1
EXHIBIT 10.40
NONQUALIFIED STOCK OPTION AGREEMENT
This NONQUALIFIED STOCK OPTION AGREEMENT (this "AGREEMENT"),
dated as of July 26, 1999, between XXXXXXXXXXXXX.XXX, INC., a Delaware
Corporation (the "CORPORATION"), and Xxxx X. Xxxx, residing at _________,
_______, _____ _____ (the "PARTICIPANT").
W I T N E S S E T H:
WHEREAS, the Corporation desires, in connection with the
Participant's employment with the Corporation and in accordance with its Stock
Option Plan for Employees, effective as of July 1, 1999 (the "PLAN"), to provide
the Participant with an opportunity to acquire shares of the Corporation's Class
A Common Stock, $0.01 par value (the "CLASS A STOCK"), on favorable terms and
thereby increase her proprietary interest in the continued progress and success
of the business of the Corporation. Unless otherwise defined herein, all
capitalized terms used herein shall have the same definitions as set forth under
the Plan.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein set forth and other good and valuable consideration, the
Corporation and the Participant hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a
determination by the Committee, which is authorized to administer the Plan, made
on July 26, 1999 (the "DATE OF GRANT"), the Corporation, subject to the terms of
the Plan and this Agreement, hereby grants to the Participant as a matter of
separate inducement and agreement, and in addition to and not in lieu of salary
or other compensation for services, the right to purchase (hereinafter referred
to as the "OPTION") an aggregate of 59,500 shares of Class A Stock, subject to
adjustment as provided in the Plan (such shares, as adjusted, hereinafter being
referred to as the "SHARES"). The Option not intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended.
2. Exercise Price. The exercise price for the purchase of the
Shares covered by the Option will be $14.08 per Share, which equals the Fair
Market Value of such Shares on the Date of Grant, subject to adjustment as
provided in the Plan.
2
3. Exercise of Option. The Option shall be exercisable on the
terms and conditions hereinafter set forth:
(a) The Option shall become exercisable as to the
following amounts of the number of Shares originally subject thereto (after
giving effect to any adjustment pursuant to the Plan), on the dates indicated:
(i) as to 19,833 Shares on or after July 26,
2000;
(ii) as to 19,833 Shares on or after July
26, 2001; and
(iii) as to 19,834 Shares on or after July
26, 2002.
(b) The Option may be exercised pursuant to the
provisions of this Section 3, by notice and payment (including, but not limited
to, by a "cashless" exercise) to the Corporation as provided in Section 10
hereof.
4. Term of Option. The term of the Option shall be a period of
ten (10) years from the Date of Grant, subject to earlier termination or
cancellation as provided in this Agreement. This Option, to the extent
unexercised, shall expire on the day immediately prior to the tenth anniversary
of the Date of Grant. The Participant shall not have any rights to dividends or
any other rights of a stockholder with respect to any shares of Class A Stock
subject to the Option until such shares shall have been issued to her (as
evidenced by the appropriate entry on the books of a duly authorized transfer
agent of the Corporation) provided that the date of issuance shall not be
earlier than the date this Option is exercised and payment of the full purchase
price of the shares of Class A Stock (with respect to which this Option is
exercised) is made to the Corporation.
5. Non-transferability of Option. The Option shall not be
assigned, transferred or otherwise disposed of, or pledged or hypothecated in
any way, and shall not be subject to execution, attachment or other process,
except as may be provided in the Plan. Any assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions of
the Plan, or any levy of execution, attachment or other process attempted upon
the Option, will be null and void and without effect. Any attempt to make any
such assignment, transfer, pledge, hypothecation or other disposition of the
Option or any attempt to make any such levy of execution, attachment or other
process will cause the Option to terminate immediately upon the happening of any
such event; provided, however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any rights or remedies
which the Corporation or any Parent or Subsidiary may have under this Agreement
or otherwise.
6. Exercise Upon Cessation of Employment. (a) If the
Participant's service with the Corporation is terminated by reason of a
Qualifying Termination, each Option granted
2
3
to the Participant shall remain exercisable by her until the end of the exercise
period under such Option, but only to the extent exercisable (and not exercised)
on the date of such Qualifying Termination, and all Options not exercisable on
the date of such Qualifying Termination shall be forfeited and canceled. If the
Participant's service with the Corporation is terminated by reason of a
Non-Qualifying Termination, all outstanding unexercised Options shall be
forfeited or canceled, as the case may be, as of the date of such Non-Qualifying
Termination. Notwithstanding the foregoing provisions of this Section 6(a), so
long as there has been no Initial Public Offering, the Corporation shall have
the right in its sole discretion to purchase during the one year period
following the date of Qualifying Termination of the Participant, and the
Participant shall have the obligation to sell to the Corporation (i) any
outstanding Option exercisable by the Participant at the then Fair Market Value
of a share of Class A Stock less the exercise price; and (ii) any shares of
Class A Stock held of record or beneficially by the Participant through the
exercise of an Option at their Fair Market Value.
(b) Except as otherwise specifically provided herein
or in the Plan, the Option shall not be affected by any change of duties or
position of the Participant so long as she continues to be a Participant of the
Corporation or of any Parent or Subsidiary thereof. If the Participant is
granted a temporary leave of absence, such leave of absence shall be deemed a
continuation of her employment by the Corporation or of any Parent or Subsidiary
thereof for the purposes of this Agreement, but only if and so long as the
employing corporation consents thereto.
7. Exercise Upon Death. If the Participant dies while holding
an outstanding Option, such Option, to the extent exercisable (and not
exercised) on the date of her death, shall remain so exercisable by her estate
(or other beneficiaries, as designated in writing by such Participant) until the
end of the exercise period under the Option, unless the Committee shall
otherwise provide at the time of the grant of the option. So long as there has
been no Initial Public Offering and subject to any restrictions or conditions
set forth in applicable credit and other financing agreements of the Corporation
and to applicable law: (i) with respect to any outstanding Option exercisable by
the estate or beneficiary of the deceased Participant, such estate or
beneficiary shall have the right to sell to the Corporation during the one year
period following the date of death of the Participant, and the Corporation shall
have the obligation to purchase, such Option at the then Fair Market Value of a
share of Class A Stock less the exercise price; and (ii) with respect to shares
of Class A Stock held of record or beneficially by the estate or beneficiary of
the deceased Participant through the exercise of such Option, such estate or
beneficiary shall have the right to sell to the Corporation during the one year
period following the date of death of the Participant, and the Corporation shall
have the obligation to purchase, such shares at their then Fair Market Value.
Notwithstanding the foregoing provisions of this Section 7, at any time during
the one year period following the date of death of the Participant, the
Corporation shall have the right in its sole discretion to purchase, and the
estate or beneficiary of the deceased Participant shall have the obligation to
sell to the Corporation (i) any outstanding Option exercisable by the estate or
beneficiary at the then Fair Market Value of a share of Class A Stock less the
exercise price; and (ii) any shares of Class A Stock held of record
3
4
or beneficiary by the estate or beneficiary through the exercise of an Option at
their then Fair Market Value.
8. Merger, Consolidation or Change in Control of Corporation.
(a) Upon the occurrence of a Liquidity Event, the Participant shall have the
right immediately prior to the effective date of such Liquidity Event (or, if
later, within 10 days of the Participant's notification of such event) to
exercise any Option granted and still outstanding (and not otherwise expired) in
whole or in part without regard to any installment or vesting provision of this
Agreement, provided that all conditions precedent to the exercise of such
Options, other than the passage of time, have occurred. The Corporation, to the
extent practicable, shall give advance notice to the Participant of any such
Liquidity Event. All such Options which are not so exercised shall be canceled
and forfeited as of the effective time of any such Liquidity Event (or, if
later, at the end of the applicable 10-day notice period). If the Corporation
engages in a Business Combination which is not a Liquidity Event, the
Corporation may, in connection with such transaction, at its option elect one of
the following: provide for (i) the continuance of the Option granted hereunder
(either by express provision or, if the Corporation is the surviving corporation
in the Business Combination, as a consequence of the failure to address the
treatment of options in the applicable agreements), (ii) the substitution of new
options for the Option granted hereunder (which new options grant the
Participant the right to purchase the securities they would have received had
they held Class A Stock immediately prior to the Business Combination) or (iii)
acceleration of any outstanding Options in which case such Business Combination
will be deemed a "Liquidity Event" and Options treated in accordance with the
preceding sentences of this Section 9(a).
(b) In the event that the Participant terminates his
employment with the Corporation or the surviving corporation in a Qualifying
Business Combination for Good Reason, or the Participant's employment is
terminated by the Corporation or such surviving corporation without Good Cause,
in either case within one year of such Qualifying Business Combination, the
Options granted hereunder shall immediately become exercisable without regard to
any installment or vesting provision of this Agreement, provided that all
conditions precedent to the exercise of such Options, other than the passage of
time, have occurred.
9. Registration. The Corporation may register or qualify the
shares covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
10. Method of Exercise of Option. (a) Subject to the terms and
conditions of this Agreement, the Option shall be exercisable by notice in the
manner set forth in Exhibit A hereto (the "NOTICE") and provision for payment to
the Corporation in accordance with the procedure prescribed herein. Each such
Notice shall:
(i) state the election to exercise the
Option and the number of Shares with respect to which it is being
exercised;
4
5
(ii) contain a representation and agreement
as to investment intent, if required by the Committee with respect to
such Shares, in a form satisfactory to the Committee;
(iii) be signed by the Participant or the
person or persons entitled to exercise the Option and, if the Option is
being exercised by any person or persons other than the Participant, be
accompanied by proof satisfactory to the Committee of the right of such
other person or persons to exercise the Option;
(iv) include payment of the full purchase
price for the shares of Class A Stock to be purchased pursuant to such
exercise of the Option; and
(v) be received by the Corporation on or
before the date of the expiration of this Option. In the event the date
of expiration of this Option falls on a day which is not a regular
business day at the Corporation's executive office then such Notice
must be received at such office on or before the last regular business
day prior to such date of expiration.
(b) Payment of the purchase price of any shares of
Class A Stock, in respect of which the Option shall be exercised, shall be made
by the Participant or such person or persons at the place specified by the
Corporation on the date the Notice is received by the Corporation (i) by
delivering to the Corporation a certified or bank cashier's check payable to the
order of the Corporation, (ii) by delivering to the Corporation properly
endorsed certificates of shares of Class A Stock (or certificates accompanied by
an appropriate stock power) with signature guaranties by a bank or trust
company, (iii) by having withheld from the total number of shares of Class A
Stock to be acquired upon the exercise of this Option a specified number of such
shares of Class A Stock, (iv) by any form of "cashless" exercise or (v) by any
combination of the above.
(c) The Option shall be deemed to have been exercised
on the date the Notice was received by the Corporation with respect to any
particular shares of Class A Stock if, and only if, the preceding provisions of
this Section 11 and the provisions of Section 12 hereof shall have been complied
with. Anything in this Agreement to the contrary notwithstanding, any Notice
given pursuant to the provisions of this Section 11 shall be void and of no
effect if all of the preceding provisions of this Section 11 (including this
subsection (c)) and the provisions of Section 12 shall not have been complied
with.
(d) The certificate or certificates for shares of
Class A Stock as to which the Option shall be exercised will be registered in
the name of the Participant (or in the name of the Participant's estate or other
beneficiary, if the Option is exercised after the Participant's death), or if
the Option is exercised by the Participant and if the Participant so requests in
the Notice exercising the Option, will be registered in the name of the
Participant and another person jointly, with right of survivorship, and will be
delivered as soon as practical after
5
6
the date the Notice is received by the Corporation (accompanied by full payment
of the exercise price), but only upon compliance with all of the provisions of
this Agreement.
(e) If the Participant fails to accept delivery of
and pay for all or any part of the number of Shares specified in such Notice,
his right to exercise the Option with respect to such undelivered Shares may be
terminated in the sole discretion of the Committee. The Option may be exercised
only with respect to full Shares.
(f) The Corporation shall not be required to issue or
deliver any certificate or certificates for shares of its Class A Stock
purchased upon the exercise of any part of this Option prior to the payment to
the Corporation, upon its demand, of any amount requested by the Corporation for
the purpose of satisfying its liability, if any, to withhold state or local
income or earnings tax or any other applicable tax or assessment (plus interest
or penalties thereon, if any, caused by a delay in making such payment) incurred
by reason of the exercise of this Option or the transfer of shares thereupon.
Such payment shall be made by the Participant in cash or, with the consent of
the Corporation, by tendering to the Corporation shares of Class A Stock equal
in value to the amount of the required withholding. In the alternative, the
Corporation may, at its option, satisfy such withholding requirements by
withholding from the shares of Class A Stock to be delivered to the Participant
pursuant to an exercise of this Option, a number of shares of Class A Stock
equal in value to the amount of the required withholding.
11. Approval of Counsel. The exercise of the Option and the
issuance and delivery of shares of Class A Stock pursuant thereto shall be
subject to approval by the Corporation's counsel of all legal matters in
connection therewith, including, but not limited to, compliance with the
requirements of the Securities Act of 1933 and the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Class A Stock may then be
listed.
12. Resale of Class A Stock. (a) If so requested by the
Corporation, upon any sale or transfer of the Class A Stock purchased upon
exercise of the Option, the Participant shall deliver to the Corporation an
opinion of counsel satisfactory to the Corporation to the effect that either (i)
the Class A Stock to be sold or transferred has been registered under the
Securities Act of 1933, and that there is in effect a current prospectus meeting
the requirements of Section 10(a) of the Securities Act which is being or will
be delivered to the purchaser or transferee at or prior to the time of delivery
of the certificates evidencing the Class A Stock to be sold or transferred, or
(ii) such Class A Stock may then be sold without violating Section 5 of said
Act.
6
7
(b) The Class A Stock issued upon exercise of the
Option shall bear the following legend if required by counsel for the
Corporation:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
TRANSFER OF SUCH SECURITIES MAY BE MADE UNLESS SUCH TRANSFER
IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
13. Reservation of Shares. The Corporation shall at all times
during the term of the Option reserve and keep available such number of shares
of the Class A Stock as will be sufficient to satisfy the requirements of this
Agreement.
14. Nonguarantee of Employment. Nothing contained in this
Agreement shall be construed as a right of the Participant to be continued as an
Participant of the Corporation (or of any Parent or Subsidiary), or as a
limitation on the right of the Corporation or any Parent or Subsidiary to remove
the Participant, with or without cause.
15. Notices. Each notice relating to this Agreement shall be
in writing and delivered in person, by air courier or by certified mail to the
proper address. All notices to the Corporation or the Committee shall be
addressed to them at XxxxxxxXxxxxx.xxx, Inc., 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxx
Xxxx, XX 00000, Attn: President and Chief Executive Officer. All notices to the
Participant shall be addressed to the Participant or such other person or
persons at the Participant's address above specified. Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect.
16. Benefits of Agreement. This Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Corporation. All
obligations imposed upon the Participant and all rights granted to the
Corporation under this Agreement shall be binding upon the Participant's heirs,
legal representatives, successors and assigns.
17. Severability. In case any provision of this Agreement
shall be held illegal or void, such illegality or invalidity shall not affect
the remaining provisions of this Agreement, but shall be fully severable, and
this Agreement shall be construed and enforced as if said illegal or invalid
provisions had never been inserted herein.
18. Governing Law. All questions pertaining to the validity,
construction and administration of this Agreement shall be determined in
accordance with the laws of the State of New York.
7
8
19. Incorporation of Terms of Plan. This Agreement shall be
interpreted under, and subject to, all of the terms and provisions of the Plan,
which are incorporated herein by reference.
IN WITNESS WHEREOF, the Corporation has caused this Agreement
to be executed in its name by its President and its corporate seal to be
hereunto affixed and attested by its Secretary or its Assistant Secretary and
the Participant has hereunto set his hand all as of the date, month and year
first above written.
XxxxxxxXxxxxx.xxx, Inc.
By:
-----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive
ATTEST: Officer
-------------------------- ---------------------------------
Secretary Xxxx X. Xxxx
---------------------------------
Social Security Number
9
EXHIBIT A
NONQUALIFIED STOCK OPTION EXERCISE FORM
--------------------
Date
XxxxxxxXxxxxx.xxx, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attention: Secretary
Dear Sirs:
Pursuant to the provisions of the Nonqualified Stock Option
Agreement dated July 26, 1999, whereby you have granted to me a nonqualified
stock option to purchase 59,500 shares of the Class A Common Stock (the "CLASS A
STOCK") of XxxxxxxXxxxxx.xxx, Inc. (the "CORPORATION"), I hereby notify you that
I elect to exercise my option to purchase ______________ of the shares covered
by such Option at the exercise price specified thereon. In full payment of the
price for the shares being purchased hereby:
1. I am delivering to you herewith:
(a) a certified or bank cashier's check payable to
the order of the Corporation in the amount of $_________; $_________ of this
amount is the purchase price of the shares, and the balance represents payment
of withholding taxes as follows: Federal $_________, State $_________ and Local
$_________. OR
(b) a certificate or certificates for [ ] shares of
Class A Stock of the Corporation, which have a Fair Market Value as of the date
hereof at least equal to the option exercise price, and a certified or bank
cashier's check, payable to the order of the Corporation, in the amount of
$_________, which represents payment of withholding taxes as follows: Federal
$_________, State $_________ and Local $_________. Any such stock certificate or
certificates are endorsed, or accompanied by an appropriate stock power, to the
order of the Corporation, with my signature guaranteed by a bank or trust
company or by a member firm of the Nations Association of Securities Dealers,
Inc.
10
(c) OR
(d) Please retain __________ shares of Class A Stock
of the Corporation covered by the Option which have a Fair Market Value as of
the date hereof at least equal to the option exercise price. I am delivering to
you herewith a certified or bank cashier's check, payable to the order of the
Corporation, in the amount of $_________ which represents payment of withholding
taxes as follows: Federal $_________, State $_________ and Local $_________.
In the event the amounts designated above are insufficient for
the withholding of federal, state and local taxes, I hereby authorize the
Corporation to withhold in accordance with applicable law from any regular cash
compensation payable to me the balance of any taxes required to be withheld by
the Corporation under federal, state or local law as a result of my election
herein. Further, I acknowledge that I am purchasing these shares for investment
purposes only and not for resale.
Very truly yours,
---------------------------------
Xxxx X. Xxxx
Address for notices, reports, dividend checks
and other communications to stockholders:
[ ]
[ ]
11
XXXXXXXXXXXXX.XXX, INC.
Stock Option Plan for Employees
NONQUALIFIED STOCK OPTION
Granted To
XXXX X. XXXX
Participant
59,500 $14.08
------------------------ ------------------------
Number of Shares Price per Share
DATE GRANTED: July 26, 1999 EXPIRATION DATE: July 25, 1999
