EXHIBIT 10.19.7
XXXXX XXXXXXXX CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated ____________ ___, 2002, is made by and between Xxxxx
Xxxxxxxx Corporation, a Delaware corporation, hereinafter referred to as the
"Company," and *, an employee of Company or a Subsidiary of Company, hereinafter
referred to as "Employee".
WHEREAS, Company wishes to afford Employee the opportunity to purchase shares of
its $1.00 par value common stock under the terms of The 1990 Stock Option and
Incentive Plan for Key Employees of Xxxxx Xxxxxxxx Corporation; and
WHEREAS, the Compensation and Executive Personnel Committee of the Company's
Board of Directors (herein after referred to as the "Committee"), appointed to
administer said Plan, has determined that it would be to the advantage and best
interest of Company and its shareholders to grant the Option provided for herein
to Employee as an inducement to remain in the service of Company or its
Subsidiaries and as an incentive for increased efforts during such service;
WHEREAS, the Committee has advised the Company of its determination and
instructed the undersigned officers to issue said Option, which the Committee
has determined should be a Non-Qualified Stock Option, as authorized under the
Plan;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, Company and Employee do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement they shall have the
meaning specified below unless the context clearly indicates to the contrary.
1.1 Option
"Option" shall mean the option to purchase common stock of the Company
granted under the Stock Option Agreement.
1.2 Plan
The "Plan" shall mean The 1990 Stock Option and Incentive Plan for Key
Employees of Xxxxx Xxxxxxxx Corporation.
1.3 Pronouns
The masculine pronoun shall include the feminine and neuter, and the
singular and plural, where the context so indicates.
1.4 Secretary
"Secretary" shall mean the Secretary of the Company.
----------
* Refer to the attached Notice.
1
1.5 Subsidiary
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock
possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
1.6 Termination of Employment
"Termination of Employment" shall mean the time when the
employee-employer relationship between the Employee and the Company or
a Subsidiary is terminated for any reason, including, but not limited
to, a termination by resignation, discharge, death or retirement, but
excluding terminations where there is a simultaneous reemployment or
continuing employment by the Company or a Subsidiary, and, at the
discretion of the Committee, terminations which result in the severance
of the employee-employer relationship that do not exceed one year. The
Committee, in its absolute discretion, shall determine the effect of
all other matters and questions relating to Termination of Employment.
1.7 Change of Control
"Change of Control" shall mean a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e)
of Schedule 14A, Regulation 240.14a-101, promulgated under the
Securities Exchange Act of 1934 as in effect on the date of this
Agreement or, if Item 6(e) is no longer in effect, any regulation
issued by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 which serves similar purposes; provided
that, without limitation, a Change of Control shall be deemed to have
occurred if and when:
(a) Any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) is or becomes
a beneficial owner, directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities, or
(b) Individuals who were members of the Board of Directors of the
Company immediately prior to a meeting of the shareholders of
the Company involving a contest or the election of the
directors shall not constitute a majority of the Board of
Directors following such election.
1.8 Beneficiary
"Beneficiary" shall mean a person properly designated by the Employee,
including his/her spouse or heirs at law, to exercise such Employee's
rights under the Plan. Designation, revocation and redesignation of
Beneficiaries must be made in writing in accordance with rules
established by the Committee and shall be effective upon delivery to
the Committee.
ARTICLE II
GRANT OF OPTION
2.1 Grant of Option
In consideration of Employee's agreement to remain in the employ of
Company or its subsidiaries and for other good and valuable
consideration, on the date hereof the Company irrevocably
2
grants to Employee the option to purchase any part or all of an
aggregate of * shares of its $1.00 par value common stock upon the
terms and conditions set forth in this Agreement. Such Option is
granted pursuant to the Plan and shall also be subject to the terms and
conditions set forth in the Plan.
2.2 Purchase Price
The purchase price of the shares of stock covered by the Option shall
be __________ dollars ($_____) per share without commission or other
charge.
2.3 Consideration to Company
In consideration of the granting of this Option by the Company, the
Employee agrees to render faithful and efficient service to the Company
or a Subsidiary, with such duties and responsibilities as the Company
shall from time to time prescribe, for a period of at least one (1)
year from the date this Option is granted (unless the Employee retires
before the end of such period and the Employee satisfies the
requirements of the last paragraph of Section 3.1(a) below). Nothing in
this Agreement or in the Plan shall confer upon the Employee any right
to continue in the employ of the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and its
Subsidiaries, which are hereby expressly reserved, to discharge the
Employee at any time for any reason whatsoever, with or without good
cause. Nor shall it interfere with or restrict in any way, other than
the forfeiture of all rights under this Agreement, the right of the
Employee voluntarily to terminate his employment with the Company or a
Subsidiary.
2.4 Adjustments in Option
In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of
merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend, or combination of shares, the Committee shall
make an appropriate and equitable adjustment in the number and kind of
shares as to which the Option, or portions thereof then unexercised,
shall be exercisable. Such adjustment shall be made with the intent
that after the change or exchange of shares, the Employee's
proportionate interest shall be maintained as before the occurrence of
such event. Such adjustment in the Option may include a necessary
corresponding adjustment in the option price per share, but shall be
made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices).
ARTICLE III
PERIOD OF EXERCISABILITY
3.1 Commencement of Exercisability
(a) The Option will vest (become available for exercise) nine
years and nine months from the date the Option was granted.
However, if certain conditions are met, the Option will become
eligible for accelerated or early vesting three years from the
date the Option was
----------
* Refer to the attached Notice.
3
granted or on subsequent anniversary dates thereafter.
Such early or accelerated vesting will occur provided that the
Company's return on total capital as reported in the annual
report to shareholders (or other report) for the most recently
completed fiscal year equals or exceeds the sixty-seventh
(67%) percentile of the return on total capital for the peer
group companies (as listed in the Company's proxy statement)
for such third year (the performance test). (For example, the
performance test for accelerated vesting for options granted
in December 2002 will be based on the return on total capital
for 2005).
To facilitate the peer group performance comparison needed to
determine whether option vesting is accelerated, the figures
for peer group companies return on total capital will be based
upon the twelve-month performance for each company in the peer
group closest to the Company's fiscal year end, using the most
recent publicly available financial information for such
companies.
If the Company meets the performance test described above, all
prior non-vested Options eligible for accelerated vesting will
become available for exercise as soon as possible following
the Committee's certifications of the Company's performance as
compared to the performance of the peer group companies.
If the Company fails to meet the performance test described
above, all prior non-vested Options eligible for accelerated
vesting will be subject to a similar performance test
following the end of the next fiscal year. The test for
accelerated vesting of Options will continue to "roll" in the
manner described above until the Company passes the
performance test, until nine years and nine months have
elapsed from the date of grant, or until such Options
otherwise vest as described herein.
Alternatively, Options, granted to employees as participants
in the Long Term Incentive Plan, who (i) retire under the
Company's retirement plan within sixty (60) days of the date
of Termination of Employment, (ii) have worked for the Company
for ten (10) or more years, and (iii) have a combination of
age and service with the Company of seventy five (75) or more,
will vest as of the date of Termination of Employment,
provided that the Company has met the performance test (as
described above) for the fiscal year ending prior to the
employee's retirement.
(b) No portion of the Option which is unexercisable under
Subsection (a) above at Termination of Employment shall
thereafter become exercisable.
(c) Notwithstanding Subsections 3.1(a) and 3.1(b) above, and
Section 3.4 below, upon a Change of Control, all Option
installments not yet exercisable shall become immediately
exercisable; provided, however, that if all or a portion of
the Option installments which otherwise would become
exercisable pursuant to this Subsection 3.1(c) is determined
by the Committee to constitute, when exercised, a "parachute
payment" as defined by Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), such Option
installments or portion thereof shall not become exercisable
upon the Change of Control. In making this determination
pursuant to the preceding sentence the Committee shall first
take into account any payments to the Employee contingent on a
change in the ownership or control of the Company or its
assets (as provided in said Section 280G) under any other
agreement or arrangement between the Company and Employee,
4
exclusive of any agreement which is not subject to Section
280G because of Section 67(e) of the Tax Reform Act of 1984.
Subsection 3.1(c) shall be final and binding upon Employee.
3.2 Term of Option
The Option will expire and will not, under any condition, be
exercisable after the tenth (10th) anniversary of the date the Option
was granted. Such date shall be the Option's Expiration Date.
3.3 Exercise of Option after Termination of Employment
This Option is exercisable by the Employee only while he is employed by
the Company or a Subsidiary, subject to the following exceptions (or as
authorized by the Committee):
(a) If the Employee dies while the Option is exercisable under the
terms of this Agreement, the Employee's Beneficiary may
exercise such rights, subject to the limitation in Subsection
3.1(b). The Option must be exercised within twelve (12) months
after the Employee's death, and the Committee may in its
discretion extend the Expiration Date of the Option to
accommodate such exercise.
(b) If the Employee's employment is terminated due to his
permanent and total disability, as defined in Section 22(c)(3)
of the Code, the Employee may exercise the Option, subject to
the limitation in Subsection 3.1(b), within twelve (12) months
after Termination of Employment, but not later than the
Option's Expiration Date.
(c) If the Employee's employment is terminated due to his
retirement, the Employee may exercise the Option, subject to
the limitations of Subsection 3.1(b), within sixty (60) months
after Termination of Employment, but not later than the
Option's Expiration Date.
(d) If the Employee's employment is terminated due to his
retirement at or after age fifty-five (55) and such Employee
continues as a director of the Company, the Employee may
exercise the Option to the same extent as he would be able to
exercise it if he continued to be employed, until the earlier
of two (2) years after he ceases to be a director of the
Company or the Option's Expiration Date.
(e) If the Employee's employment is terminated other than for good
cause or the reasons set forth in Subsections (a) through (d)
above, the Employee may exercise the Option, subject to the
limitations of Subsection 3.1(b), within three (3) months
after Termination of Employment, but not later than the
Option's Expiration Date.
3.4 Exercise of Option Upon Merger or Consolidation
(a) Notwithstanding Section 3.3, the Option may not be exercised
to any extent by anyone after the effective date of either the
merger or consolidation of the Company into another
corporation, the exchange of all or substantially all of the
assets of the Company for the securities of another
corporation, the acquisition by another corporation of 80% or
more of the Company's then outstanding voting stock, or the
liquidation or dissolution of the Company. At least ten (10)
days prior to the effective date of such merger,
consolidation, exchange, acquisition, liquidation, or
dissolution, the Committee shall give the
5
Employee notice of such event if the Option has then neither
been fully exercised nor become unexercisable due to the
passage of the specified time period in Subsection (b) below.
(b) In the event of such merger, consolidation, exchange,
liquidation, or dissolution, the Committee may, in its
absolute discretion and on such terms and conditions as it
deems appropriate, provide by resolution adopted prior to such
event and incorporated in the notice referred to in Subsection
(a) above, that for a specified period of time prior to the
effective date of such event, the Option shall be exercisable
as to all shares covered hereby, notwithstanding that the
Option may not yet have become fully exercisable under
Subsection 3.1(a).
ARTICLE IV
EXERCISE OF OPTIONS
4.1 Partial Exercise
Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time
prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.2. Each partial exercise shall be for not
less than twenty-five (25) shares (or a smaller number, if it is the
maximum number which may be exercised under Section 3.1), and shall be
for whole shares only.
4.2 Manner of Exercise
The Option, or any exercisable portion thereof, may be exercised solely
by delivery to the Secretary or his office of all of the following:
(a) A written notice, complying with the applicable rules
established by the Committee, stating that the Option or
portion is thereby exercised. The notice shall be signed by
the Employee or the other person then entitled to exercise the
Option; and
(b) Full payment for the shares with respect to which the option
or portion thereof is exercised. Payment may be made in cash
(or by certified or bank cashier's check), or by actual or
constructive delivery to the Company, in accordance with the
procedures established by the Company, of Company Common Stock
then owned by the Employee with a fair market value on the
date the option is exercised equal to the aggregate exercise
purchase price of the shares with respect to which the option
or portion thereof is exercised, or by a combination of cash
and surrender of stock in the manner herein specified; and
(c) Full payment to the Company of any federal, state or local
taxes required to be withheld in connection with the exercise,
which payment may be made in cash (or by certified or bank
cashier's check) or by actual or constructive delivery and
surrender to the Company in accordance with procedures
established by the Company, of Company Common Stock then owned
by the Employee with a fair market value on the date the
option is exercised equal to the total of such taxes due in
connection with the exercise, or by a combination of cash and
surrender of stock in the manner herein specified; and
(d) In the event the Option or portion thereof shall be exercised
by any person or persons other than the Employee, appropriate
proof of the right of such person or persons to
6
exercise the Option.
4.3 Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of the Option, or any
part there of, may be either previously authorized but unissued shares
or issued shares which have then been reacquired by the Company. Such
shares shall be fully paid and nonassessable. The Company shall not be
required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of the Option or part thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which such class of stock is then listed;
(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under rulings
or regulations of the Securities and Exchange Commission or
any other governmental regulatory body which the Committee
shall, in its absolute discretion, deem necessary or
advisable;
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee
shall, in its absolute discretion, determine to be necessary
or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time
establish for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares.
4.4 Rights as Shareholders
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and
until certificates representing such shares shall have been issued by
the Company to such holder.
ARTICLE V
MISCELLANEOUS
5.1 Administration
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith
and to interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Committee in good faith
shall be final and binding upon the Employee, the Company and all other
interested persons. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Option. In its absolute
discretion, the Board of Directors of the Company may at any time and
from time to time exercise any and all rights and duties of the
Committee under the Plan and this Agreement.
7
5.2 Transferability
Neither the Option nor any interest or right therein or part thereof
may be sold, pledged, assigned or transferred in any manner other than
by will or by the applicable laws of descent and distribution, except
as authorized by the Committee. The Option shall be exercised during
the Employee's lifetime only by the Employee, or his guardian or legal
representative, except as authorized by the Committee.
5.3 Notices
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary and any
notice to be given to the Employee shall be addressed to him at the
address given beneath his signature here to. By a notice given pursuant
to this Section, either party may hereafter designate a different
address for notices to be given to him. Any notice which is required to
be given to Employee shall, if Employee is then deceased, be given to
Employee's personal representative if such representative has
previously informed the Company of his status and address by written
notice under this Section. Any notice shall have been deemed duly given
when enclosed in a properly sealed envelope or wrap per addressed as
aforesaid, deposited (with postage prepaid) in a post office or branch
post office regularly maintained by the United States Postal Service.
5.4 Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement.
5.5 Construction
This Agreement shall be administered and interpreted under the laws of
the State of California.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.
XXXXX XXXXXXXX CORPORATION
by: Chairman & Chief Executive Officer*
by: Secretary*
by: Optionee*
----------
* Refer to the attached Notice.
8
