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Exhibit 4.02
STOCK OPTION AGREEMENT
DATED AS OF:
To: Optionee
1. Pursuant to the 1996 Stock Option Plan ("1996 Plan") of Rock
Financial Corporation (the "Company") and with the approval of the Company's
Compensation Committee in accordance with the 1996 Plan, the Company hereby
grants to you an option (the "Option") to purchase Shares Words (Shares Number)
Common Shares, par value $0.01 per share, of the Company (the "Shares") at $____
per Share, upon the terms and conditions contained in this Stock Option
Agreement and in the 1996 Plan, a copy of which is attached to, and, as amended
from time to time, is made a part of, this Stock Option Agreement. You agree
that this Option is not in lieu of any salary or other compensation for services
rendered or to be rendered by you to the Company or any Subsidiary. Capitalized
terms not otherwise defined in this Stock Option Agreement shall have the
meanings given them in the 1996 Plan.
2. Nonqualified Option. The Option is intended to be a Nonqualified
Option, as defined in the 1996 Plan.
3. Vesting and Term.
(a) Vesting. Subject to the other terms of this Option and
the 1996 Plan, you may exercise the Option in accordance with the following
schedule:
(1) Between the date of this option and ___________,
199__, none of the Shares may be purchased.
(2) Commencing _________________, one-fifth (1/5) of
the Shares may be purchased.
(3) Commencing _________________, an additional
one-fifth (1/5) of the Shares may be purchased.
(4) Commencing _________________, an additional
one-fifth (1/5) of the Shares may be purchased.
(5) Commencing _________________, an additional
one-fifth (1/5) of the shares may be purchased.
(6) Commencing _________________, the final
one-fifth (1/5) of the Shares may be purchased.
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(b) Term. The Option shall expire (to the extent not
previously exercised), and all rights to exercise any unexercised portion of
this Option shall cease, on the earliest of (i) _________________, (ii) the date
you cease to be an employee of the Company or a Subsidiary because of
termination for "cause" (as defined in Section 2.(c) or because of your
retirement, resignation or other termination by you of employment with the
Company (other than by your death or disability), (iii) only with respect to the
portion of this Option, if any, that is not exercisable at the date of
termination of your employment with the Company or a Subsidiary, the date you
cease to be an employee of the Company or a Subsidiary for any reason or for no
reason, and (iv) only with respect to the portion of this Option, if any, that
is exercisable at the date of termination of your employment with the Company,
(A) one year after such termination, if such termination is a result of your
death or permanent disability, and (B) 90 days after such termination, if such
termination is by the Company without "cause" (as defined in Section 2.(c).
(c) Cause. For purposes of this Option, "cause" has the same
meaning as in your employment agreement with the Company, if any, or if you do
not have an employment agreement with the Company, "cause" means the occurrence
of any of the following:
(1) A material breach of any term or provision of
your employment agreement, if any, with the Company or a Subsidiary, the
Company's Employee Handbook, or this Stock Option Agreement.
(2) Your failure to perform your duties of
employment in a reasonable and business-like manner.
(3) Your conviction of a felony or any crime
involving moral turpitude, including, without limitation, crimes
involving drugs or liquor, regardless of whether appealed.
(4) Your commission of, or participation in, any act
of fraud, false pretense, forgery, embezzlement or dishonesty against
the Company or any Subsidiary.
(5) Your commission of, or participation in, any
other act or omission, wantonly, willfully, or recklessly, or in a
manner that is negligent against, and having an adverse effect upon, the
affairs of the Company or any Subsidiary.
(6) Your substantial dependence on any mind altering
or other harmful substance, including, without limitation, alcohol,
marijuana, amphetamines, barbiturates, LSD, cocaine, narcotic drugs, or
any natural or synthetic substance having the same or similar effects as
any of the foregoing, to the extent that such use would constitute
reasonable cause for termination under applicable law.
(d) Special Termination Provisions. The purpose of the 1996
Plan is to provide key employees with an increased incentive to make significant
and extraordinary
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contributions to the long-term performance and growth of the Company and its
Subsidiaries, to join the interests of key employees with the interests of the
shareholders of the Company, and to facilitate attracting and retaining key
employees of exceptional ability. You acknowledge that the Company expends
considerable time, money and resources in recruiting, training and developing
the skills and abilities of its employees, developing business relationships
with referral sources and customers so as to improve the good will of the
Company, establishing and maintaining close business relationships between
employees and the Company's customers and obtaining, compiling and developing
confidential customer lists, various internal computer reports and other
proprietary business information not readily available to the public or through
other sources. You agree that the provisions in this Section 2.(d) are necessary
to preserve and protect the legitimate business interests of the Company. In
return for granting this Option to you, notwithstanding any other term of this
Option to the contrary, you agree to the following:
(1) Forfeiture of Option Gain if You Leave the
Company Within One Year After Exercise. If you exercise any portion of
this Option and your employment with the Company terminates within one
year after such exercise for any reason except death, disability, normal
retirement or termination by the Company without "cause", then the gain
represented by the fair market value of a Share, determined pursuant to
Paragraph 8 of the 1996 Plan, on the date of such exercise over the
exercise price, multiplied by the number of Shares you purchased
("option gain"), without regard to any subsequent increase or decrease
in fair market value, shall be paid by you to the Company.
(2) Forfeiture of Option Gain and Unexercised
Options if You Engage In Certain Activities. If, at any time within (i)
one year after termination of your employment with the Company, or (ii)
one year after you exercise any portion of this Option, whichever is
later, you engage in any activity in competition with any activity of
the Company or inimical, contrary or harmful to the interests of the
Company, including, but not limited to,
(A) conduct related to your employment for
which either criminal or civil penalties against you may be
sought,
(B) violation of published Company policies,
including, without limitation, the Company's xxxxxxx xxxxxxx
policy,
(C) owning, maintaining, operating or
engaging in the same or similar line of business or activity as
the Company or any Subsidiary or in any business or activity
that competes with the Company or any Subsidiary ("Competing
Business") in any county of any state in which the Company or
any Subsidiary is operating a prime or sub-prime mortgage loan
origination office or is engaged in telemarketing operations or
call center operations,
(D) accepting employment with or serving as
a consultant, advisor or in any other capacity to an employer
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(including, without limitation, any individual, firm, agency,
partnership, limited liability company, unincorporated
association, corporation or pre-incorporated association
("Person or Entity")) that is a Competing Business or is acting
against the interests of the Company or any Subsidiary,
(E) undertaking any efforts or activities
toward pre-incorporating, incorporating, financing or commencing
any Competing Business,
(F) advising, serving, or consulting with
any Person or Entity which is or will be undertaking efforts
towards incorporating, financing or commencing any Competing
Business or activity which engages in a Competing Business,
(G) employing, offering employment to,
soliciting for the purpose of employing or recruiting any
present, former or future employee of the Company or any
Subsidiary for or on behalf of any Person or Entity,
(H) calling upon, soliciting, diverting or
referring to any Person or Entity customers or referral sources
of the Company or any Subsidiary who have conducted business
with the Company or any Subsidiary within the two years before
the time in question,
(I) disclosing, copying, communicating,
distributing, revealing, or using any confidential information,
material, trade secrets, proprietary information, or
confidential business information concerning the Company, any
Subsidiary or any of their customers ("Confidential
Information"), except as your employment duties with the Company
or a Subsidiary may require during your employment with the
Company or a Subsidiary,
(J) failing to return any Confidential
Information or any documents, records, files, lists and the like
(including originals and copies) containing Confidential
Information immediately upon your termination or separation of
employment with the Company or any Subsidiary, or
(K) participating in a hostile takeover
attempt of the Company or any Subsidiary,
(3) then (y) this Option shall terminate effective on the date on which
you enter into such activity, unless terminated sooner by operation of
another term or condition of this Stock Option Agreement or the 1996
Plan, and (z) any option
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gain realized by you from exercising all or a portion of this Option
shall be paid by you to the Company.
(4) Right of Set-off. By accepting this Option, you
consent to a deduction from any amounts the Company or any Subsidiary
owes to you from time to time (including amounts owed to you as wages or
other compensation, fringe benefits, or vacation pay, as well as any
other amounts owed to you by the Company or any Subsidiary), to the
extent of the amounts you owe the Company under Sections 2.(d)(1) and
2.(d)(2) above. Whether or not the Company elects to make any set-off in
whole or in part, if the Company does not recover by means of set-off
the full amount you owe it, calculated as set forth above, you agree to
pay immediately the unpaid balance to the Company.
(5) Committee Discretion. You may be released from
all or any portion of your obligations under Sections 2.(d)(1), 2(d)(2)
and 2.(d)(3) above only if the Committee (or its duly appointed agent)
determines in its Discretion that such action is in the best interests
of the Company.
4. Exercise of the Option. The Option shall be exercised by giving
a written notice of exercise to the Treasurer of the Company. Such notice shall
specify the number of Shares to be purchased and shall be accompanied by payment
in full in cash (or in such other manner as is approved by the Committee
pursuant to the 1996 Plan) of the aggregate option price for the number of
Shares purchased and by the representation required by Paragraph 14 of the 1996
Plan if the Shares to be issued under the 1996 Plan have not been registered
under the Securities Act of 1933. Such exercise shall be effective only upon the
actual receipt of such written notice, such exercise price and an executed
shareholders agreement (on terms and conditions consistent with this Stock
Option Agreement or otherwise mutually acceptable to you and the Company) and no
rights or privileges of a shareholder of the Company in respect of any of the
Shares issuable upon the exercise of any part of the Option shall inure to you,
or any other person entitled to exercise the Option, unless and until
certificates representing such Shares shall have been issued.
5. Miscellaneous Representations, Warranties and Covenants.
(a) Investment Purpose. It is your current intention to,
and, if the Company has not both (i) closed a public offering of its securities
registered under the Securities Act of 1933, as amended (an "IPO"), and (ii)
registered the Shares under the Securities Act of 1933, as amended, at the time
of exercise of this Option (the "Registration Events") you will, acquire any of
the Shares subject to the Option for investment and not with a view toward their
sale in connection with any distribution thereof. If the Registration Events
have not occurred, any Shares you acquire pursuant to this Option will be
acquired for your own account, and no one else will have any interest in such
Shares. You acknowledge that, as of the date of this Stock Option Agreement, the
Shares have not been registered under federal or state law, have no ready marked
for resale, and may not be resold without registration under state and federal
securities laws or applicable exemptions from such registration requirements.
You also acknowledge that the Company is relying on these representations,
warranties and covenants for purposes of
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determining whether you are eligible to receive this Option or purchase any
Shares without registration under applicable state and federal securities laws.
(b) Ability to Bear Risk; Sophistication; Access to
Information. If, at the time you exercise all or any part of this Option, the
Registration Events have not occurred, you represent, warrant and covenant that
you will be able to bear the economic risk of any investment in the Shares for
an indefinite period. In addition, if the Registration Events have not occurred,
you represent, warrant and covenant that at the time you exercise this Option,
you, or your financial advisor, will have such knowledge and experience in
financial and business matters that you will be capable of evaluating the merits
and risks of the prospective investment in the Shares. In addition, if the
Registration Events have not occurred, you represent, warrant and covenant that
at the time you exercise this Option, you will have, or your financial advisor
will have, carefully reviewed all of the information regarding the Company,
access to which will be accorded to you, and you will be thoroughly familiar
with the business, operations, properties, financial condition, results of
operations, prospects and risks of the Company and its business by virtue of
your review and of your relationship with the Company as an employee and will
have discussed with officers of the Company any questions you may have with
respect to the Company or its securities.
(c) Opinion of Counsel for Transfers. You will not dispose
of all or any part of or any interest in this Option or any of the Shares you
acquire upon exercise of this Option, or encumber, pledge, hypothecate, sell or
transfer this Option, any of such Shares or any interest therein, unless you
furnish the Company, upon its request, with an opinion of counsel in form and
substance satisfactory to the Company to the effect that the disposition will
not require registration of any of the Shares. The Company may refuse to
transfer any Shares if its believes that such transfer will require registration
or qualification of the Shares under any securities laws or result in a breach
of any of your representations, warranties or covenants in this Stock Option
Agreement.
6. No Exercise Until Required Registrations, Listings, and
Approvals Obtained. This Option is subject to the requirement that, if at any
time the Committee shall determine, in its Discretion, that the listing,
registration, or qualification of the Shares with any securities exchange or
association or under any state or federal law, or the consent or approval or any
governmental regulatory body, or imposed by any securities underwriter, is
necessary or desirable as a condition of, or in connection with, the granting of
this Option or the issue or purchase of the Shares pursuant to this Option, this
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee. The Company
shall use its best efforts to obtain expeditiously any such registration,
qualification, consent or approval.
7. No Employment Rights Created. It is understood and agreed that
nothing contained in the 1996 Plan or in this Stock Option Agreement, nor any
action taken by the Committee, shall confer upon you any right with respect to
the continuation of your employment by the Company or any Subsidiary, nor
interfere in any way with the right of the Company or a Subsidiary to terminate
your employment at any time.
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8. Income Tax Withholding Requirements. Pursuant to the 1996 Plan,
if upon or as a result of your exercise of this Option there shall be payable by
the Company or any Subsidiary any amount for income tax withholding, you will
pay such amount to the Company to reimburse it for such income tax withholding.
9. Restrictions on Sale or Transfer. You agree that you shall not
sell, assign, pledge, encumber, hypothecate, make a gift of, exchange, dispose
of, or otherwise transfer or alienate, by operation of law or otherwise (each a
"transfer"), all or any part of this Option, any right to exercise this Option
or any of the Shares you may acquire upon exercise of this Option (collectively,
the "Securities"), except for any transfer described in, and made in accordance
with (i) Section 8.(g), and (ii) one or more of the other subsections of this
Section 8. Any purported transfer in violation of this Section 8 will be void,
and if you try to make any purported transfer in violation of any of the terms
of this Section 8, you will retain beneficial ownership of such Securities,
including the right to vote any Shares you may acquire upon exercise of this
Option and to receive dividends and liquidation proceeds upon such Shares, and
you will continue to report the income or loss allocated to such Shares by the
Company in accordance with the relevant sections of the Internal Revenue Code of
1986, as amended (the "Code"), as long as the Company is taxed as an S
corporation under the Code.
(a) Permitted Transfer With First Refusal Rights. You and
any person or entity to whom any of your Securities are transferred (each such
person or entity is referred to in this Section 8(a) as a "transferor") may
transfer all or any part of any Shares you may acquire upon exercise of this
Option to any person or entity if (i) the transfer is made pursuant to, and in
accordance with, the terms of this Section 8.(a), (ii) the purchase price for
such Shares, if any, shall consist only of cash, a promissory note or some
combination of the foregoing, and (iii) the only security for any indebtedness
in connection with any such transfer shall be the Shares being transferred.
(1) Notice. The transferor shall first give written
notice to the Company and to the each of the other holders of
outstanding common shares of the Company (the "Shareholders") of any
such proposed transfer, which notice shall state the name and address of
the proposed transferee (such person or entity is referred to in this
Section 8.(a) as the "transferee"), the number of Shares proposed to be
transferred, and the price, terms of payment, and other terms and
conditions of such proposed transfer. Attached to such notice shall be a
copy of the offer and all other pertinent documents in connection with
the proposed transfer of the Shares.
(2) First Refusal Rights.
(A) Xxxxxx X. Xxxxxxx. Xxxxxx X. Xxxxxxx
shall have the exclusive option for a period of 30 days after
receipt of such a notice under Section 8.(a)(1) in which to
purchase all or any part of the Shares proposed to be
transferred at the same price and
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on the same terms (including, without limitation, payment terms)
as are offered by the proposed transferee for the Shares.
(B) Company. To the extent Xxxxxx X. Xxxxxxx
does not exercise such option to purchase all of the Shares
proposed to be transferred, the Company shall have the exclusive
option for a period of 30 days immediately after the expiration
of Xxxxxx X. Xxxxxxx'x 30-day option to purchase all or any part
of the Shares proposed to be transferred and not being purchased
by Xxxxxx X. Xxxxxxx pursuant to his option, at the same price
and on the same terms (including, without limitation, payment
terms) as are offered by the proposed transferee for the Shares.
(C) Other Shareholders. To the extent Xxxxxx
X. Xxxxxxx and the Company do not exercise their options to
purchase all of the Shares proposed to be transferred, the
remaining Shareholders shall have the exclusive option for a
period of 30 days immediately after the expiration of the
Company's 30-day option to purchase all or any part of the
Shares proposed to be transferred and not being purchased by
Xxxxxx X. Xxxxxxx or the Company pursuant to their options, at
the same price and on the same terms (including, without
limitation, payment terms) as are offered by the proposed
transferee for the Shares.
(D) All or None. Notwithstanding anything to
the contrary in this Section 8.(a)(2), Xxxxxx X. Xxxxxxx, the
Company and the remaining Shareholders (other than Xxxxxx X.
Xxxxxxx and the transferor) must exercise their options to
purchase, in the aggregate, all or none of the Shares proposed
to be transferred pursuant to this Section 8.(a). If the options
described in this Section 8.(a) are not exercised to purchase,
in the aggregate, all of the Shares proposed to be transferred
pursuant to this Section 8.(a), within the time periods provided
in this Section 8.(a)(2), such options shall expire unexercised,
and the transferor may transfer all of the Shares proposed to be
transferred pursuant to Section 8.(a)(5).
(3) Allocation of Option Among Other Shareholders.
Subject to Section 8.(a)(2)(D), the right of the Shareholders (other
than the transferor and Xxxxxx X. Xxxxxxx) to purchase such Shares, if
any, shall be in proportion to their relative ownership of Shares;
provided that if such Shareholders do not initially elect to purchase
all of the Shares available to them, each of such Shareholders
purchasing all of the Shares available to him shall have the right to
purchase the remaining Shares available in proportion to his relative
ownership of Shares until such Shareholders have exercised their options
to purchase all of the Shares
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available to them in connection with such transfer. If the options
described in Section 8.(a)(2) are not exercised to purchase all of the
Shares, pursuant to Section 8(a)(2)(D), all of the options shall expire
unexercised.
(4) Exercise of First Refusal Rights. The options in
favor of Xxxxxx X. Xxxxxxx, the Company and the Shareholders (other than
the transferor and Xxxxxx X. Xxxxxxx), described in this Section 8.(a),
shall be exercised by giving written notice of such exercise to the
transferor, to the Company, and to any other Shareholders. Such notice
shall also specify a date for closing which shall be not more than
thirty days after the date the option to purchase all of the remaining
Shares being transferred is exercised. The closing of any sale pursuant
to the exercise of the options described in this Section 8.(a) will be
made at the Company's principal executive offices or such other place as
may be agreed upon by the applicable parties. On the closing date, the
transferor will, upon receipt of the consideration for the Shares being
sold, transfer, assign and deliver to the person exercising the option
certificates for the Shares being transferred, together with such
assignments separate from certificate and such other documents and
instruments as the person exercising the option may reasonably request
to properly and validly effectuate or evidence such transfer.
(5) Right to Transfer. To the extent Xxxxxx X.
Xxxxxxx, the Company and the other Shareholders do not elect to purchase
all of the Shares proposed to be transferred pursuant to this Section
8.(a), then the transferor shall be free, for thirty days immediately
after the expiration of the option periods provided in this Section
8.(a), to sell all of the Shares proposed to be transferred to the
proposed transferee, on the same terms and conditions described in the
notice of such transfer; provided that (i) the transferee shall take
such Shares subject to all the restrictions of this Section 8 as though
such transferee were an original signatory to this Stock Option
Agreement, (ii) the transferee agrees in writing to comply with, and be
bound by, the terms and conditions of this Section 8 as if such
transferee were you, and that any Shares owned by any such transferee
will be subject to such terms and conditions, and (iii) such transferee
shall be treated for all purposes of this Section 8 as you. Such written
agreement must be delivered to the Company and the other Shareholders on
or before the date of such transfer to such transferee. If such transfer
is not consummated within such thirty-day period, the restrictions and
options provided in this Section 8.(a) shall be restored and shall
continue in full force and effect with respect to any transfer of such
Shares.
(b) Permitted Transfers To Xxxxxx X. Xxxxxxx. You and all
transferees deemed to be you pursuant to this Section 8 or any agreement by
which such transferees agree to be bound by this Section 8 may transfer any
Shares you may acquire upon exercise of this Option or any interest in any
Shares you may acquire upon exercise of this Option to Xxxxxx X. Xxxxxxx on any
terms and conditions.
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(c) Transfers Pursuant to Your Death or Termination of Your
Employment. Upon your death, upon any exercise of this Option after your death,
upon the termination of your employment with the Company and upon any exercise
of this Option after the termination of your employment with the Company (each
an "Event"), Xxxxxx X. Xxxxxxx, the Company, and the other Shareholders shall
have a right to purchase all of the Shares acquired upon exercise of this Option
(regardless of whether acquired before or after the Event occurs and regardless
of who owns them at the time the Event occurs) on the same terms and conditions
set forth in Section 8.(a) as if you owned all of such Shares and had given
notice of a proposed transfer of all of such Shares, except as such terms and
conditions are modified by the remaining provisions of this Section 8.(c). The
Option may be transferred only by will or by the laws of descent and
distribution; provided that (i) the transferee shall take such Option and any
Shares acquired upon exercise of this Option subject to all the restrictions of
this Section 8 as though such transferee were an original signatory to this
Stock Option Agreement, (ii) the transferee agrees in writing to comply with,
and be bound by, the terms and conditions of this Section 8 as if such
transferee were you, and that this Option and any Shares owned by any such
transferee will be subject to such terms and conditions, and (iii) such
transferee shall be treated for all purposes of this Section 8 as you. During
your lifetime, however, the Option is exercisable only by you.
(1) Notice and Period for First Option. You, your
representative or agent or the person to whom this Option is transferred
by will or by the laws of descent and distribution, as the case may be
(the "Agent"), shall give written notice to the Company and to the other
Shareholders of the occurrence of the Event, which notice shall identify
the Event, state when the Event occurred, and state the number of Shares
that are subject to the provisions of this Section 8.(c) as a result of
the Event. Attached to such notice shall be a copy of all pertinent
documents in connection with the Event. The first exclusive option
period shall begin on the date of the Event and shall end 30 days after
receipt of the notice described in this Section 8.(c)(1).
(2) Purchase Price. The purchase price to anyone
exercising his option will be an appraised price determined in
accordance with this Section 8.(c)(2). The appraised price shall be
determined by one business appraiser selected by mutual agreement of (i)
the persons with options to purchase Shares pursuant to this Section
8.(c), and (ii) the Agent, or, if the parties are unable to agree on an
appraiser, the Company's independent public accountants at the time of
such determination (or, if they decline so to serve, an appraiser
selected by the Company's independent public accountants) (the
"Appraiser"). The Appraiser shall determine the appraised value by (i)
determining the fair market value of the Company as an operating entity
as of the date of the Event, (ii) dividing such amount by the number of
Shares outstanding as of the date of the Event, and (iii) multiplying
such amount by the number of Shares being transferred. Such appraised
value shall not include (i) any discounts and premiums based on the size
of the shareholdings being transferred, or (ii) any increase in value of
the Company resulting from any life insurance proceeds received by the
Company as a result of the Event or of your prior death. The appraisal
provided for in this
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Section 8.(c)(2) shall be final and binding and shall be in lieu of any
other settlement procedure with respect to the valuation of the
applicable Shares under this Section 8 or otherwise. Any determination
of such appraised value pursuant to this Section 8.(c)(2) shall be
deemed to be, and shall have the same effect as, an arbitration pursuant
to Michigan Compiled Laws Annotated Section 600.5001, and a judgment of
any Michigan Circuit Court may be rendered upon any appraisal made
pursuant to this Section 8.(c)(2).
(3) Right to Maintain Life Insurance. While this
Section 8.(c) is in effect, the Company may, but shall not be required
to, maintain in full force and effect at its sole cost and expense, life
insurance on your life in an amount it deems appropriate to pay the
exercise price of any option it might have pursuant to this Section
8.(c). The Company shall be the absolute owner of each policy of life
insurance issued in accordance with the terms of this Section 8.(c)(3),
shall pay all premiums on such policies and, subject to the provisions
of this Section 8.(c), shall have the exclusive right to exercise every
privilege or right set forth in such policy or policies, which
privileges and rights shall be exercised only by and for the benefit of
the Company by the Board of Directors or its designee. This Section
8.(c)(3) shall apply to all policies of insurance issued on your life
for purposes of this Section 8.(c)(3). The Company is not obligated to
obtain or continue in force any insurance policies on your life. You
will cooperate with the Company in connection with its obtaining such
life insurance (including having a physical examination).
(4) Payment of the Purchase Price. At the closing,
any purchaser exercising his purchase option, must pay in cash, by check
or by wire transfer the total purchase price for the Shares being
purchased by him.
(5) Closing Place and Time. The closing of such
purchase and sale shall take place at the offices of the Company on the
date designated by the person or entity purchasing the Shares in the
notice of exercise of the option. Such closing date shall be not more
than 120 days after the date options to purchase all of the Shares being
transferred have been exercised.
(6) Transfers Upon Death After Failure to Exercise
First Refusal Rights. To the extent such first refusal rights are not
exercised after your death, such Shares may be transferred pursuant to
your will or by the applicable laws of descent and distribution or
pursuant to your trust holding such Shares, as the case may be, if (i)
the transferee takes such Shares subject to all the restrictions of this
Section 8 as though such transferee were an original signatory to this
Stock Option Agreement, and (ii) such transferee first agrees in writing
to comply with, and be bound by, the terms and conditions of this
Section 8 as if such transferee were you, and that any Shares owned by
any such transferee will be subject to such terms and conditions. Such
transferee shall be treated for all purposes of this Section 8 as you.
Such written agreement must be delivered to the
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Company and the other Shareholders on or before the date of such
transfer to such transferee.
(d) Transfers Pursuant to Sale of the Company. Xxxxxx X.
Xxxxxxx shall have the right to request that you and all transferees deemed to
be you pursuant to this Section 8 or any agreement by which such transferees
agree to be bound by this Section 8 transfer or cause to be transferred all of
the Company common shares then held by any of the foregoing in connection with a
sale of all of the Company's common shares to a third party (a "Sale Request").
Upon receipt by any of the foregoing of a Sale Request, each of the foregoing
shall transfer or cause to be transferred all of his Company common shares for
the consideration per common share, and otherwise on the same terms and
conditions, received by Xxxxxx X. Xxxxxxx. Such transfers shall not be subject
to any of the transfer restrictions contained in any other section of this
Section 8, and, upon the closing of such transfer, the transferee shall acquire
such common shares free of the restrictions contained in this Section 8, and
this Section 8 shall terminate.
(e) Transfers to Revocable Inter Vivos Trusts. You may
transfer during your lifetime all or part of the Shares you may acquire upon
exercise of this Option to a revocable inter vivos trust, the terms of which
trust provide that you are the grantor, the sole trustee and the sole
beneficiary of the trust during your lifetime, and that you have the power at
any time during your lifetime to withdraw your Shares from the trust. In case of
any such transfer, you, as trustee of such trust, shall receive and hold such
Shares subject to, and the trust and the Shares transferred to the trust, shall
be bound by, the terms and conditions of this Section 8, and any reference to
you in this Section 8 shall include the trust and the trustee. Upon any transfer
into such a trust, the trust and the trustee (i) shall take such Shares subject
to all the restrictions of this Section 8 as though such trust and trustee were
original signatories to this Stock Option Agreement, (ii) shall agree in writing
to comply with, and be bound by, the terms and conditions of this Section 8 as
if such trust and trustee were you, and that any Shares owned by any such trust
and trustee will be subject to such terms and conditions, and (iii) shall be
treated for all purposes of this Section 8 as you. Such written agreement must
be delivered to the Company and the other Shareholders on or before the date of
such transfer to such trust and trustee. Such trust may also transfer all or any
part of such Shares back to you upon any withdrawal of such Shares from such
trust, upon any revocation of the trust, upon any distribution from the trust,
or pursuant to the terms of the trust. Any distribution of Shares from the trust
to the beneficiaries upon your death shall be subject to Section 8.(c).
(f) Transfer with Consent. You may transfer all or any part
of the Shares you may acquire upon exercise of this Option with the prior
express written consent of the Company and all of the other Shareholders, if
such transfer occurs within 30 days after such consent is given. Any such
transferee shall take such Shares subject to all the restrictions of this
Section 8 as though such transferee were an original signatory to this Stock
Option Agreement, and the transferee must agree in writing to comply with, and
be bound by, the terms and conditions of this Section 8 as if such transferee
were you, and that any Shares owned by any such transferee will be subject to
such terms and conditions. Such transferee shall be treated for all purposes of
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this Section 8 as you. Such written agreement must be delivered to the Company
and the other Shareholders on or before the date of such transfer to such
transferee.
(g) Overriding Subchapter S Transfer Restriction;
Termination of S Corporation election.
(1) Transfer Restriction. Except as otherwise
provided in Section 8.(g)(2), as a condition to every transfer of
Shares, so long as the Company continues to be taxed as an S
corporation, you agrees that you (i) will not transfer any or all of any
Shares you may acquire upon exercise of this Option to any person or
entity if the ownership of Shares by the transferee would result in the
loss of the Company's election to be taxed as an S corporation under the
provisions of the Code, and (ii) will not transfer any or all of any
Shares you may acquire upon exercise of this Option unless the Company
has first obtained from counsel approved by the Company an opinion,
satisfactory in form and substance to the Company, to the effect that
your proposed transfer will not cause the Company's S corporation
election to terminate under the provisions of the Code in effect at the
time of such transfer.
(2) Termination of Election. The Company's election
to be taxed as an S corporation under the provisions of the Code shall
terminate upon either of the following events: (i) the approval of such
termination by written consent of the holders of a majority of the
outstanding Company common shares at any time, or (ii) upon the closing
of an IPO. After such termination, if you are a holder of Company common
shares, you shall file such documents with the IRS and any other
authorities consenting to the Company's termination of its S corporation
election. If the S corporation election is terminated, but this Section
8 is not terminated, all references in this Section 8 to actions
required or permitted in connection with the S corporation election
shall be of no further force or effect, including, without limitation,
all of the provisions of this Section 8 providing restrictions relating
to the Company's maintenance of its status as an S corporation, this
Section 8.(g) and Section 9.
(h) Endorsement on Stock Certificates. Each certificate
representing Shares issuable upon exercise of this Option now or later held by
you while this Section 8 is in effect, except as otherwise provided in this
Section 8, shall be endorsed with a legend in substantially the following form:
(i) "The securities represented by this certificate
are subject to the terms of the Stock Option Agreement,
dated as of _____________, 199__, between Rock Financial
Corporation, a Michigan corporation, and Optionee (the
"Agreement"). The Agreement imposes restrictions on any
sale, assignment, pledge, encumbrance, hypothecation,
gift, exchange, disposition, or other transfer or
alienation, by
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operation of law or otherwise, of the common shares
represented by this certificate and restrictions to
preserve the Company's S corporation election. Any
purported transfer in violation of the Agreement will be
void. Any person accepting an interest in these
securities, by accepting such interest, will be deemed
to agree to, and become bound by, all of the provisions
of Section 8 of the Agreement. A copy of the Agreement
is on file and is available for examination at the
principal office of Rock Financial Corporation."
(j) Termination. This Section 8 shall terminate upon the
occurrence of any of the following events: (i) dissolution of the Company, (ii)
final, and unappealed from, adjudication of bankruptcy of the Company, (iii)
joint written agreement of the Company and the Shareholders, (iv) joint written
agreement of Xxxxxx X. Xxxxxxx and Xxxx Xxxxxxx, (v) pursuant to Section 8.(d),
or (vi) the closing of an IPO. Upon the termination of this Section 8, you shall
surrender to the Company the certificate or certificates for any Shares you have
acquired upon exercise of this Option, and the Company shall issue to you in
lieu of such certificate or certificates a new certificate for an equal number
of Shares without the endorsement set forth in Section 8.(h). The remedies
contained in this Section 8 shall survive and remain in full force and effect
after the termination of this Section 8. You shall have the right within 30 days
after the termination of this Section 8 to purchase from the Company any
existing policies of insurance on your life at a price equal to then cash
surrender value of those policies as of the date of such termination. Upon
receipt of the purchase price, the Company shall deliver the policies to you and
shall execute any necessary instruments of transfer. You shall have no further
rights in any policies not purchased within the above 30-day period.
10. Maintaining Election of S Corporation Status. You consent to the
election that the Company be taxed as an S corporation under the provisions of
the Code. If you exercise this Option, you will, in your capacity as a
shareholder of the Company, sign any documents, agreements, certificates, or
communications that may be reasonably requested by the Company so that the
Company will continue to be taxed as an S corporation under the provisions of
the Code, including, without limitation, such elections to be filed with the
Internal Revenue Service ("IRS") for the Company to continue to be treated as an
S corporation under the Code. You will sign such elections or requests to be
filed with the IRS for the Company to be treated as continuing to be an S
corporation notwithstanding inadvertent termination of its status as such, to
the extent reasonably requested by the Company consistent with this Stock Option
Agreement. Unless and until the Company's S corporation election is terminated
in a manner which is either contemplated by or consistent with the provisions of
this Stock Option Agreement, you will not, in your capacity as a shareholder of
the Company, sign any document (including, without limitation, any election to
be filed with the IRS) indicating your consent to a revocation of the Company's
status as an S corporation under the Code or take any other action which is
inconsistent with the foregoing, and you shall cooperate and work with the other
Shareholders to make the benefits of the Company's S corporation election as
fully available to all of the Shareholders as possible.
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(a) Two or More Taxable Years. The Board of Directors of the
Company shall determine whether or not to treat the taxable year of the Company
in which the interest of any Shareholder is terminated or is subject to a
qualifying disposition (within the meaning of Section 1.1368-1(g) of the
Treasury Regulations) as two or more separate taxable years (depending on the
number of events of termination) pursuant to Section 1377(a)(2) of the Code or
Section 1.1368-1(g) of the Treasury Regulations, as the case may be. If the
Board of Directors decides to treat such taxable year as two or more separate
taxable years pursuant to Section 1377(a)(2) of the Code or Section 1.1368-1(g)
of the Treasury Regulations, then if you have exercised this Option, you shall
execute and file any and all consents and other documents required by Section
1377(a)(2) of the Code, the underlying Treasury Regulations or Section
1.1368-1(g) of the Treasury regulations to effectuate the purposes of this
Section 9.(a).
(b) Beneficial Ownership. You represent and warrant that if
you exercise this Option, you will be the sole beneficial owner of the Shares
you acquire upon such exercise and that no person (including your spouse) or
entity will have any right, title or interest in or to such Shares.
11. Injunctive Relief. The terms, covenants and obligations of this
Stock Option Agreement relate to special, unique and extraordinary matters, and
a violation of any of the terms, covenants and obligations of this Stock Option
Agreement will cause the Company and its Shareholders irreparable injury in an
amount which would be difficult, if not impossible, to estimate or determine and
for which adequate compensation could not be fashioned. Therefore, the Company
and the other Shareholders will be entitled, jointly and severally, to an
injunction, restraining order or other equitable relief as a matter of course
from any court of competent jurisdiction, restraining you and any other
person(s) the court may order from committing any violation or threatened
violation of the terms, covenants or obligations in this Stock Option Agreement.
The Company's and the Shareholders' rights and remedies under this Section 10
are cumulative and are in addition to any other rights and remedies that the
Company or any Shareholder may have under this Stock Option Agreement or any
other agreement or at law or in equity.
12. Indemnification. You and your his personal representatives,
guardians, conservators, heirs, devisees, successors and assigns (collectively,
"Successors") shall indemnify and hold harmless the Company, its successors and
assigns and any of its officers, agents, employees and directors and each of the
other Shareholders (collectively, the "Indemnified Parties"):
(a) against any and all damages, liabilities, claims,
losses, taxes and expenses (including reasonable attorneys' fees, court costs,
interest and expenses) incurred by any Indemnified Party arising out of or
relating to any breach by you or by any of your Successors of any of your
representations, warranties, covenants, terms or agreements in this Stock Option
Agreement or any document executed in connection with this Stock Option
Agreement, including, without limitation, any such breach which results in or
causes the S corporation election of the Company to terminate in an manner
inconsistent with the terms and conditions of this Stock Option Agreement;
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(b) against any and all damages, liabilities, claims,
losses, taxes and expenses (including reasonable attorneys' fees, court costs,
interest, judgments, fines and amounts paid in settlement) incurred by any
Indemnified Party in connection with any threatened, pending or completed
action, suit or proceeding (whether civil, criminal, administrative or
investigative) instituted by the Internal Revenue Service, any state tax
authority or any other third party relating to or arising out of any actual or
alleged breach by you or any of your Successors of the representations,
warranties, covenants, terms or agreements in this Stock Option Agreement or any
document executed in connection with this Stock Option Agreement; and (c)
against any and all damages, liabilities, claims, losses and expenses, including
reasonable attorneys' fees and court costs) incurred by any Indemnified Party in
connection with any action, suit or proceeding in which any Indemnified Party
either enforces or defends the validity of this Stock Option Agreement or any
other document executed in connection with this Stock Option Agreement against
you or any of your Successors.
13. Severability. It is the desire and intent of the parties to this
Stock Option Agreement that the terms, provisions, conditions, covenants,
representations, warranties and remedies contained in this Stock Option
Agreement will be enforceable to the fullest extent permitted by law. The
provisions of this Stock Option Agreement will be deemed severable, and if any
term, provision, condition, covenant, representation, warranty or remedy in this
Stock Option Agreement or the application thereof to any person or circumstance
will, to any extent, be construed to be illegal, invalid or unenforceable, in
whole or in part, then such term, provision, condition, covenant,
representation, warranty or remedy may be changed to the extent necessary to
make such term, provision, condition, covenant, representation, warranty or
remedy, as so changed, legal, valid, binding and enforceable and such term,
provision, condition, covenant, representation, warranty or remedy will be
construed in a manner so as to permit its enforceability under the applicable
law to the fullest extent permitted by such law. If a court or agency determines
that all or any part of Section 2 is unreasonable or unenforceable, you agree to
be bound by a less restrictive covenant within the stated covenants as shall be
permitted by law and which a court shall specifically enforce. If any term,
provision, condition, covenant, representation, warranty or remedy of this Stock
Option Agreement is held illegal, void, invalid or unenforceable in its
entirety, the remaining terms, provisions, conditions, covenants,
representations, warranties and remedies of this Stock Option Agreement and the
application thereof to any person or circumstance, except those which have been
held illegal, invalid or unenforceable, will not in any way be affected or
impaired but will remain valid, binding and enforceable in accordance with their
terms.
14. Entire Agreement. This Stock Option Agreement, including the
1996 Plan, are the entire agreement between you and the Company with respect to
the subject matter of this Stock Option Agreement, and any prior or
contemporaneous understandings, arrangements or agreements are superseded by
this Stock Option Agreement and the 1996 Plan and are merged into this Stock
Option Agreement.
15. Governing Law and Choice of Forum. The laws of the State of
Michigan shall govern this Stock Option Agreement, its construction, and the
determination of any rights, duties or remedies of the parties arising out of or
relating to this Stock Option Agreement. The parties
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acknowledge that the United States District Court for the Eastern District of
Michigan or the Michigan Circuit Court for the County of Oakland shall have
exclusive jurisdiction over any case or controversy arising out of or relating
to this Stock Option Agreement and that all litigation arising out of or
relating to this Stock Option Agreement shall be commenced in the United States
District Court for the Eastern District of Michigan or the Oakland County
(Michigan) Circuit Court. You irrevocably consent to the jurisdiction of the
United States District Court for the Eastern District of Michigan and the
Oakland County (Michigan) Circuit Court in connection with all actions and
proceedings arising out of, or in any way related to this Stock Option
Agreement.
16. Notices. Any and all notices, designations, consents, offers,
acceptances or other communications provided for in this Stock Option Agreement
shall be given in writing and shall be delivered in person, sent by certified or
registered mail, sent by facsimile or similar method of transmission or sent by
overnight courier, addressed in the case of the Company to its principal office
and in the case of you or a Shareholder to his address appearing on the stock
records of the Company or such other address as may be designated by you or such
Shareholder.
17. Counterparts. This Stock Option Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
18. Interpretation. The headings contained in this Stock Option
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Stock Option Agreement. Wherever in this Stock Option Agreement, words,
including pronouns, are used in the masculine, they shall be read and construed
in the feminine or neuter whenever they would so apply, and wherever in this
Stock Option Agreement, words, including pronouns, are used in the singular or
plural, they shall be read and construed in the plural or singular,
respectively, wherever they would so apply.
19. No Waiver. No waiver of any Section or provision of this Stock
Option Agreement will be valid unless in a writing signed by the party to be
charged and only to the extent set forth in that writing. Unless such a writing
expressly provides otherwise, no waiver of any breach of any agreement or
provision contained in this Stock Option Agreement shall be deemed a waiver of
any preceding or succeeding breach of this Stock Option Agreement or of any
other agreement or provision contained in this Stock Option Agreement, and no
such waiver shall constitute a course of conduct which may be relied upon to
justify any subsequent breach of this Stock Option Agreement. No extension of
time for the performance of any obligations or acts shall be deemed an extension
of time for the performance of any other obligations or acts.
20. Binding Effect; Assignment. This Stock Option Agreement, and the
rights and duties under it, shall be binding upon and inure to the benefit of
the parties to this Agreement and (i) the Company's successors and assigns, (ii)
your beneficiaries, personal representatives, guardians, conservators, heirs,
and devisees, and (iii) and any transferee of yours permitted under this Stock
Option Agreement, regardless of whether such transferee has agreed in writing to
be bound by this Stock Option Agreement or any portion of this Stock Option
Agreement.
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You may not assign or transfer any of your rights or delegate any of your duties
or obligations under this Stock Option Agreement, except that you may both
assign your rights and delegates your duties under Section 8 in connection with
a transfer of Shares that is permitted by, and is made in accordance with, the
provisions of Section 8, and then only to the extent of such transfer. Any
purported assignment or transfer by you contrary to the preceding sentence shall
be void.
21. Subsequent Documents. The parties agree that they will, at any
time, duly execute and deliver to any party any additional documents and
instruments that such party may reasonably determine to be necessary in
connection with the transactions contemplated in this Stock Option Agreement,
and the failure of a party to demand such documents or instruments on or before
the date of this Stock Option Agreement shall not alleviate the obligation of
any party to execute and deliver such documents or instruments at any time, upon
the written demand of a party.
22. Counsel. You acknowledge that you have had an opportunity to
obtain separate counsel before execution of this Stock Option Agreement. This
Stock Option Agreement is made voluntarily and without duress of any kind.
23. Committee and Board of Directors Determinations Conclusive. Each
determination, interpretation, or other action made or taken pursuant to the
provisions of the 1996 Plan by the Committee or the Company's Board of Directors
shall be final and shall be binding and conclusive for all purposes on you and
the Company and our respective successors in interest.
Very truly yours,
ROCK FINANCIAL CORPORATION,
a Michigan corporation
By:
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Its:
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The above is agreed to and accepted.
Optionee
Dated: _____________________
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