due to his death or Total Disability, then the ISO may be
exercised by Holder or the person or persons to which Holder's rights under this
Agreement pass by will, or if no such person has such right, by his executors or
administrators, within six months after the date of death or Total Disability,
but no later than the expiration date specified in Section 3(d) below. "Cause"
means the Holder's act of fraud or dishonesty, knowing and material failure to
comply with applicable laws or regulations, drug or alcohol abuse, as determined
by the Committee of the Xxxxxx Natural Corporation Stock Option Plan (the
"Committee"). "Total Disability" means the complete and permanent inability of
Holder to perform all of his duties of employment with the Company, as
determined by the Committee upon the basis of such evidence, including
independent medical reports and data, as the Committee deems appropriate or
necessary.
3. Exercise of Option
(a) Subject to the other terms of this Agreement regarding the
exercisability of the ISO, the ISO may only be exercised in respect of the
number of shares listed in column A from and after the exercise dates listed in
column X,
Xxxxxx "X" Xxxxxx "X"
Number of Shares Exercise Date
30,000 July 12, 2003
40,000 July 12, 2004
40,000 July 12, 2005
40,000 July 12, 2006
--------
150,000
(b) This ISO may be exercised, to the extent exercisable by its terms, from
time to time in whole or in part at any time prior to the expiration thereof.
Any exercise shall be accompanied by a written notice to the Company specifying
the number of shares as to which this ISO is being exercised (the "Option
Shares"). Notations of any partial exercise or installment exercise, shall be
made by the Company on Schedule A hereto.
(c) Notwithstanding the above, this ISO shall be fully exercisable in the
event Holder's employment with the Xxxxxx Group is terminated by Holder for
"Good Reason" (as defined below), or a member of the Xxxxxx Group terminates his
employment without "Cause" (as defined above). "Good Reason" means the Holder's
termination of employment with the Xxxxxx Group on or after a reduction in his
compensation or benefits, his removal as the Company's Vice Chairman of the
Board of Directors, President, Chief Operating Officer, Chief Financial Officer
or Secretary, or his being assigned duties or responsibilities that are
inconsistent with the dignity, importance or scope of his position with the
Company.
(d) Notwithstanding anything else herein to the contrary, this ISO shall
expire ten years from the date of this agreement.
(e) The Holder hereby agrees to notify the Company in writing in the event
shares acquired pursuant to the exercise of this ISO are transferred, other than
by will or by the laws of descent and distribution, within two years after the
date indicated above or within one year after the issuance of such shares
pursuant to such exercise.
4. Payment of Purchase Price Upon Exercise. At the time of any exercise of
the ISO the purchase price of the ISO shall be paid in full to the Company in
either of the following ways or in any combination of the following ways:
(a) By check or other immediately available funds.
(b) With property consisting of shares of Common Stock. (The shares of
Common Stock to be used as payment shall be valued as of the date of exercise of
the ISO at the Closing Price as defined below. For example, if Holder exercises
the option for 4,000 shares at a total Exercise Price of $7,000, assuming
exercise price of $1.75 per share, and the Closing Price is $5.00, he may pay
for the 4,000 Option Shares by transferring 1,400 shares of Common Stock to the
Company.)
(c) For purposes of this Agreement, the term "Closing Price" means, with
respect to the Company's Common Stock, the last sale price regular-way or, in
case no such sale takes place on such date, the average of the closing bid and
asked prices regular-way on the principal national securities exchange on which
the securities are listed or admitted to trading; or, if they are not listed or
admitted to trading on any national securities exchange, the last sale price of
the securities on the consolidated transaction reporting system of the National
Association of Securities Dealers (NASD"), if such last sale information is
reported on such system or, if not so reported, the average of the closing bid
and asked prices of the securities on the National Association of Securities
Dealers Automatic Quotation System ("NASDAQ") or any comparable system or, if
the securities are not listed on NASDAQ or a comparable system, the average of
the closing bid and asked prices as furnished by two members of the NASD
selected from time to time by the Company for that purpose.
5. Purchase for Investment; Resale Restrictions. Unless at the time of
exercise of the ISO there shall be a valid and effective registration statement
under the Securities Act of 1933 ("'33 Act") and appropriate qualification and
registration under applicable state securities laws relating to the Option
Shares being acquired, Holder shall upon exercise of the ISO give a
representation that he is acquiring such shares for his own account for
investment and not with a view to, or for sale in connection with, the resale or
distribution of any such shares. In the absence of such registration statement,
Holder shall execute a written affirmation, in a form reasonably satisfactory to
the Company, of such investment intent. Holder further agrees that he will not
sell or transfer any Option Shares until he requests and receives an opinion of
the Company's counsel or other counsel reasonably satisfactory to the Company to
the effect that such proposed sale or transfer will not result in a violation of
the '33 Act, or a registration statement covering the sale or transfer of the
shares has been declared effective by the Securities and Exchange Commission, or
he obtains a no-action letter from the Securities and Exchange Commission with
respect to the proposed transfer.
6. Nontransferability. This ISO shall not be transferable other than by
will or by the laws of descent and distribution. During the lifetime of Holder,
this ISO shall be exercisable only by Holder.
7. Adjustments.
(a) If the Company hereafter (i) declares a distribution on its shares in
shares, (ii) splits its outstanding shares, (iii) combines its outstanding
shares into a smaller number of securities or (iv) issues any shares or other
securities by reclassification of its shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing entity), the purchase price in effect at the time of
the record date for such distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall equal the
price determined by multiplying the purchase price by a fraction, the
denominator of which shall be the number of shares outstanding immediately after
giving effect to such action, and the numerator of which shall be the number of
shares outstanding immediately prior to such action. Whenever the purchase price
payable upon exercise of the ISO is adjusted pursuant to the preceding sentence
above, the number of shares purchasable upon exercise of the ISO shall
simultaneously be adjusted by multiplying the number of shares issuable upon
exercise of the ISO immediately prior to the event which causes the adjustment
by the purchase price in effect immediately prior to the event which causes the
adjustment and dividing the product so obtained by the purchase price, as
adjusted. Such adjustments shall be made successively whenever any event listed
above shall occur.
(b) If, at any time, as a result of an adjustment made pursuant to
paragraph 7(a) above, the Holder shall become entitled to receive any securities
of the Company other than shares, the number of such other securities so
receivable upon exercise of the ISO shall thereafter be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the shares contained in paragraph 7(a) above.
(c) If any other event contemplated in Section 10(a) of the Plan occurs,
adjustments to the number and kind of shares subject to this ISO and/or to the
purchase price for each share subject to this ISO may be made in accordance with
Section 10(a) of the Plan.
(d) No adjustments shall be made under this Section 7 that would have the
effect of modifying this ISO under Internal Revenue Code xx.xx. 422 or 424.
(e) Whenever the purchase price or the number of shares is adjusted, as
herein provided, Xxxxxx shall within 10 business days of the event causing such
adjustment give a notice setting forth the adjusted purchase price and adjusted
number of shares issuable upon exercise of the ISO to be mailed to the Holder.
(f) Notwithstanding anything else herein to the contrary, upon the
occurance of a change in control (as defined in (g) below), the option or any
portion thereof not theretofore exercisable, shall immediately become
exercisable in its entirety and the option (being the option to purchase shares
of Common Stock subject to the applicable provisions of the Plan and awarded in
accordance with the Plan in terms of section 1 above) may, with the consent of
Holder, be purchased by the Company for cash at a price equal to the fair market
value (as defined in 7(g) below) less the purchase price payable by Holder to
exercise the option as set out in Article 1 above for one (1) share of Common
Stock of the Company multiplied by the number of shares of Common Stock which
Holder has the option to purchase in terms of Article 1 above.
(g) For the purposes of this agreement
(i) "Change in Control" means;
(A)the acquisition of "Beneficial Ownership" by any person (as
defined in rule 13 (d) - 3 under the Securities Exchange Act
1934), corporation or other entity other than the Company or a
wholly owned subsidiary of the Company of 20% or more of the
outstanding Stock,
(B)the sale or disposition of substantially all of the assets of
the Company, or
(C)the merger of the Company with another corporation in which
the Common Stock of the Company is no longer outstanding after
such merger.
(ii) "Fair Market Value" means, as of any date, the Closing Price for one
share of the Common Stock of the Company on such date.
8. The provisions of Section 5(b) (iii) of the Plan, regarding the
execution of a shareholder's agreement as a condition precedent to the Company's
obligation to issue shares under the Plan, shall not apply to the ISO or any
shares issued pursuant to the ISO.
9. The Company represents and warrants to Holder that (a) there are no
options to purchase the Company's Common Stock, containing the same or
substantially the same terms as the ISO, which are actively traded on an
established market within the meaning of Internal Revenue Code ss.83 and the
regulations promulgated thereunder; and (b) the shares of the Company's Common
Stock issued upon exercise of the ISO, when issued in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and nonassessable.
The Company shall reserve and keep reserved out of its authorized shares of
Common Stock the number of shares of Common Stock that may be issuable from time
to time upon exercise of the ISO.
10. No Rights as Stockholder. Holder shall have no rights as a stockholder
with respect to any shares of Common Stock subject to this ISO prior to the date
of issuance to him of a certificate or certificates for such shares.
11. No Right to Continue Employment. This Agreement shall not confer upon
Holder any right with respect to continuance of employment with any member of
the Xxxxxx Group nor shall it interfere in any way with the right of any such
member to terminate his employment at any time.
12. Compliance With Law and Regulation. This Agreement and the obligation
of the Company to sell and deliver shares of Common Stock hereunder shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required. If at
any time the Board of Directors of the Company shall determine that (i) the
listing, registration or qualification of the shares of Common Stock subject or
related thereto upon any securities exchange or under any state or federal law,
or (ii) the consent or approval of any government regulatory body, is necessary
or desirable as a condition of or in connection with the issue or purchase of
shares of Common Stock hereunder, this ISO may not be exercised in whole or in
part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. The Company agrees to use its reasonable
efforts to obtain any necessary listing, registration, qualification, consent,
approval or agreement as expeditiously as possible, and the term of this ISO
shall be extended until 30 days following the date such listing, registration,
qualification, consent, approval or agreement is effected or obtained. Moreover,
this ISO may not be exercised if its exercise or the receipt of shares of Common
Stock pursuant thereto would be contrary to applicable law.
13. Tax Withholding Requirements. The Company shall have the right to
require Holder to remit to the Company an amount sufficient to satisfy any
federal, state or local withholding tax requirements prior to the delivery of
any certificate or certificates for Common Stock.
14. Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of stock shall be issued upon the exercise of
this ISO and the Company shall not be under any obligation to compensate Holder
in any way for such fractional shares.
15. Notices. Any notice hereunder to the Company shall be addressed to it
at its office at 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxxx Xxxxx with a copy to Xxxxxxxx Xxxx, Xxxxxxx, Breed, Xxxxxx &
Xxxxxx 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and any notice hereunder to
Holder shall be addressed to him at __________, subject to the right of either
party to designate at any time hereafter in writing some other address.
16. Amendment. No modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing specifically
referring hereto, and signed by both parties.
17. Governing Law. This Agreement shall be construed according to the laws
of the State of Delaware and all provisions hereof shall be administered
according to and its validity shall be determined under, the laws of such State,
except where preempted by federal laws.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Xxxxxx Natural Corporation has caused this Agreement to
be executed by a duly authorized officer and Holder has executed this Agreement
both as of the day and year first above written.
XXXXXX NATURAL CORPORATION
By:/s/XXXXXX XXXXX
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Title: Chairman and CEO
/s/HILTON X. XXXXXXXXXX
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Hilton X. Xxxxxxxxxx
