STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, made as of this first day of
June, 1998, by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation ("Holdings") and Xxxxxxx X. Banner (the "Employee"), who is an
Employee of Universal Compression, Inc. ("Universal"), a wholly owned and
subsidiary of Holdings.
WHEREAS, Holdings has agreed to grant to the Employee an
option to purchase Holdings Common Stock, $.01 par value per share (the "Common
Stock"), pursuant to the terms and conditions of this Agreement in
consideration for services to Universal; and
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the
parties agree as follows:
1. GRANT OF OPTION. Holdings hereby grants to the Employee an
option (the "Option") to purchase 2,206 shares of Common Stock at $50 per
share. This Option shall become effective on the date of this Agreement as set
forth above ("Date of Grant") and unless sooner terminated under the provisions
hereof, shall expire at 12:00 midnight on February 20, 2008 (the "Expiration
Date"). This Option is granted under Holdings' Incentive Stock Option Plan (the
"Plan"), a copy of which is attached hereto as Exhibit "A" and is incorporated
herein by reference, and shall constitute, to the extent permissible, an
Incentive Stock Option under Section 422 of the Internal Revenue Code of 1986,
as amended, and otherwise shall be a Non-qualified Stock Option.
2. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become
exercisable in accordance with the following schedule:
Years from Grant Date Amount Exercisable
--------------------- ------------------
June 01, 1999 33 1/3%
June 01, 2000 33 1/3%
June 01, 2001 33 1/3%
Notwithstanding the foregoing, Options shall become
immediately exercisable upon: (i) a public offering of Common Stock of the
Corporation; (ii) the acquisition by any Person of fifty one percent (51%) or
more of the Common Stock of the Corporation; or (iii) a sale of all or
substantially all of the assets of the Corporation.
(b) Termination of Employment.
(i) Termination due to Death, Disability or
Retirement. In the event the Employee's employment with Universal terminates on
account of death, Disability (as defined in the Plan) or retirement after age
65, the Option shall terminate as of the date of Employee's termination of
employment, except for the portion of the Option which is exercisable as of the
date of termination of employment, which shall terminate unless exercised by
Employee within three months following the date of Employee's death, disability
or retirement after age 65.
(ii) Termination of Employment Without
Cause. In the event the Employee's employment with Universal shall terminate
without cause, the Option shall terminate as of the date of Employee's
termination of employment except for the portion of the Option which is
exercisable as of the date of termination of employment, which shall terminate
unless exercised by Employee within 30 days following the date of such
termination of employment.
(iii) Termination of Employment for Cause.
In the event the Employee's employment with Universal shall terminate for
cause, the Option, whether or not exercisable as of the date of termination of
employment, shall terminate in its entirety on the date of termination.
3. NON-TRANSFERABILITY. No Option granted hereby and no right
arising thereunder shall be transferable other than by will or by the laws of
descent and distribution. During the lifetime of the Employee, the Option shall
be exercisable only by the Employee. If the Option is exercisable at the date
of the Employee's death and is transferred by will or by the laws of descent
and distribution, the Option shall be exercisable in accordance with the terms
of such Option by the executor or administrator, as the case may be, of the
Employee's estate for a period of three (3) months after the date of the
Employee's death and shall then terminate.
4. MODE OF EXERCISE. The Option shall be exercised by giving
to Holdings written notice stating (a) the number of shares with respect to
which the Option is being exercised, (b) the aggregate Exercise Price for such
shares, and (c) the method of payment. At the option of the Employee, such
aggregate Exercise Price may be paid: (i) in cash; (ii) with the consent of the
Board of Directors of Holdings (the "Board"), which consent may be given or
withheld in its sole discretion, by delivery of a promissory note to Holdings
payable over a three (3) year period and bearing interest at the prime rate;
(iii) by delivery of shares of Common Stock owned by the Employee having a Fair
Market Value (as determined by Section 5 hereof) equal in amount to the
aggregate Exercise Price of the Option being exercised; (iv) by any combination
of (i), (ii) and (iii); or (v) by cancellation of any portion of the Option, in
which case the number of shares of Common Stock to be received shall be
computed using the following formula:
X = Y x (A - $50)
-------------
A
2
Where: X = the number of shares of Common Stock to be
issued pursuant to clause (v) above;
Y = the number of shares of Common Stock that
otherwise would have been issuable in
respect of that portion of the Option to be
exercised pursuant to clause (v) above if
such exercise had been pursuant to clause
(i), (ii), (iii) or (iv) above;
A = the Market Price of one share of Common
Stock on the date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Fair
Market Value is applicable under clause (iv) of Section 5.
5. FAIR MARKET VALUE OF COMMON STOCK. The "Fair Market Value"
of the Common Stock on any day shall be determined by the Holdings Board as
follows: (i) if the Common Stock is listed on a national securities exchange or
quoted through the NASDAQ National Market System, the Fair Market Value on any
day shall be the average of the high and low reported Consolidated Trading
sales prices, or if no such sale is made on such day, the average of the
closing bid and asked prices reported on the Consolidated Trading listing for
such day; (ii) if the Common Stock is quoted on the NASDAQ inter-dealer
quotation system, the Fair Market Value on any day shall be the average of the
representative bid and asked prices at the close of business for such day;
(iii) if the Common Stock is not listed on a national stock exchange or quoted
on NASDAQ, the Fair Market Value on any day shall be the average of the high
bid and low asked prices reported by the National Quotation Bureau, Inc. for
such day; or (iv) if none of clauses (i) - (iii) are applicable, the Fair
Market Value as may be determined by the Board or any committee of the Board,
there being no obligation to make such determination.
6. STOCK CERTIFICATES. All stock certificates representing
shares of Common Stock acquired pursuant to the exercise of an Option that are
issued by Holdings shall contain a legend substantially in the following form:
"SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC. ("HOLDINGS")
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS
AGREEMENT, DATED AS OF FEBRUARY 20, 1998, AS [MAY BE] AMENDED
WHICH CONTAINS PROVISIONS REGARDING THE RESTRICTIONS ON THE
TRANSFER OF SUCH SHARES AND OTHER MATTERS. A COPY OF SUCH
AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE
OF HOLDINGS. THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
NOT REGISTERED UNDER, AND ARE SUBJECT TO, THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE
3
SECURITIES ACT OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT."
In the event that the shares of Common Stock issued pursuant
to the Option are (i) registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to an effective registration statement which
complies with the then applicable regulations, rules and procedures and
practices of the Securities and Exchange Commission, and are registered
qualified in accordance with any applicable state laws, regulations, rules and
administrative procedures practices, or (ii) transferred pursuant to an
exemption from registration under the Securities Act and, at the request of
Holdings, Holdings has received an executed legal opinion, satisfactory to its
counsel, as to the availability of and compliance with such exemption and that
such shares need not bear the restrictive legend stating that such shares have
not been registered under the Securities Act, Holdings may issue new
certificates representing such shares omitting that portion of such restrictive
legend.
The shares of Common Stock acquired pursuant to the Option
shall be subject to the provisions regarding transfers of shares in the
Stockholders Agreement dated as of February 20, 1998, among Holdings and the
partners named on the signature pages thereto, as amended from time to time
(the "Stockholders Agreement"). At the request of Holdings, the Employee shall
become a party to the Stockholders Agreement prior to the issuance of any
shares under this Agreement.
7. OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS. The
Option granted hereunder and the obligation of Holdings to sell and deliver
shares under such Option 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. Holdings, in its discretion, may postpone
the issuance or delivery of shares upon any exercise of the Option until
completion of any stock exchange listing, or other qualification of such shares
under any state or federal law, rule or regulation as Holdings may consider
appropriate, and may require the Employee, his beneficiary or his legal
representative to make such representations and furnish such information as it
may consider appropriate in connection with the issuance or delivery of the
shares in compliance with applicable laws, rules and regulations.
Upon demand by the Board, the Employee (or any person acting
under Section 3 of this Agreement) shall deliver to the Board at the time of
exercise of the Option a written representation that the shares to be acquired
upon the exercise of the Option are being acquired for his own account and not
with a view to, or for resale in connection with, any distribution in violation
of federal or state securities laws. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon exercise of the
Option shall be a condition precedent to the right of the Employee or such
other person to purchase any shares.
8. ANTI-DILUTION ADJUSTMENTS. In the event of any change in
the Common Stock by reason of any stock dividend, stock split,
recapitalization, reorganization, merger, consolidation, combination or
exchange of shares, or of any similar change affecting the Common Stock, the
number and kind of shares subject to the Option and the Option price thereof
shall be appropriately adjusted consistent with such change in such manner as
the Board may
4
deem equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, the Employee.
9. BUYBACK RIGHT. Upon any termination of the employment of
the Employee prior to a public offering of Common Stock, Holdings or its
designee may at its option purchase all Common Stock acquired upon any exercise
of the Option then held by the Employee for a purchase price equal to the
determined value of such stock at the time of purchase. For purposes of this
Section 9, "determined value" shall mean the determined value of the shares of
Common Stock being purchased by Holdings pursuant to this Section 9, such value
to be determined annually as of March 31 of each year by a nationally
recognized investment banking firm selected by Holdings. This valuation will
serve as the determined value for the shares until the next valuation unless
the Board determines that a significant change in Holdings performance or
prospects requires a revaluation of the shares.
The purchase by Holdings pursuant to this Section 9 shall be
paid for in cash, to the extent permitted under the loan agreements and debt
instruments relating to Holdings or any of its subsidiaries, or, to the extent
cash payments are not permitted thereunder, by means of a subordinated
payment-in-kind promissory note issued by Holdings bearing interest, payable
annually, at the lowest interest rate required to avoid imputed interest, which
note shall be repaid as soon as permitted.
10. NO RIGHTS PRIOR TO EXERCISE OF OPTION. The Participant
shall not have any rights as a stockholder with respect to any shares subject
to the Option prior to the date on which the Employee is recorded as the holder
of such shares on the records of Holdings.
11. NO RIGHTS WITH RESPECT TO CONTINUANCE OF EMPLOYMENT.
Neither the grant of the Option nor any action taken with respect thereto shall
be construed as giving the Employee the right to be retained in the employ of
Universal or any subsidiary or affiliate, nor shall it interfere in any way
with the right of Universal or any such subsidiary or affiliate to terminate
any Employee's employment at any time for any reason, or for no reason at all.
12. TAXES. Holdings may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of all
Federal, state, local and other taxes required by law to be withheld with
respect to the Option including, but not limited to: (i) reducing the number of
shares of Common Stock otherwise deliverable, based upon their Fair Market
Value on the date of exercise, to permit deduction of the amount of any such
withholding taxes from the amount otherwise payable under this Agreement; (ii)
deducting the amount of any such withholding taxes from any other amount then
or thereafter payable to the Employee; or (iii) requiring the Employee, his
beneficiary or his legal representative to pay to Holdings the amount required
to be withheld or to execute such documents as Holdings deems necessary or
desirable to enable it to satisfy its withholding obligations as a condition of
releasing the Common Stock.
13. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware.
5
14. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one such
counterpart.
15. NOTICES. Any notice or other communication required or
which may be given hereunder shall be in writing and shall be delivered
personally, telecopied with confirmed receipt, sent by certified, registered,
or express mail, postage prepaid, or sent by a national next-day delivery
service to the parties at the following addresses or at such other addresses as
shall be specified by the parties by like notice, and shall be deemed given
when so delivered personally or telecopied, or if mailed, 2 days after the date
of mailing, or, if by national next-day delivery service, on the day after
delivery to such service as follows:
(i) if to Holdings, to it at:
Universal Compression, Inc.
0000 0/0 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Universal Compression, Inc.
0000 0/0 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Banner
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
(ii) if to Employee, to him or her at:
Universal Compression, Inc.
0000 Xxxxxxxxxx
Xxxxxxx, XX 00000
16. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
17. SEVERABILITY. If any term, provision, covenant
or restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign federal, state, county or local
government or any other governmental, regulatory or administrative
6
agency or authority to be invalid, void, unenforceable or against public policy
for any reason, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
18. SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party would be irreparably harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto shall and do
hereby waive the defense in any action for specific performance that a remedy
at law would be adequate and that the parties hereto, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of this Agreement in any action instituted in the
Supreme Court of the State of New York or the United States District Court for
the Southern District of New York, or, in the event such courts shall not have
jurisdiction of such action, in any court of the United States or any state
thereof having subject matter jurisdiction of such action.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed this Agreement as of the day and year first
above mentioned.
EMPLOYEE
By: /s/ Xxxxxxx X. Banner
--------------------------------------
Print Name:
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
7
