NONQUALIFIED STOCK OPTION AGREEMENT
GRANTED TO: Xxxxxxx X. Xxx
EFFECTIVE DATE OF July 28, 1997
GRANT:
GRANTED PURSUANT TO: NORTH ATLANTIC TRADING COMPANY 1997
SHARE INCENTIVE PLAN
NUMBER OF UNDERLYING 15,966
SHARES:
EXERCISE PRICE: 18.19 per share
VESTING SCHEDULE: One third commencing on July 28, 1997 and one fifth of
the remaining options on each of the first five
anniversaries thereafter
1. This Nonqualified Stock Option Agreement (the "Agreement") is made
and entered into as of September 3, 1997 between North Atlantic Trading
Company, Inc., a Delaware corporation (the "Company") and Xxxxxxx X. Xxx (the
"Employee"). It is the intent of the Company and the Employee that this Option
(as defined in Paragraph 2 below) will not qualify as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986, as amended from
time to time.
2. The Employee is granted an option to purchase 15,966 shares of the
Common Stock (the "Option"). The Option is granted under the Company's 1997
Share Incentive Plan (the "Plan") and is subject to the terms of the Plan and
of this Agreement. Capitalized terms not defined herein shall have the meanings
ascribed thereto in the Plan.
3. The Option's Exercise Price is $18.19 per share.
4. Subject to Paragraph 5 below, the Option shall become exercisable
according to the vesting schedule set forth below:
5,322 shares of Common Stock shall become exercisable and remain exercisable
on July 28, 1997
2,129 shares of Common Stock shall become exercisable and remain exercisable
on July 28, 1998
2,129 shares of Common Stock shall become exercisable and remain exercisable
on July 28, 1999
2,129 shares of Common Stock shall become exercisable and remain exercisable
on July 28, 2000
2,129 shares of Common Stock shall become exercisable and remain exercisable
on July 28, 2001
2,128 shares of Common Stock shall become exercisable and remain exercisable
on July 28, 2002.
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5. The Option, unless sooner terminated or exercised in full, shall
expire on July 28, 2012 and, notwithstanding anything herein to the contrary,
no portion of the Option may be exercised after such date.
6. (a) In the event of death of the Employee, or if the Employee's
employment is terminated due to disability, each stock option theretofore
granted to him shall be exercisable until July 28, 2012, and then only by the
executor or administrator of the estate of the deceased participant or the
person or persons to whom the deceased participant's rights under the Option
shall pass by will or the laws of descent or distribution or the disabled
employee or his legal guardian.
(b) In the event the Employee's employment is terminated due
to retirement, the unexercisable portion of the Option held by the Employee on
the date of termination of employment shall immediately be forfeited by the
Employee and the exercisable portion of the Option held by the Employee on the
date of termination of employment shall remain exercisable until the earlier of
(i) 90 days after the Employee's termination of employment or (ii) the date the
Option would otherwise expire.
(c) In the event the Employee's employment is terminated by
the Company without Cause or by the Executive for Good Reason (as defined in
the Executive's Employment Agreement) and not by reason of the Employee's death
or disability, the unexercisable portion of the Option held by the Employee on
the date of termination of employment shall immediately become exercisable and
the entire Option held by the Employee on the date of termination of employment
shall remain exercisable until the date the Option would otherwise expire.
(d) In the event the Employee's employment is terminated by
the Company or any Subsidiary for Cause or is terminated by the Employee for
any reason other than Retirement, Good Reason, death or Disability, the
unvested portion of the Option held by the Employee at the time of termination
of employment shall immediately be forfeited by the Employee. The vested
portion of the Option shall remain exercisable until the earlier of (i) the end
of the 90 day period following the Employee's termination of employment or (ii)
the date the Option would otherwise expire.
7. The Employee may exercise the Option regardless of whether any
other option that the Employee has been granted by the Company remains
unexercised. In no event may the Employee exercise the Option for a fraction of
a share or for less than 100 shares.
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8. The Option's Exercise Price shall be paid by the Employee on the
date the Option is exercised, in cash, in shares of Common Stock owned by the
Employee or by a combination of the foregoing. Any shares of Common Stock
delivered in payment of the Exercise Price shall be valued at Fair Market
Value.
9. (a) The Employee may pay within thirty (30) days following the
exercise of the Option the amount of taxes required to be withheld upon
exercise of the Option by (i) delivering a check made payable to the Company or
(ii) delivering to the Company shares of Common Stock having a Fair Market
Value equal to the amount of such withholding taxes; provided, however, that at
the Employee's election, any amount due to the Company under this Section 9(a)
may be reduced in whole or part by any amounts the Company owes such Employee
under subparagraph (b) below.
(b) Unless otherwise agreed to by the parties, on or before
April 15 of the calendar year following the year in which the Option is
exercised (the "Payment Date"), the Company shall pay the Employee an amount
(the "Payment") equal to the sum of:
(i) the difference between (A) the amount of taxable
income reportable by the Employee in connection with the
exercise of the Option multiplied by the highest aggregate
marginal statutory federal, state and local income tax rate
(determined by taking into account the deductibility of state
and local income taxes for federal income tax purposes) to
which such Employee is subject at the time of exercise (the
"Marginal Ordinary Tax Rate") and (B) the amount of taxable
income reportable by the Employee in connection with the
exercise of the Option multiplied by the highest aggregate
marginal statutory federal, state and local income tax rate
(determined by taking into account the deductibility of state
and local income taxes for federal income tax purposes) to
which such Employee would be subject at the time of exercise
if such taxable income was characterized as long-term capital
gain (the "Marginal Capital Gain Tax Rate") (such difference
referred to as the "Incremental Tax Amount"); and
(ii) (A) the Incremental Tax Amount divided by (B)
one minus the Employee's Marginal Ordinary Tax Rate.
(c) The payment shall not be made pursuant to Section 9(b) in
the event the Option is exercised (i) within 180 days prior to the Employee's
termination of employment described in Section 6(d) of the Agreement or (ii)
following the Employee's termination of
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employment described in Section 6(d) of the Agreement. Notwithstanding the
foregoing, if the Payment Date falls within 180 days from the date of exercise,
the Company shall only make the Payment to Employee upon the signing of an
undertaking, reasonably satisfactory to the Company, by the Employee to repay
the Payment to the Company if Employee terminates his employment as described
with Section 6(d) of the Agreement within 180 days of the date of the exercise
of the Option.
(d) The Company shall treat the amount paid in 9(b) as
compensation payable to the Employee.
10. The Employee shall not have any of the rights of a shareholder
with respect to the shares of Common Stock underlying the Option while the
Option is unexercised.
11. Any exercise of this Option shall be in writing addressed to the
Corporate Secretary of the Company at the principal place of business of the
Company, specifying the Option being exercised and the number of shares to be
purchased.
12. If the Company, in its sole discretion, shall determine that it is
necessary, to comply with applicable securities laws, the certificate or
certificates representing the shares purchased pursuant to the exercise of this
Option shall bear an appropriate legend in form and substance, as determined by
the Company, giving notice of applicable restrictions on transfer under or in
respect of such laws.
13. The Employee covenants and agrees with the Company that if, at the
time of exercise of this Option, there does not exist a Registration Statement
on an appropriate form under the Securities Act of 1933, as amended (the
"Act"), which Registration Statement shall have become effective and shall
include a prospectus that is current with respect to the shares subject to this
Option, (i) that he is purchasing the shares for his own account and not with a
view to the resale or distribution thereof, (ii) that any subsequent offer for
sale or sale of any such shares shall be made either pursuant to (x) a
Registration Statement on an appropriate form under the Act, which Registration
Statement shall have become effective and shall be current with respect to the
shares being offered and sold, or (y) a specific exemption from the
registration requirements of the Act, but in claiming such exemption, the
Employee shall, prior to any offer for sale or sale of such shares, obtain a
favorable written opinion from counsel for or approved by the Company as to the
applicability of such exemption and (iii) that the Employee agrees that the
certificates evidencing such shares shall bear a legend to the effect of the
foregoing.
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14. This Agreement is subject to all terms, conditions, limitations
and restrictions contained in the Plan, which shall be controlling in the event
of any conflicting or inconsistent provisions.
15. This Agreement is not a contract of employment and the terms of
the Employee's employment shall not be affected hereby or by any agreement
referred to herein except to the extent specifically so provided herein or
therein. Nothing herein shall be construed to impose any obligation on the
Company to continue the Employee's employment, and it shall not impose any
obligation on the Employee's part to remain in the employ of the Company.
17. Employee acknowledges and agrees that neither the Company, its
shareholders nor its directors and officers, has any duty or obligation to
disclose to the Employee any material information regarding the business of the
Company or affecting the value of the Common Stock before or at the time of a
termination of the employment of the Employee by the Company, including,
without limitation, any information concerning plans for the Company to make a
public offering of its securities or to be acquired by or merged with or into
another firm or entity.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
NORTH ATLANTIC TRADING COMPANY, INC.
By /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------------
Xxxxxx X. Xxxxx, Xx.
President
ACCEPTED:
/s/ Xxxxxxx X. Xxx
-------------------------------
Signature of Employee
Xxxxxxx X. Xxx
-------------------------------
Name of Employee - Please Print
Date: September 3, 1997
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