Orion Ethanol, Inc. Restricted Stock Agreement
This
Restricted Stock Agreement
(“Agreement”),
dated
as of this 12th
day of
January, 2007, is made by and between Orion Ethanol, Inc. (formerly RTO
Holdings, Inc.),
a Nevada
corporation (“Company”),
and
Xxxx X. Xxxxx (“Stockholder”).
Whereas,
the
Company desires to issue, and Stockholder desires to acquire, stock of the
Company as herein described, on the terms and subject to the conditions
hereinafter set forth.
Now,
Therefore, It Is Agreed
between
the parties as follows:
1. Issuance
of Stock; Delivery.
(a) Issuance.
On the
terms and subject to the conditions set forth herein, the Company hereby agrees
to issue to Stockholder, and Stockholder agrees to accept, Three Million Five
Hundred Thousand (3,500,000) shares of the Common Stock, $.001 par value, of
the
Company (the “Stock”),
in
exchange for Stockholder’s past services and/or expected provision of future
services on behalf of the Company and/or its affiliated entities.
(b) Delivery.
As soon
as is practicable following the execution of this Agreement,
the
Company shall issue, subject to Section 5 below, a certificate or certificates
evidencing the Stock, registered in the name of Stockholder and bearing any
and
all legends as set forth in Section 8 herein. Upon the issuance of such
certificate or certificates, Participant shall have all rights of a stockholder
with respect to the Stock and to receive all dividends or other distributions
paid or made with respect thereto; provided,
however,
that
such Stock shall be subject to the restrictions hereunder.
2. Redemption
Option
(a) Option.
Except
as
otherwise provided herein, the Company shall have an irrevocable option (the
“Redemption
Option”),
for a
period of ninety (90) days following October 24, 2009, or such longer period
as
may be agreed to by the Company and the Stockholder, to redeem from Stockholder,
at no cost to the Company, up to but not exceeding the number of shares of
Stock
that have not vested in accordance with the provisions of this Section 2 as
of
such termination date.
(b) Vesting.
The
Stock awarded hereby is subject to vesting upon either the passage of time
or
upon the occurrence of certain specified events, as follows:
(i) As
of the
date hereof, Ten Percent (10%) of the Stock shall vest and be released from
the
Redemption Option.
(ii) Except
as
otherwise provided in this Agreement, as of the date when the Company has
consummated one or more convertible debt financings at any time after October
24, 2006 but prior to October 24, 2009 which, in the aggregate, provide gross
proceeds to the Company of at least $12,400,000, Ten Percent (10%) of the Stock
shall vest and be released from the Redemption Option.
(iii) Except
as
otherwise provided in this Agreement, as of the date when the Company has
consummated one or more equity financings at
any
time after October 24, 2006 but
prior
to October 24, 2009 which, in the aggregate, provide gross proceeds to the
Company of at least $20,000,000, Twenty Percent (20%) of the Stock shall vest
and be released from the Redemption Option.
(iv) Except
as
otherwise provided in this Agreement, as of the date when the closing price
of
the Common Stock, $.001 par value, of the Company is equal to or greater than
$3.00 per share for ten (10) consecutive trading days at any time after October
24, 2006 but prior to October 24, 2009, Thirty Percent (30%) of the Stock shall
vest and be released from the Redemption Option. For purposes of this subsection
(iv) and subsection (v) below, trading days shall be defined as those trading
days in which the volume equals or exceeds twenty thousand shares per
day.
(v) Except
as
otherwise provided in this Agreement, as of the date when the closing price
of
the Common Stock, $.001 par value, of the Company is equal to or greater than
$5.00 per share for ten (10) consecutive trading days at any time after October
24, 2006 but prior to October 24, 2009, Thirty Percent (30%) of the Stock shall
vest and be released from the Redemption Option.
(c) Acceleration
of Vesting. In
the
event of a Change of Control or termination of Stockholder’s employment by the
Company without Cause or by Stockholder for Good Reason (as those terms are
defined below), the Redemption Option shall lapse and all shares of Stock
subject to the Redemption Option shall immediately become fully
vested.
(i) For
purposes of this Section 2(c), Change
of Control
shall
mean that
(1)
the
Company is merged, consolidated or reorganized into or with another corporation
or other legal person (an “Acquiring
Person”),
or
securities of the Company are exchanged for securities of an Acquiring Person,
and immediately after such merger, consolidation, reorganization or exchange
less than a majority of the combined voting power of the then outstanding
securities of the Acquiring Person immediately after such transaction are held,
directly or indirectly, in the aggregate by the holders of voting stock of
the
Company immediately prior to such transaction; (2) the Company, in any
transaction or series of related transactions, sells or otherwise transfers
all
or substantially all of its assets to an Acquiring Person; or (3) the Company
files a report or proxy statement with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange
Act”),
disclosing that a change in control of the Company has occurred. Notwithstanding
the foregoing, unless otherwise determined in a specific case by majority vote
of the Board of Directors of the Company, a Change in Control shall not be
deemed to have occurred for purposes of this subsection (c)(i) solely because
(A) the Company, (B) an entity in which the Company directly or indirectly
beneficially owns fifty percent (50%) or more of the voting securities, or
(C)
any Company-sponsored employee stock ownership plan, or any other employee
benefit plan of the Company, either files or becomes obligated to file a report
or a proxy statement under or in response to Schedule 13D, Schedule 14D-1,
Form
8-K or Schedule 14A (or any successor schedule, form or report or item therein)
under the Exchange Act, disclosing beneficial ownership by it of shares of
stock
of the Company, or because the Company reports that a Change in Control of
the
Company has or may have occurred or will or may occur in the future by reason
of
such beneficial ownership.
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(ii) For
purposes of this Section 2(c), Cause
shall
have the meaning set forth in any employment or similar agreement between the
Stockholder and the Company. In the event Cause is not defined in any such
agreement, it shall mean Stockholder’s
(1) willful failure or refusal to carry out any proper direction by the Board
of
Directors of the Company with respect to the services to be rendered by him
or
the manner of rendering such services; (2) willful failure or refusal to perform
in all material respects the services required of him; (3) willful misconduct
in
connection with the performance of his duties and/or services; (4) commission
of
an act of fraud, embezzlement or theft, or any felony; or (5) breach of any
confidentiality, non-competition, non-solicitation or similar provisions or
agreements with the Company or engagement in any activity prohibited by
Stockholder’s employment or similar agreement with the Company, in each case as
determined in good faith by the Board of Directors of the Company. For purposes
of this subsection (c)(ii) and in the absence of anything in a separate
employment agreement to the contrary, the Company shall be required to provide
Stockholder a specific written warning with regard to any occurrence specified
in (1), (2) and (3) herein, which warning shall include a statement of
corrective actions and a thirty (30) day period for Stockholder to respond
to
and implement such actions, prior to any termination of employment.
(iii) For
purposes of this Section 2(c), Good
Reason
shall
have the meaning set forth in any employment or similar agreement between the
Stockholder and the Company. In the event Good Reason is not defined in any
such
agreement, it shall mean (1) a
material reduction in Stockholder’s base salary, (2) a
material reduction in Stockholder’s duties without Stockholder’s consent, or
(3) a
relocation of Stockholder’s regular place of work to any location outside a
fifty (50) mile radius of the location from which Stockholder served the Company,
without Stockholder’s consent.
(d) Any
reference to Stockholder shall (when applicable) be deemed to be and include
references to Stockholder’s estate, executors or administrators, personal or
legal representatives, successors and permitted assigns, and transferees (direct
or indirect). Stock that has not yet vested and which remains subject to the
Redemption Option is sometimes referred to herein as “Unvested
Stock”;
Stock
that has vested and which is released or is eligible for release from the
Redemption Option is sometimes referred to herein as “Vested
Stock”
3. Exercise
of Redemption Option.
The
Redemption Option, when and to the extent exercisable, shall be exercised by
written notice within the period specified in Section 2(a) above, signed by
an
officer of the Company or by any assignee or assignees of the Company, and
delivered or mailed as provided in Section 13. Such notice shall identify
the number of shares of Unvested Stock to be redeemed and the date of such
redemption (which date shall be no earlier than twenty (20) business days
following the date of such redemption notice). Effective as of such redemption
date, the Company shall become the legal and beneficial owner of the Unvested
Stock being redeemed and all rights and interest therein or related thereto,
and
the Company shall have the right to transfer to its own name the Unvested Stock
being redeemed by the Company, without further action by
Stockholder.
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4. Adjustments
to Stock.
If, at
any time and from time to time, during the term of the Redemption Option there
is any change affecting the Company’s outstanding Common Stock as a class that
is effected without the receipt of consideration by the Company (through merger,
consolidation, reorganization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, change in corporation structure or other transaction not involving
the
receipt of consideration by the Company), then any and all new, substituted
or
additional securities or other property to which Stockholder is entitled by
reason of Stockholder’s ownership of Stock shall be immediately subject to the
Redemption Option and be included in the word “Stock”
for
all
purposes of the Redemption Option, with the same force and effect as the shares
of the Stock presently subject to the Redemption Option, but only to the extent
the Stock is, at the time, covered by such Redemption Option and considered
Unvested Stock.
5. Escrow
of Unvested Stock; Release.
(a) As
security for Stockholder’s faithful performance of the terms of this Agreement
and to insure the availability for delivery of Stockholder’s Unvested Stock upon
exercise of the Redemption Option herein provided for, Stockholder agrees,
at
the execution hereof, to deliver to and deposit with the Secretary of the
Company or the Secretary’s designee (“Escrow
Agent”),
as
Escrow Agent in this transaction, a stock assignment duly endorsed (with date
and number of shares blank) in the form attached hereto as Exhibit A,
together with the certificate or certificates evidencing the Stock issuable
hereunder, to be held in accordance with the provisions of this Agreement and
until such time as the Stock shall no longer be subject to the Redemption
Option. Any new, substituted or additional securities or other property
described in Section 4
above
shall further immediately be delivered to the Company to be held in escrow,
but
only to the extent the Stock is at the time Unvested Stock.
All
regular cash dividends on Unvested Stock (or other securities at the time held
in escrow) shall be paid directly to the Stockholder and shall not be held
in
escrow. Stockholder hereby acknowledges that the Secretary of the Company,
or
the Secretary’s designee, is so appointed as the Escrow Agent. Stockholder
agrees that the Escrow Agent shall not be liable to any party hereof (or to
any
other party), and may rely upon any letter, notice or other document executed
by
any signature purported to be genuine, and may resign at any time. Stockholder
agrees that if the Secretary of the Company, or the Secretary’s designee,
resigns as Escrow Agent for any or no reason, the Board of Directors of the
Company shall have the power to appoint a successor to serve as Escrow Agent
pursuant to the terms of this Agreement. Stockholder agrees that if the
Secretary of the Company resigns as Secretary, the successor Secretary shall
serve as Escrow Agent pursuant to the terms of this Agreement.
(b) Unvested
Stock, together with any other assets or securities held in escrow hereunder,
shall
be
surrendered to the Company for redemption and cancellation upon the Company’s
exercise of its Redemption Option. Unvested Stock that is held in escrow with
respect to which the Company’s Redemption Option lapses unexercised after the
period referred to in Section 2(a)
shall
be
released to Stockholder promptly upon Stockholder’s request
therefor.
(c) All
Vested Stock (and any other vested assets and securities attributable thereof)
shall be released from escrow within ten (10) days of the date such Stock
becomes Vested Stock and is no longer subject to the Redemption Option pursuant
to Section 2 herein.
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6. Rights
of Stockholder. Subject
to the provisions of Sections 5, 7, 11 and 12 herein, Stockholder shall exercise
all rights and privileges of a shareholder of the Company with respect to the
Stock deposited in escrow. Stockholder shall be deemed to be the holder for
purposes of receiving any dividends that may be paid with respect to such shares
of Stock and for the purpose of exercising any voting rights relating to such
shares of Stock, even if some or all of such Stock is Unvested Stock and subject
to the Redemption Option.
7. Limitations
on Transfer.
In
addition to any other limitation on transfer created by applicable securities
laws, Stockholder shall not sell, exchange, assign, hypothecate, bequeath,
gift,
donate, pledge, mortgage, encumber or otherwise dispose of, whether by operation
of law or otherwise, any interest in the Stock while the Stock is Unvested
Stock
and subject to the Redemption Option. After any Stock becomes Vested Stock
and
has been released from the Redemption Option, Stockholder shall not sell,
exchange, assign, hypothecate, bequeath, gift, donate, pledge, mortgage,
encumber or otherwise dispose of, whether by operation of law or otherwise,
any
interest in the Stock except in compliance with applicable securities laws.
8. Restrictive
Legends.
All
certificates representing the Stock shall have endorsed thereon legends in
substantially the following forms (in addition to any other legend which may
be
required by other agreements between the parties hereto):
(a) “THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH
IN
A RESTRICTED STOCK AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER,
OR
SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY
SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT
OF THE COMPANY.”
(b) Any
legend required by applicable securities laws.
9. Investment
Representations.
In
connection with the issuance of the Stock, Stockholder represents to the Company
the following:
(a) Stockholder
is aware of the Company’s business affairs and financial condition and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Stock. Stockholder is acquiring the Stock
for investment for Stockholder’s own account only and not with a view to, or for
resale in connection with, any “distribution”
thereof
within the meaning of the Act. Stockholder further acknowledges that during
the
period of time during which the Stockholder holds the Stock, the value of the
Stock may increase or decrease, and any risk associated with such Stock and
such
fluctuation in value shall be borne by Stockholder.
(b) Stockholder
is familiar with the provisions of Rule 144 under the Securities Act of 1933,
as
in effect from time to time, which, in substance, permit limited public resale
of “restricted
securities”
acquired, directly or indirectly, from the issuer thereof (or from an affiliate
of such issuer), in a non-public offering subject to the satisfaction of certain
conditions. The Stock may be resold by Stockholder in certain limited
circumstances subject to the provisions of Rule 144, which requires, among
other
things: (i) the availability of certain public information about the Company
and
(ii) the resale occurring following the required holding period under Rule
144
after the Stockholder has acquired, and made full payment of (within the meaning
of Rule 144), the securities to be sold.
5
(c) Stockholder
further understands that at the time Stockholder wishes to sell the Stock there
may be no public market upon which to make such a sale, and that, even if such
a
public market then exists, the Company may not be satisfying the current public
information requirements of Rule 144, and that, in such event, Stockholder
would
be precluded from selling the Stock under Rule 144 even if the minimum holding
period requirement had been satisfied.
10. Section
83(b) Election. Stockholder
understands that Section 83(a) of the Internal Revenue Code of 1986, as amended
(the “Code”),
taxes
as ordinary income the difference between the amount paid for the Stock and
the
fair market value of the Stock as of the date any restrictions on the Stock
lapse. In this context, “restriction”
includes the right of the Company to redeem the Stock pursuant to the Redemption
Option set forth in Section 2 above. Stockholder understands that Stockholder
may elect to be taxed at the time the Stock is acquired, rather than when and
as
the Redemption Option expires, by filing an election substantially in the form
of Exhibit B hereto
under Section 83(b) (an “83(b)
Election”)
of the
Code with the Internal Revenue Service within thirty (30) days from the date
of
transfer. Even if the fair market value of the Stock at the time of the
execution of this Agreement equals the amount paid for the Stock, the 83(b)
Election must be made to avoid income under Section 83(a) in the future.
Stockholder understands that failure to file such an 83(b) Election in a timely
manner may result in adverse tax consequences for Stockholder. Stockholder
further understands that an additional copy of such 83(b) Election is required
to be filed with his or her federal income tax return for the calendar year
in
which the date of this Agreement falls. Stockholder
further acknowledges and understands that it is Stockholder’s sole obligation
and responsibility to timely file such 83(b) Election, and neither the Company
nor the Company’s legal or financial advisors shall have any obligation or
responsibility with respect to such filing.
Stockholder acknowledges that the foregoing is only a summary of the effect
of
United States federal income taxation with respect to acquisition of the Stock
hereunder, and does not purport to be complete. Stockholder further acknowledges
that the Company has directed Stockholder to seek independent advice regarding
the applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Stockholder may reside, and the tax
consequences of Stockholder’s death. Stockholder assumes all responsibility for
filing an 83(b) Election and paying all taxes resulting from such election
or
the lapse of the restrictions on the Stock.
11. Refusal
to Transfer. The
Company shall not be required (a) to transfer on its books any shares of Stock
of the Company which shall have been transferred in violation of any of the
provisions set forth in this Agreement, or (b) to treat as owner of such shares
of Stock or to accord the right to vote as such owner or to pay dividends to
any
transferee to whom such shares of Stock shall have been so
transferred.
12. No
Service Rights. This
Agreement is not an employment or service contract and nothing in this Agreement
shall affect in any manner whatsoever the right or power of the Company (or
a
parent or subsidiary of the Company) to terminate Stockholder’s employment or
service for any reason at any time, with or without Cause and with or without
notice, subject to the terms of any separate employment agreement to the
contrary.
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13. Miscellaneous.
(a) Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified,
(ii) when sent by confirmed facsimile if sent during normal business hours
of the recipient, and if not during normal business hours of the recipient,
then
on the next business day, (iii) five (5) calendar days after having been
sent by registered or certified mail, return receipt requested, postage prepaid,
or (iv) one (1) business day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification
of
receipt. All communications shall be sent to the other party hereto at such
party’s address hereinafter set forth on the signature page hereof, or at such
other address as such party may designate by ten (10) days advance written
notice to the other party hereto.
(b) Successors
and Assigns. This
Agreement
shall
be
binding upon, and shall inure to the benefit of, the Company and its successors
and assigns and, subject to the restrictions set forth herein, Stockholder
and
Stockholder’s estate, executor or administrator, personal and legal
representatives, successors and permitted assigns, and direct and indirect
transferees. The Redemption Option of the Company hereunder shall be assignable
by the Company at any time, from time to time, in whole or in part.
(c) Attorneys’
Fees; Specific Performance. Stockholder
shall reimburse the Company for all costs incurred by the Company in enforcing
the performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys’ fees. It
is the
intention of the parties that the Company, upon exercise of the Redemption
Option and payment therefor, pursuant to the terms of this Agreement, shall
be
entitled to receive the Stock, in specie, in order to have such Stock available
for future issuance without dilution of the holdings of other shareholders.
Furthermore, it is expressly agreed between the parties that money damages
are
inadequate to compensate the Company for the Stock and that the Company shall,
upon proper exercise of the Redemption Option, be entitled to specific
enforcement of its rights to purchase and receive said Stock.
(d) Governing
Law; Venue.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Nevada. The parties agree that any action brought by either party
to
interpret or enforce any provision of this Agreement shall be brought in, and
each party agrees to, and does hereby, submit to the jurisdiction and venue
of,
the appropriate state or federal court for the district encompassing the
Company’s principal place of business.
(e) Further
Execution.
The
parties agree to take all such further action(s) as may reasonably be necessary
to carry out and consummate this Agreement as soon as practicable, and to take
whatever steps may be necessary to obtain any governmental approval in
connection with or otherwise qualify the issuance of the securities that are
the
subject of this Agreement.
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(f) Independent
Counsel.
Stockholder acknowledges that Stockholder has been provided with an opportunity
to consult with their own legal counsel and tax or other advisors with respect
to this Agreement.
(g) Entire
Agreement; Amendment.
This
Agreement constitutes the entire agreement between the parties with respect
to
the subject matter hereof and supersedes and merges all prior agreements or
understandings, whether written or oral. This Agreement may not be amended,
modified or revoked, in whole or in part, except by an agreement in writing
signed by each of the parties hereto.
(h) Severability.
If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, the parties agree to renegotiate such provision in good faith.
In the event that the parties cannot reach a mutually agreeable and enforceable
replacement for such provision, then (i) such provision shall be excluded from
this Agreement, (ii) the balance of the Agreement shall be interpreted as if
such provision were so excluded and (iii) the balance of the Agreement shall
be
enforceable in accordance with its terms.
(i) Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall constitute one
instrument.
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In
Witness Whereof,
the
parties hereto have executed this Agreement as of the day and year first above
written.
|
By:
________________________________
Title:
_______________________________
Address:
____________________________
____________________________________
|
Stockholder
acknowledges and agrees that the vesting of Stock pursuant to Section 2
hereof is earned only as set forth herein. Stockholder further acknowledges
and
agrees that nothing in this Agreement shall confer upon Stockholder any right
with respect to continuation of any employment or other relationship with the
Company or any subsidiary, nor shall it interfere in any way with Stockholder’s
right or the Company’s or any subsidiary’s right to terminate Stockholder’s
employment or other relationship at any time, with or without cause, subject
to
the terms of any separate employment or other agreement to the
contrary.
Stockholder
further acknowledges that any risk related to the fluctuation in the value
of
the Stock from and after the date hereof, including any losses to Stockholder
as
a result of Company’s exercise of its redemption option pursuant to
Section 2,
shall
be borne by Stockholder.
Stockholder
acknowledges that Stockholder has read all tax related sections and further
acknowledges Stockholder has had an opportunity to consult Stockholder’s own
tax, legal and financial advisors regarding the acquisition of Stock under
this
Agreement.
Stockholder
acknowledges and agrees that in making the decision to acquire the Stock
hereunder, Stockholder has not relied on any statement, whether written or
oral,
regarding the subject matter hereof, except as expressly provided herein and
in
the attachments and exhibits hereto.
|
Stockholder:
_____________________________ Xxxx
X. Xxxxx
Address: 0000
Xxxxx xx Xxx
Xxxxxx
Xxxxx, XX 00000
|
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Attachments:
Exhibit
A
- Stock Assignment
Exhibit
B
- 83(b) Election
EXHIBIT
A
ASSIGNMENT
SEPARATE
FROM CERTIFICATE
FOR
VALUE
RECEIVED and pursuant to that certain Restricted
Stock Agreement (the
“Agreement”) between the undersigned (the
“Stockholder”)
and Orion
Ethanol, Inc., a Nevada corporation (the “Company”),
Stockholder hereby sells, assigns and transfers unto the Company __________
shares
of
the Common
Stock of
the
Company, standing in Stockholder’s name on the books of the Company and
represented by Certificate
No(s).
_______,
and hereby irrevocably appoints the
authorized officers of
the
Company to transfer said stock on the books of the Company with full power
of
substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED
BY
THE AGREEMENT.
Dated:
|
Stockholder
Signature:
|
OF
TRANSFER PURSUANT TO SECTION 83(b)
OF
THE INTERNAL REVENUE CODE
The
undersigned
hereby makes an election pursuant to Section 83(b)
of
the
Internal
Revenue Code with
respect to the property described below and supplies the following information
in accordance with the regulations thereunder:
Xxxxxx
Xxxxx, XX 00000
3. Date
on
which property was transferred is _____________.
The
taxable year to which this election relates is calendar year
______.
5. The
fair
market value at time of transfer (determined without regard to any restrictions
other than restrictions which by their terms will never lapse) of the property
with respect to which this election is being made is $_____
per
share
or an aggregate of $_____.
