Exhibit 10.3
STOCK OPTION AGREEMENT
Agreement made as of the 23rd day of June 1992, between Kaneb Services,
Inc. (the "Company"), and Xxxx X. Xxxxxx ("Option Holder").
Option Holder has been elected and is presently serving as President,
Chief Executive Officer and Chairman of the Board of the Company. In order to
induce Option Holder to continue employment with the Company and to afford
Option Holder the opportunity to purchase shares of the Common Stock of the
Company, without par value (the "Stock"), the Company and Option Holder hereby
agree as follows:
1. Grant of Option. Pursuant to foregoing recitals, the Company grants
to Option Holder an option to purchase from the Company a total of 275,000
shares of Common Stock, no par value, of the Company at $8.50 per share (being
200% of the fair market value per share of the Stock on the date of this grant),
in the amounts, during the periods and upon the terms and conditions set forth
in this Agreement. The date of grant of this option is June 23, 1992.
2. Time of Exercise. Subject to the acceleration provisions and except
as otherwise specifically provided elsewhere in this Agreement, this option is
exercisable, in whole or in part, cumulatively at any time subsequent to (and to
the extent of) the vesting rights set forth below but prior to the expiration of
ten (10) years from the date of grant, after which no unexercised part of the
option may be exercised.
3. Vesting. The right to exercise shall vest in the amounts and over
the periods of time as follows: (a) one-fifth (1/5) of the total optional shares
on June 23, 1993; (b) one-forty eighth (1/48) of the total optional shares per
month thereafter.
4. Acceleration of Vesting. In the event of a Change of Control or
Potential Change of Control, any stock options not previously vested under this
Agreement shall be fully vested. A Change of Control means (i) a person becomes
the beneficial owner of Company securities having 20% or more of the total votes
that may be cast for the election of directors of the Company, or (ii) the
stockholders approve the sale of substantially all of the assets of the Company
or the merger or consolidation of the Company with or into another corporation,
or (iii) as a result of or in connection with any tender or exchange offer,
merger or other business combination, sale of assets, proxy contest or
combination of the foregoing, the directors of the Company immediately preceding
the event shall cease to constitute the majority of the Company's Board of
Directors. A Potential Change of Control means the entering into an agreement by
the Company, consummation of which would result in a Change of Control.
5. Not Subject to Plan. This option and its exercise are not subject to
the Amended and Restated Kaneb Services, Inc. 1984 Nonqualified Stock Option
Plan (the "Plan").
6. Term. This option will terminate at the first of the following:
(a) 5 p.m. on June 22, 2002.
(b) 5 p.m. on the date which is one (1) year following
the date that the Option Holder's service to the
Company is terminated by reason of the Option
Holder's death, total and permanent disability or
voluntary or involuntary termination, as an officer
and/or director, without cause; for the purpose of
this section 6(b), the one (1) year period shall not
commence until Option Holder is no longer serving as
either an officer or a director.
(c) 5 p.m. on the date which Option Holder's service to
the Company, whether as an officer or director, is
terminated involuntarily for cause. "Cause" shall
mean Options Holder's gross negligence or willful
misconduct, fraud or final conviction of a felony
offense.
7. Who May Exercise. During the lifetime of the Option Holder, this
option may be exercised only by the Option Holder, or by the Option Holders's
administrators or assigns, as provided herein;
8. Restrictions on Exercise. This option may be exercised in whole or
in part, but only with respect to full shares and no fractional share of stock
shall be issued.
9. Manner of Exercise. This option may be exercised upon written notice
to the Company of the number of shares being purchased accompanied by the
following:
(a) Full payment of the option price for the shares of
stock being purchased; and
(b) Such documents as the Company in its discretion deems
necessary to evidence the exercise, in whole or in
part, of the option.
Full payment for shares purchased upon exercise of an Option shall be
made in cash, by the Option Holder's delivery to the Company of shares of Common
Stock which have a fair market value equal to the option price, or in any
combination of cash and shares of Common Stock having an aggregate fair market
value equal to the option price. The fair market value of each share of such
tendered stock shall be the closing sale price of a share of Common Stock on the
New York Stock Exchange, Inc. (the "Exchange") on the date the Option is
exercised, or if the Common Stock was not traded on the Exchange on that date,
then on the next preceding date on which the Common Stock was traded on the
Exchange. No shares may be issued until full payment of the purchase price
therefore has been made, and the Option Holder will have none of the rights of a
stock holder until shares are issued to him.
10. Non-Assignability. This option is not assignable or transferable by
the Option Holder except by assignment or transfer to members of Option Holder's
family or to an entity created for the benefit of Option Holder's family or
family members, or by will or by the laws of descent and distribution. Any such
assignee or transferee shall be subject to all of the terms and conditions
hereof and shall be prohibited from any further assignment or transfer.
11. Rights of Stockholder. Except for the adjustment in the number of
shares as provided in Section 12 below, the Option Holder will have no rights as
a stockholder with respect to any shares covered by this option until the
issuance of a certificate or certificates to the Option Holder for the shares.
Except as otherwise provided in Section 12 hereof, no adjustment shall be made
for dividends or other rights for which the record date is prior to the issuance
of such certificate or certificates.
12. Adjustment of Number of Shares and Related Matters. The Option
Holder understands that in the event of the merger, consolidation or
reorganization of the Company, or in the event of the recapitalization of the
Company, the number of shares that may be purchased upon exercise of the option
granted hereunder and the exercise price thereof shall be proportionately
adjusted. Notwithstanding the foregoing, the existence of the option granted
hereunder shall not affect the right of the Company to issue shares of stock of
any class, or securities convertible into shares of stock of any class, for
cash, property, labor or services, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities. The
issuance of such shares or securities shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Stock subject to the option granted hereunder.
Upon the occurrence of each event requiring an adjustment of the
exercise price and/or the number of shares purchasable pursuant to this
Agreement, the Company shall as soon as practicable mail to the Option Holder a
copy of its computation of such adjustment which shall be conclusive and shall
be binding upon the Option Holder unless contested by him by written notice to
the Company within thirty (30) days after the Option Holder's receipt of such
computation.
13. Option Holder's Representations. Notwithstanding any of the
provisions hereof, the Option Holder hereby agrees that he will not exercise the
option granted hereby, and that the Company will not be obligated to issue any
shares to the Option Holder hereunder, if the exercise thereof or the issuance
of such shares shall constitute a violation by the Option Holder or the Company
of any provision of any law or regulation of any governmental authority. Any
determination in this connection by the Board of Directors of the Company shall
be final, binding, and conclusive. The obligations of the Company and the rights
of the Option Holder are subject to all applicable laws, rules and regulations
including, without limitation, the Securities Exchange Act of 1934, as amended,
the Securities Act of 1933, as amended, the Internal Revenue Code of 1986, as
amended, any successors thereto, and any other applicable laws.
14. Investment Representation. By his execution hereof, the Option
Holder represents and warrants to the Company that all Stock which may be
purchased hereunder will be acquired by Option Holder for investment purposes
for his own account and not with any intent for resale or distribution. Unless
previously registered or issued in a transaction registered under applicable
federal and state securities laws, all certificates issued with respect to the
Common Stock shall bear an appropriate restrictive investment legend.
15. Law Governing. This Agreement is intended to be performed in the
State of Texas and shall be construed and enforced in accordance with and
governed by the laws of Texas.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Option Holder, to evidence his
consent and approval of all the terms hereof, has duly executed this Agreement,
as of the date specified in Section 1 hereof.
KANEB SERVICES, INC.
By:
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Title:
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OPTION HOLDER:
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Xxxx X. Xxxxxx
