STOCK OPTION AGREEMENT
EXHIBIT
10.3
This
Stock Option Agreement (this “Option Agreement”) is entered into as of March 31,
2006 between XXX.XXX, INC., a Minnesota corporation (the “Company”) and XXXXXX
X. XXXXXXX (“Executive”).
Executive
and the Company are parties to an employment agreement dated of even date
herewith (the “Employment
Agreement”).
In
accordance with the Employment Agreement, in connection with Executive’s
entering into employment with the Company, Executive is to receive a stock
option grant with respect to one
hundred thousand (100,000)
shares
of the common stock, $0.01 par value per share, of the Company (the
“Common
Stock”).
Therefore,
the parties agree as follows:
1. Grant
of Incentive Stock Option.
The
Company hereby grants to Executive the right and option to purchase from the
Company, on the terms and subject to the conditions set forth in this Option
Agreement, 100,000 shares of Common Stock (such shares, the “Option
Shares”;
such
option, the “Option”).
The
date of grant of the Option (the “Grant
Date”)
is
March 31, 2006. The
Option is intended to constitute an incentive stock option within the meaning
of
Section 422 of the Internal Revenue Code of 1986, as
amended.
2. Exercise
Price of the Option.
The
exercise price for the Option Shares is $5.93 per share, the closing price
of
the Common Stock on the NASDAQ National Market on the Grant Date as reported
by
Nasdaq National Market System (the “Exercise
Price”).
3. Vesting
of the Option.
The
Option Shares granted under this Option Agreement are immediately exercisable
and fully-vested.
4. Method
of Exercise of Option.
(a) To
the
extent then exercisable, Executive may exercise the Option in whole or in part;
except that no single exercise of the Option is to be for less than 100 Option
Shares, unless at the time of the exercise, the maximum number of Option Shares
available for purchase under the Option is less than 100 Option Shares. In
no
event is the Option to be exercised for a fractional share of Common
Stock.
(b) To
exercise the Option, Executive shall give written notice to The Company stating
the number of shares for which the Option is being exercised and the intended
manner of payment. The date of this notice shall be the exercise date. The
notice must be accompanied by payment in full of the aggregate Exercise Price,
either by cash, check, note or any other instrument acceptable to the
Compensation Committee. Payment in full or in part may also be made in the
form
of shares of Common Stock already owned by Executive based, in each case, on
the
Market Price of the shares of Common Stock on the date the Option is exercised;
except that in no event is payment in full or in part for the exercise of an
Option to be made with any Option Shares that, as of the date of exercise of
the
Option, have been owned by Executive less than six months. If the payment is
in
the form of shares of Common Stock, then the certificate or certificates
representing the those shares must be duly executed in blank by Executive or
must be accompanied by a stock power duly executed in blank suitable for
purposes of transferring those shares to the Company. Fractional shares of
Common Stock will not be accepted in payment of the purchase price of Option
Shares. The Company shall not issue Option Shares until full payment for them
has been made.
(c) As
soon
as practicable upon the Company’s receipt of Executive’s notice of exercise and
payment, the Company shall direct the due issuance of the shares so
purchased.
(d) As
a
further condition precedent to the exercise of this Option in whole or in part,
Executive shall comply with all regulations and the requirements of any
regulatory authority having control of, or supervision over, the issuance of
the
shares of Common Stock and accordingly shall execute any documents that the
Board of Directors of the Company (the “Company
Board”),
in
its sole discretion, deems necessary or advisable to effect such
compliance.
(e) In
the
case of Executive’s death, the Option, to the extent exercisable, may be
exercised by the executor or administrator of Executive’s estate or by any
person or persons who have acquired the Option directly from Executive by
bequest or inheritance.
5. Non-Transferability
of Options.
Executive shall not assign or transfer the Option, other than by will or the
laws of descent and distribution. During Executive’s lifetime, only Executive
(or, in the event of legal incapacity or incompetency, Executive’s guardian or
legal representative) may exercise the Option. Notwithstanding
the foregoing, however, Executive, with the approval of the Compensation
Committee, may transfer the Option for no consideration to or for the benefit
of
Executive’s Immediate Family (including, without limitation, to a trust for the
benefit of Executive’s Immediate Family or to a partnership or limited liability
company for one or more members of Executive’s Immediate Family, subject to such
limits as the Compensation Committee may establish, and the transferee(s) shall
remain subject to all the terms and conditions applicable to the Option prior
to
transfer. The term “Immediate Family” means Executive’s spouse, parents,
children, stepchildren, adoptive relationships, sisters, brothers and
grandchildren (and, for this purpose, shall also include
Executive).
6. Termination
of Option.
(a) This
Option Agreement and any portion of the Option not either terminated or already
exercised will terminate automatically and without further notice at the close
of business on the earliest of the following dates: (i) thirty (30) days
following the termination of Executive’s employment for any reason; or (ii) in
any event, the tenth (10th)
anniversary of the Grant Date.
(b) In
no
event may the Option be exercised, in whole or in part, after termination.
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7. Investment
Representations.
The
Company may require Executive, as a condition of exercising the Option, to
give
written assurances in substance and form satisfactory to the Company to the
effect that Executive is acquiring the Option Shares for Executive’s own account
for investment and not with any present intention of selling or otherwise
distributing them, and to such other effect as The Company deems necessary
or
appropriate in order to comply with applicable federal and state securities
laws.
8. Registration
of Option and Option Shares.
As soon
as practicable after the date hereof, the Company shall file a registration
statement on Form S-8 under the Securities Act of 1934, as amended, to register
the resale of the Option Shares.
9. Compliance
with Law.
The
Option is subject to the requirement that, if at any time counsel to the Company
determines that the listing, registration or qualification of the Option Shares
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance or purchase of the Option Shares, then
the Option may not to be exercised, in whole or in part, unless the listing,
registration, qualification, consent or approval has been effected or obtained
on conditions acceptable to the Compensation Committee. Nothing in this Option
Agreement will be deemed to require the Company to apply for or to obtain the
listing, registration, qualification, consent or approval.
10. Recapitalization.
If the
outstanding shares of Common Stock are changed into or exchanged for a different
number or kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, stock dividend, combination,
subdivision or similar transaction, then, subject to any required action by
the
Company’s shareholders, the number and kind of Option Shares and the Exercise
Price for the Option Shares are to be proportionately adjusted; except that
no
fractional Option Shares are to be issued or made subject to the Option in
making the foregoing adjustments. All adjustments made by the Compensation
Committee under this paragraph 10
will be
final, conclusive and binding upon Executive.
11. Reorganization.
If,
while all or any portion of the Option remains exercisable, the Company proposes
to merge or consolidate with another corporation, whether or not the Company
is
to be the surviving corporation, or if the Company proposes to liquidate or
sell
or otherwise dispose of substantially all of its assets or substantially all
of
the outstanding shares of Common Stock are to be sold, then the Compensation
Committee may, in its sole discretion, either (i) make appropriate provision
for
the protection of the Option by the substitution on an equitable basis of (A)
appropriate stock of the surviving corporation or its parent in the merger
or
consolidation, or other reorganized corporation that will be issuable in respect
to the Option Shares then exercisable, or (B) any alternative consideration
as
the Compensation Committee, in good faith, may determine to be equitable in
the
circumstances; and, in either case, require in connection therewith the
surrender of the Option so replaced; or (ii) upon written notice to Executive,
provide that the unexercised (but exercisable) portion of the Option must be
exercised within a specified number of days of the date of such notice or it
will be terminated. In any such case, the Compensation Committee may, in its
discretion, accelerate the date on which the Option, in whole or in part,
becomes exercisable.
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12. Rights
as Shareholder.
Neither
Executive nor any executor, administrator, distributee or legatee of Executive’s
estate will have any of the rights or privileges of, a shareholder of the
Company in respect of any of the Option Shares unless and until those Option
Shares have been fully paid and certificates representing those Option Shares
have been endorsed, transferred and delivered, and the name of Executive (or
of
Executive’s personal representative, administrator, distributee or legatee of
Executive’s estate) has been entered as the shareholder of record on the
Company’s books.
13. Withholding
of Taxes.
The
Company’s obligation to deliver Options Shares upon exercise of the Option is
subject to Executive’s satisfaction of any applicable federal, state and local
income and employment tax and withholding requirements in a manner and form
satisfactory to the Company.
14. No
Special Employment Rights.
No
provision in this Option Agreement will be deemed to grant to Executive any
right with respect to Executive’s continued employment with, or other engagement
by, the Company or any subsidiary, parent or affiliate or interfere in any
way
with the ability of the Company or any subsidiary, parent or affiliate at any
time to terminate Executive’s employment or other engagement or to increase or
decrease Executive’s compensation from the rate in existence at the Grant Date.
15. Other
Employee Benefits.
The
amount of any compensation deemed to be received by Executive as a result of
the
exercise of the Option or the sale of Option Shares received upon the exercise
will not constitute “earnings” with respect to which any other benefits of
Executive are determined, including, without limitation, benefits under any
pension, profit sharing, life insurance or salary continuation plan.
16. Interpretation
of this Option Agreement.
All
decisions and interpretations made by the Company Board or the Compensation
Committee with regard to any question arising under this Option Agreement will
be binding and conclusive on the Company and Executive and any other person
entitled to exercise the Option as provided for in this Option
Agreement.
17. Choice
of Law.
This
Option Agreement is to be governed by the internal law, and not the laws of
conflicts, of the State of Georgia.
18. Successors
and Assigns.
Subject
to paragraph 5,
this
Option Agreement is to bind and inure to the benefit of and be enforceable
by
Executive, the Company and their respective heirs, executors, personal
representatives, successors and assigns.
19. Notices.
Any
notice provided for in this Option Agreement must be in writing and is to be
either personally delivered, sent by reputable overnight carrier or mailed
by
first class mail, return receipt requested, to the recipient at the address
indicated as follows:
Notices
to Executive:
Xxxxxx
X.
Xxxxxxx
0000
Xxxxxxx Xxxxx Xx.
Xxxxx
Xxxxxxx, XX 00000
4
Copy
to:
Xxxxxx
X.
Xxxxxxx
Xxx.xxx,
Inc.
000
Xxxxxxxxx Xxxxxx Xxx., Xxxxx 000
Xxxxxxx,
XX 00000
_
Notices
to The Company:
Xxx.xxx,
Inc.
000
Xxxxxxxxx Xxxxxx Xxxxxx
Xxxxx
000
Xxxxxxx,
Xxxxxxx 00000
Attn:
Chief Executive Officer
or
any
other address or to the attention of any other person as the recipient party
shall have specified by prior written notice to the sending party. Any notice
under this Option Agreement will be deemed to have been given when so delivered,
sent or mailed.
20. Severability.
Whenever possible, each provision of this Option Agreement is to be interpreted
in a manner as to be effective and valid under applicable law, but if any
provision of this Option Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any particular
jurisdiction, that invalidity, illegality or unenforceability is not to affect
any other provision or any other jurisdiction, and this Option Agreement shall
be reformed, construed and enforced in the particular jurisdiction as if the
invalid, illegal or unenforceable provision had never been contained
herein.
21. Complete
Agreement.
This
Option Agreement embodies the complete agreement and understanding between
the
parties with respect to the subject matter hereof and effective as of its date
supersedes and preempts any prior understandings, agreements or representations
by or between the parties, written or oral, that may have related to the subject
matter hereof in any way.
22. Amendment
and Waiver.
Subject
to the next sentence, the provisions of this Option Agreement may be amended
or
waived only with the prior written consent of the Company and Executive, and
no
course of conduct or failure or delay in enforcing the provisions of this Option
Agreement is to affect the validity, binding effect or enforceability of this
Option Agreement. The Company unilaterally may waive any provision of this
Option Agreement in writing to the extent that the waiver does not adversely
affect the interests of Executive under this Option Agreement, but the waiver
is
not to operate as or be construed to be a subsequent waiver of the same
provision or a waiver of any other provision of this Option
Agreement.
[
SIGNATURE PAGE TO FOLLOW ]
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The
parties are signing this Option Agreement as of the date stated in the
introductory clause.
XXX.XXX,
INC.
By:
/s/ Xxxxxxxx X. Xxxxxx
Name:
Xxxxxxxx X. Xxxxxx
Title:
Senior Vice President
/s/
Xxxxxx X. Xxxxxxx
Xxxxxx
X.
Xxxxxxx
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