OUTSOURCING SERVICES GROUP, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made this 30th day
of June, 1998, by and between OUTSOURCING SERVICES GROUP, INC., a Delaware
corporation having its principal place of business at 000 Xxxxx Xxxxx Xxxxxx,
Xxxx xx Xxxxxxxx, Xxxxxxxxxx 00000-0000 (the "Company"), and XXXX X. XXXXXX,
whose address is 0 Xxxxxxxx Xxx, Xxxx xx Xxxx, Xxxxxxxxxx (the "Employee").
RECITALS
A. As an inducement to retain Employee as an employee in the Company, the
Company has agreed to grant to Employee options to purchase shares of the
Company's common stock in connection with the Employment and Non-Competition
Agreement, of even date, by and among Employee and the Company and certain of
its subsidiaries (the "Employment Agreement").
B. The Company and Employee desire to enter into this Agreement to
memorialize the grant of the options to Employee.
NOW, THEREFORE, the parties hereto agree as follows:
1. GRANT. Upon the effectiveness of this Agreement, as
described in Section 19, the Company hereby grants to Employee the right to
purchase up to twenty thousand (20,000) shares of common stock of the Company
at a price of $10.00 per share (which price equals the fair market value of a
share of the Company's common stock as determined by the Company's Board of
Directors in good faith) (the "Initial Option"), on the terms and conditions
set forth herein. For each of the first five years after the Effective Date
(as defined herein) Employee shall participate, along with other executives
of the Company, in the annual award to all such participants in the
aggregate, of options to purchase up to 60,000 shares of the Company's common
stock at an exercise price equal to the then fair market value as determined
by the Board of Directors at the time of the grant. Any such options granted
to Employee shall be referred to herein as "Subsequent Options." The
Subsequent Options shall be issued on the terms and conditions set forth
herein. The Initial Option and Subsequent Options are also referred to as
the "Options"). Employee agrees that Employee and any other person who may
be entitled hereunder to exercise the Options shall be bound by all terms and
conditions of this Agreement. Unless otherwise defined herein, capitalized
terms have the meaning given in the Company's 1998 Stock Option Plan (the
"Plan").
2. EXERCISABILITY. Subject to the terms of this Agreement, the
Options granted herein shall become exercisable at the following times and in
the following amounts:
The Initial Option shall become exercisable on the
third anniversary of the Effective Date described below.
Each Subsequent Option shall become exercisable at a rate of
20% per year on each anniversary of the effective date of the
grant of such Subsequent Option until it is fully vested.
All unvested Options shall become exercisable on the
earliest of the date (i) the Company's common stock becomes
publicly traded on a national securities exchange or the
Nasdaq stock market, (ii) the Company completes an initial
public offering of its common stock with proceeds in excess
of $15,000,000, (iii) the Company, or its assets or
business, is sold substantially as an entirety. Each Option
granted hereunder shall lapse and expire on the tenth (10th)
anniversary of the effective date of its grant.
If Employee does not purchase the full number of shares
Employee is entitled to purchase in any one year, the right to purchase such
shares carries over to the subsequent years during the term of the Option.
3. EXERCISE. The Options may be exercised on the terms and
conditions contained herein by giving three (3) day's prior written notice of
exercise to the Company, specifying the number of shares to be purchased and
the price to be paid therefor and by delivering a check in the amount of the
purchase price payable to the Company. The purchase price may also be paid,
in whole or in part, by delivery to the Company of outstanding shares of the
Company's common stock previously held by the Employee valued at "Fair Market
Value".
For the purposes of this Agreement, "Fair Market Value" as
of a certain date (the "Determination Date") means: (a) the closing price of
a share of the Company's common stock on the principal exchange on which
shares of the Company's common stock are then trading, if any, on the
Determination Date, or, if shares were not traded on the Determination Date,
then on the nearest preceding trading day during which a sale occurred; or
(b) if such stock is not traded on an exchange but is quoted on NASDAQ or a
successor quotation system, (i) the last sales price (if the stock is then
listed as a National Market Issue under The Nasdaq National Market System) or
(ii) the mean between the closing representative bid and asked prices (in all
other cases) for the stock on the Determination Date as reported by NASDAQ or
such successor quotation system; or (c) if the Company's stock is not
publicly traded, the fair market value established in good faith by the Board.
4. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF EMPLOYEE. Employee shall forfeit all
unexercised Options if Employee's employment terminates because of Employee's
resignation (unless such resignation is for "good reason" as described below)
or
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because of Employee's termination for any of the grounds specified in Section
4.01 of the Employment Agreement.
(b) TERMINATION BY EMPLOYEE FOR "GOOD REASON." If
Employee's employment is terminated by Employee for "good reason" as
described in Section 4.02 of the Employment Agreement, Employee shall have
the right to exercise the (i) initial Option at any time prior to the Initial
Option's expiration; and (ii) subsequent Options for twelve (12) months
following Employee's termination, but only to the extent that the Subsequent
Options were exercisable on such date of termination.
(c) DEATH. If Employee's employment is terminated for
death, or having ceasing to be an employee, but during the period during
which Employee could have exercised the Options granted hereunder in
accordance with the terms of this Agreement, Employee should die, Employee's
executor or administrator of Employee's estate shall have the right for
twelve (12) months following such death to exercise the Options, but only to
the extent that the Options were exercisable on the date of Employee's death.
(d) DISABILITY. If Employee's employment is terminated for
disability, Employee or his administrator or legal guardian, shall have the
right for six (6) months following such termination to exercise the Options
granted hereunder, but only to the extent that the Options were exercisable
on the date of termination.
(e) OTHER. If Employee's employment is terminated for any
reason other than as set forth in Sections 4(a), (b), (c) and (d) above,
including without limitation, Retirement, Employee shall have ninety (90)
days following such termination to exercise the Options granted hereunder,
but only to the extent that the Options were exercisable on the date of
termination.
5. TRANSFERABILITY. The Options shall be transferable only by
will or by the laws of descent and distribution to the estate (or other
personal representative) of Employee and shall be exercisable during
Employee's lifetime only by Employee. Except as otherwise provided herein,
any attempt at alienation, assignment, pledge, hypothecation, transfer, sale,
attachment, execution or similar process, whether voluntary or involuntary,
with respect to all or any part of this option or any right under this
Agreement, shall be null and void and, at the Company's option, shall cause
Employee's rights under this Agreement to terminate.
6. WITHHOLDING REQUIREMENTS. In the event the Company
determines that it is required to withhold state or federal income taxes as a
result of the exercise of the Options, Employee shall be required, as a
condition to the exercise thereof, to make arrangements satisfactory to the
Company to enable it to satisfy such withholding requirements.
7. RIGHTS AS A STOCKHOLDER. Employee, or any permitted
transferee of Employee, shall have no rights as a stockholder with respect to
any shares covered by the Options until the date of the issuance of a stock
certificate for such shares. No
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adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except
as provided in Section 8 of this Agreement. This Agreement shall not confer
upon Employee any right of continued employment by the Company or interfere
in any way in the Company's right to terminate Employee.
8. RECAPITALIZATION. The number of shares of Common Stock
covered by the Options and the exercise price thereof shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of common stock resulting from a subdivision or consolidation of such
shares or the payment of a stock dividend (but only of common stock) or any
other increase or decrease in the number of issued shares of common stock
effected without receipt of consideration by the Company. Subject to any
required action by stockholders, if the Company is the surviving corporation
in any merger or consolidation, the Options shall pertain and apply to the
securities to which a holder of the number of shares of common stock subject
to the Options would have been entitled.
The foregoing adjustments shall be made by the Company's
Board of Directors, whose determination shall be conclusive and binding on
the Company and Employee.
Except as expressly provided in this Section 8, Employee
shall have no rights by reason of any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class, or by
reason of any dissolution, liquidation, merger, consolidation or spin-off of
assets or stock of another corporation, and any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock
of any class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of shares subject to the Options or the
exercise price thereof.
The Options shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or
assets.
9. SECURITIES ACT AND OTHER REGULATORY REQUIREMENTS. If
through any act or omission of Employee the exercise of the Options or the
sale of any of the underlying shares of stock would, in the opinion of
counsel for the Company, violate the Securities Act of 1933 (or any other
federal or state statutes having similar requirements) as it may be in effect
at that time, then the Options shall not be exercisable and the Company shall
not be obligated to sell any shares subject to the Options.
Further, the Board of Directors of the Company may require as a
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condition of issuance of any shares under the Options that Employee furnish a
written representation that Employee is acquiring the shares for investment
and not with a view to distribution to the public.
10. SHARES SUBJECT TO SHAREHOLDER AGREEMENT. Shares issued to
Employee upon exercise of the Options granted hereunder shall be subject to
the Company's Amended and Restated Stockholder Agreement, dated as of June
30, 1997, as it may be amended from time to time, including by the Amendment
to Stockholder Agreement dated as of December 31, 1997, as amended (the
"Stockholder Agreement"). In connection with the issuance of the shares of
Company common stock, Employee shall take such actions and shall execute such
documents as the Company shall require for Employee to become a party to the
Stockholder Agreement.
11. LEGENDS. Each certificate representing shares of the
Company's common stock issued upon exercise of the Options shall bear upon
its face the following legends in addition to any legends required by
applicable state law:
(a) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL TO THE
STOCKHOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND SUBSTANCE OF
WHICH OPINION ARE, SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION
IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH
THE ACT, SUCH LAWS AND THE STOCKHOLDER AGREEMENT, DATED AS OF
JUNE 30, 1997, AS AMENDED."
(b) "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER AND OTHER CONDITIONS, AS SPECIFIED IN
A STOCKHOLDER AGREEMENT ENTERED INTO AS OF THE 30TH DAY OF JUNE,
1997, AS AMENDED, COPIES OF WHICH ARE ON FILE AT THE OFFICE OF
THE ISSUER AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF
SUCH SHARES UPON WRITTEN REQUEST."
Employee shall be bound by the requirements of such legends to the
extent that such legends are applicable.
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12. EFFECT OF EXERCISE. Upon the exercise of all or any part of
the Options, the number of shares of common stock subject to the Options
under this Agreement shall be reduced by the number of shares with respect to
which such exercise is made.
13. NOTICES. Any notices to be given hereunder by either party
to the other shall be in writing and may be effected by personal delivery, by
courier, or by mail (registered or certified), postage prepaid with return
receipt requested, or by facsimile confirmed by mail. Mailed notices shall
be addressed to the parties at the addresses appearing in the introductory
paragraph. Mailed notices shall be deemed communicated as of four (4)
calendar days after mailing. Notices delivered personally or by courier
shall be deemed delivered when actually received.
14. ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements (other than the Employment Agreement), either oral or in
writing, between the parties hereto with respect to the employment of the
employee by the company and contains all the covenants and agreements between
the parties with respect to such employment in any manner whatsoever. Each
party to this Agreement acknowledges that no representations, inducements,
promises or agreements, orally or otherwise, have been made by any party,
which are not embodied herein, and that no other prior agreement, statement
or promise not contained in this Agreement shall not be valid or binding.
Any modification of this Agreement will be effective only if it is in writing
signed by the party to be charged. To the extent that this Agreement and the
Plan are in conflict, the term of this Agreement controls.
15. PARTIAL INVALIDITY. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall nevertheless continue in full
force without being impaired or invalidated in any way.
16. CHOICE OF LAW; COUNTERPARTS. This Agreement, and all rights
and obligations hereunder, shall be governed by the laws of the State of New
York. This Agreement may be executed in one or more counterparts, each of
which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument.
17. SUCCESSOR. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, heirs,
beneficiaries, executors and administrators.
18. PARAGRAPH HEADINGS. Paragraph headings are for convenience
only and are not part of the context.
19. EFFECTIVE DATE. The"Effective Date" for purposes of this
Agreement is February 1, 1998.
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[Signature Page Attached]
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[SIGNATURE PAGE -- OPTION AGREEMENT]
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
"Company"
OUTSOURCING SERVICES GROUP, INC.
By: /s/ Xxxxxxxxxx Xxxxxx
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Name: Xxxxxxxxxx Xxxxxx
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Title: CEO and President
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"Employee"
/s/ Xxxx X. Xxxxxx
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XXXX X. XXXXXX
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