INCENTIVE STOCK OPTION AGREEMENT Pursuant to the United Fuel & Energy Corporation
EXHIBIT
10.2
Pursuant
to the
United
Fuel & Energy Corporation
2005
Equity Incentive Plan
| Name of Optionee: | Xxxxxxx X. Xxxxxxx | |
| Date of Grant: | September 16, 2008 | |
| Number of Shares: | 150,000 | |
| Exercise Price Per Share: | $0.70 | |
| Expiration Date: | September 16, 2018 |
This
Incentive Stock Option Agreement (this “Option Agreement”),
is
made as of September 16, 2008 between United Fuel & Energy Corporation, a
Nevada corporation (the “Company”),
and
the above-named individual, an employee of the Company or one of its
Subsidiaries (the “Optionee”),
to
record the granting of an incentive stock option pursuant to the Company’s 2005
Equity Incentive Plan (the “Plan”).
Terms
used herein that are defined in the Plan shall have the meanings ascribed to
them in the Plan. If there is any inconsistency between the terms of this Option
Agreement and the terms of the Plan, the Plan’s terms shall supersede and
replace the conflicting terms herein.
1. Grant
of Option.
The
Company hereby grants to the Optionee, as of the Grant Date, an option to
purchase up to the number of Option Shares specified above (the “Option”).
The
Option Shares shall be purchasable from time to time during the option term
specified in Section 2 at the Exercise Price. This Option is intended to qualify
as an “incentive stock option” as defined in Section 422 of the Code
(“Incentive
Stock Option”).
However, notwithstanding such designation, to the extent that the aggregate
Fair
Market Value of Shares subject to Options designated as Incentive Stock Options
which become exercisable for the first time by the Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options, to the extent of the Shares covered thereby
in
excess of the foregoing limitation, shall be treated as Non-Statutory Options.
For this purpose, Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of the Shares shall
be determined as of the date the Option with respect to such Option Shares
is
awarded. For purposes hereof, “Non-Statutory
Stock Option”
means
an Option not intended to qualify as an Incentive Stock Option.
2. Option
Term.
Unless
the Optionee directly or by attribution owns more than ten percent (10%) of
the
total combined voting power of all classes of stock of the Company or of any
Parent or Subsidiary of the Company, this Option shall have a term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close
of
business on the Expiration Date, unless sooner terminated in accordance with
Section
5.
If the
Optionee owns more than ten percent (10%) of the total combined voting power
of
all classes of stock of the Company or of any Parent or Subsidiary of the
Company, then this Option shall have a term of five (5) years measured from
the
Grant Date.
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3. Limited
Transferability.
During
Optionee’s lifetime, this Option shall be exercisable only by Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following Optionee’s death.
4. Dates
of Vesting.
This
Option shall become exercisable for the Option Shares in twelve equal quarterly
installments on the last day of each calendar quarter beginning on December
31,
2008. As the Option becomes exercisable for such installments, those
installments shall accumulate and the Option shall remain exercisable for the
accumulated installments until the Expiration Date or sooner termination of
the
option term under Section
5.
5. Cessation
of Service.
The
option term specified in Section
2
shall
terminate (and this Option shall cease to be outstanding) prior to the
Expiration Date should any of the following events occur:
(a) If
the
Optionee’s service as an employee of the Company is terminated (i) by the
Company without Cause (as the term “Cause” is defined in that certain Employment
Agreement between the Company and the Optionee dated the date hereof (the
“Employment
Agreement”)),
or
(ii) by the Optionee for Good Reason (as the term “Good Reason” is defined in
the Employment Agreement), then the unvested portion of this Option shall fully
vest and this Option may be exercised in full but must be exercised by the
Optionee no later than twelve (12) months after the date the Optionee’s
employment is terminated (and in no event later than the Expiration Date).
(b) If
the
Optionee’s service as an employee of the Company is terminated because of the
Optionee’s death or Disability (as the term “Disability” is defined in the
Employment Agreement), then the unvested portion of this Option shall fully
vest
and this Option may be exercised in full but must be exercised by the Optionee
(or the Optionee’s legal representative or authorized assignee) no later than
six (6) months after the date the Optionee’s employment is terminated (and in no
event later than the Expiration Date).
(c) If
the
Optionee’s service as an employee of the Company is terminated (i) by the
Company for Cause (as the term “Cause” is defined in the Employment Agreement),
or (ii) by the Optionee without Good Reason (as the term “Good Reason” is
defined in the Employment Agreement), neither the Optionee, the Optionee’s
estate nor such other person who may then hold this Option shall be entitled
to
exercise it as to any shares on or after the date the Optionee’s employment is
terminated.
6. Incentive
Stock Option Provisions.
(a) Change
in Status of Optionee.
In the
event of the Optionee’s change in status from an Employee to any other status of
Director or Consultant, with respect to any Incentive Stock Option that shall
remain in effect after a change in status from Employee to Director or
Consultant, such Incentive Stock Option shall cease to be treated as an
Incentive Stock Option and shall be treated as a Non-Statutory Option on the
day
three (3) months and one (1) day following such change in status. Except as
provided in Sections 6(b) and (c) below, to the extent that the Option
was unvested on the Termination Date, or if the Optionee does not exercise
the
vested portion of the Option within the Post-Termination Exercise Period, the
Option shall terminate. For purposes hereof: “Employee”
means
any person, including an Officer or Director, who is an employee of the Company
or any Related Entity; the payment of a director’s fee by the Company or a
Related Entity shall not be sufficient to constitute “employment” by the
Company; “Director”
means
a
member of the Board or the board of directors of any Related Entity;
“Consultant”
means
any person (other than an Employee or a Director, solely with respect to
rendering services in such person’s capacity as a Director) who is engaged by
the Company or any Related Entity to render consulting or advisory services
to
the Company or such Related Entity; and “Related
Entity”
means
any Parent, Subsidiary and any business, corporation, partnership, limited
liability company or other entity in which the Company, a Parent or a Subsidiary
holds a substantial ownership interest, directly or indirectly.
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(b) Disability
of Optionee.
In the
event the Optionee’s service as an employee of the Company is terminated as a
result of his Disability (as the term “Disability” is defined in the Employment
Agreement), the Optionee may, but only within six (6) months from the date
the
Optionee’s employment is terminated (and in no event later than the Expiration
Date), exercise the amount of the Option, including any amount that was not
vested on the date the Optionee’s employment was terminated; provided, however,
that if such Disability is not a “disability” as such term is defined in
Section 22(e)(3) of the Code and the Option is an Incentive Stock Option,
such Incentive Stock Option shall cease to be treated as an Incentive Stock
Option and shall be treated as a Non-Statutory Option on the day three (3)
months and one (1) day following date the Optionee’s employment was terminated.
In addition, in the event that the Optionee exercises any portion of the Option
that was not vested on the date the Optionee’s employment was terminated, such
Incentive Stock Option shall cease to be treated as an Incentive Stock Option
and shall be treated as a Non-Statutory Option. To the extent that the Optionee
does not exercise the Option within the time specified herein, the Option shall
terminate.
(c) Death
of Optionee.
In the
event the Optionee’s service as an employee of the Company is terminated as a
result of his death, or in the event of the Optionee’s death during the
Post-Termination Exercise Period, the Optionee’s estate, or a person who
acquired the right to exercise the Option by bequest or inheritance, may
exercise the amount of the Option, including any amount that was not vested
on
the date the Optionee’s employment was terminated, within six (6) months from
the date of death (but in no event later than the Expiration Date). In the
event
that the Optionee’s estate, or a person who acquired the right to exercise the
Option by bequest or inheritance exercises any portion of the Option that was
not vested on the date the Optionee’s employment was terminated, such Incentive
Stock Option shall cease to be treated as an Incentive Stock Option and shall
be
treated as a Non-Statutory Option. To the extent that the Option is not
exercised within the time specified herein, the Option shall terminate.
“Post-Termination
Exercise Period”
means
the period specified in this Agreement commencing on the date of termination
of
the Optionee’s service as an employee (other than termination by the Company for
Cause or termination by the Optionee without Good Reason), during which the
Optionee or the Optionee’s estate, or a person who acquired the right to
exercise the Option by bequest or inheritance, as the case may be, may exercise
the Option.
(d) Transferability
of Option.
The
Option, if an Incentive Stock Option, may not be transferred in any manner
other
than by will or by the laws of descent and distribution and may be exercised
during the lifetime of the Optionee only by the Optionee. The Option, if a
Non-Statutory Option may be transferred by will, by the laws of descent and
distribution, and to the extent and in the manner authorized by the Committee,
to members of the Optionee’s Immediate Family. The
terms
of the Option shall be binding upon the executors, administrators, heirs and
successors of the Optionee. “Immediate
Family”
means
any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law and shall also include adoptive relationships.
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7. Adjustment
in Option Shares.
Should
any change be made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the Company’s
receipt of consideration, appropriate adjustments shall be made to (i) the
total
number and/or class of securities subject to this Option and (ii) the Exercise
Price in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
8. Shareholder
Rights.
The
holder of this Option shall not have any shareholder rights with respect to
the
Option Shares until such person shall have exercised the Option, paid the
Exercise Price and become a holder of record of the purchased shares.
9. Manner
of Exercising Option.
(a) In
order
to exercise this Option with respect to all or any part of the Option Shares
for
which this Option is at the time exercisable, the Optionee (or any other person
or persons exercising the Option) must take the following actions:
(i) Execute
and deliver to the Company a written notice setting forth the number of Option
Shares for which the Option is exercised.
(ii) Pay
the
aggregate Exercise Price for the purchased shares in cash or in one or more
of
the following forms:
(A) by
cancellation of indebtedness of the Company to the Optionee;
(B) if
approved by the Committee, by surrender of shares that either: (1) have been
owned by the Optionee for more than six (6) months and have been paid for within
the meaning of SEC Rule 144 (and, if such shares were purchased from the Company
by use of a promissory note, such note has been fully paid with respect to
such
shares); or (2) were obtained by the Optionee in the public market;
or
(C) with
respect only to purchases upon exercise of an Option, and provided that a public
market for the Company’s stock exists:
i. through
a
“same day sale” commitment from the Optionee and a broker-dealer that is a
member of the Financial Industry Regulatory Authority (FINRA Dealer) whereby
the
Optionee irrevocably elects to exercise the Option and to sell a portion of
the
Option Shares so purchased to pay for the Exercise Price, and whereby the FINRA
Dealer irrevocably commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
ii. through
a
“margin” commitment from the Optionee and a FINRA Dealer whereby the Optionee
irrevocably elects to exercise the Option and to pledge the Option Shares so
purchased to the FINRA Dealer in a margin account as security for a loan from
the FINRA Dealer in the amount of the Exercise Price, and whereby the FINRA
Dealer irrevocably commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
(D) by
any
combination of the foregoing.
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(iii) Payment
of the Exercise Price must accompany the written notice delivered to the Company
in connection with the Option exercise.
(iv) Furnish
to the Company appropriate documentation that the person or persons exercising
the Option (if other than Optionee) have the right to exercise this
Option.
(v) Execute
and deliver to the Company such written representations as may be requested
by
the Company in order for it to comply with the applicable requirements of
federal and state securities laws.
(vi) Make
appropriate arrangements with the Company for the satisfaction of all federal,
state and local income and employment tax withholding requirements applicable
to
the Option exercise.
(b) As
soon
as practical after the Exercise Date, the Company shall issue to or on behalf
of
the Optionee (or any other person or persons exercising this Option) a
certificate for the purchased Option Shares, with the appropriate legends
affixed thereto.
(c) In
no
event may this Option be exercised for any fractional shares.
10. Corporate
Transactions.
(a) Termination
of Award to Extent Not Assumed in Corporate Transaction.
Effective upon the consummation of a Corporate Transaction, this Option shall
terminate subject to the provisions of this Section
10.
Notwithstanding the foregoing, this Option shall not terminate to the extent
that it is Assumed in connection with the Corporate Transaction. “Assumed”
means
that pursuant to a Corporate Transaction either (i) the Award is expressly
affirmed by the Company or (ii) the contractual obligations represented by
the
Award are expressly assumed (and not simply by operation of law) by the
successor entity or its Parent in connection with the Corporate Transaction
with
appropriate adjustments to the number and type of securities of the successor
entity or its Parent subject to the Award and the exercise or purchase price
thereof which at least preserves the compensation element of the Award existing
at the time of the Corporate Transaction as determined in accordance with the
instruments evidencing the agreement to assume the Award. “Corporate
Transaction”
shall
mean:
(i) a
dissolution or liquidation of the Company;
(ii) a
merger
or consolidation in which the Company is not the surviving corporation (other
than a merger or consolidation with a wholly-owned subsidiary, a reincorporation
of the Company in a different jurisdiction, or other transaction in which there
is no substantial change in the stockholders of the Company or their relative
stock holdings and the Option is assumed, converted or replaced by the successor
corporation, which assumption will be binding on the Optionee);
(iii) a
merger
in which the Company is the surviving corporation but after which the
stockholders of the Company immediately prior to such merger (other than any
stockholder that merges, or which owns or controls another corporation that
merges, with the Company in such merger) cease to own their shares or other
equity interest in the Company;
(iv) the
sale
of substantially all of the assets of the Company; or
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(v) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of
the
Company by tender offer or similar transaction (other than a tender offer or
similar transaction in which there is no substantial change in the stockholders
of the Company or their relative stock holdings and the Option is assumed,
converted or replaced by the successor corporation, which assumption will be
binding on the Optionee).
(b) Acceleration
of Award Upon Corporate Transaction.
In the
event of a Corporate Transaction:
(i) for
the
portion of the Award hereunder that is Assumed or replaced by the successor
entity with a comparable award, then this Award (if Assumed), the replacement
award (if replaced) automatically shall become fully vested and exercisable
for
all of the Shares at the time represented by such Assumed or replaced portion
of
the Award, immediately upon Termination of the Optionee’s service if such
service is Terminated by the successor company or the Company without Cause
within twelve (12) months after
the
Corporate Transaction; and
(ii) for
the
portion of the Award hereunder that is neither Assumed nor replaced by the
successor entity with a comparable award, such portion of this Award shall
automatically become fully vested and exercisable for all of the Shares at
the
time represented by such portion of this Award, immediately prior to the
specified effective date of such Corporate Transaction, provided that the
Optionee’s service has not Terminated prior to such date.
11. Compliance
with Laws and Regulations.
(a) The
exercise of this Option and the issuance of the Option Shares upon such exercise
shall be subject to compliance by the Company and Optionee with all applicable
requirements of law relating thereto and with all applicable regulations of
any
stock exchange (or the Nasdaq Stock Market or Over-the-Counter Bulletin Board,
if applicable) on which the Common Stock may be listed for trading at the time
of such exercise and issuance.
(b) The
inability of the Company to obtain approval from any regulatory body having
authority deemed by the Company to be necessary to the lawful issuance and
sale
of any Common Stock pursuant to this Option shall relieve the Company of any
liability with respect to the non-issuance or sale of the Common Stock as to
which such approval shall not have been obtained. The Company, however, shall
use its best efforts to obtain all such approvals.
12. Section
409A Limitation.
In the
event the Administrator determines at any time that this Option has been granted
with an exercise price less than Fair Market Value of the Shares subject to
the
Option on the date the Option is granted (regardless of whether or not such
exercise price is intentionally or unintentionally priced at less than Fair
Market Value, or is materially modified at a time when the Fair Market Value
exceeds the exercise price), or is otherwise determined to constitute
“nonqualified deferred compensation” within the meaning of Section 409A of the
Code, notwithstanding any provision of the Plan or this Option Agreement to
the
contrary, the Option shall satisfy the additional conditions applicable to
nonqualified deferred compensation under Section 409A of the Code, in accordance
with the Plan. The specified exercise date and term shall be the default date
and term specified in the Plan. Notwithstanding the foregoing, the Company
shall
have no liability to any Optionee or any other person if an Option designated
as
an Incentive Stock Option fails to qualify as such at any time or if an Option
is determined to constitute “nonqualified deferred compensation” within the
meaning of Section 409A of the Code and the terms of such Option do not satisfy
the additional conditions applicable to nonqualified deferred compensation
under
Section 409A of the Code and the Plan.
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13. Successors
and Assigns.
Except
to the extent otherwise provided in Section 3 and 6, the provisions of this
Option Agreement shall inure to the benefit of, and be binding upon, the Company
and its successors and assigns and the Optionee, the Optionee’s assigns and the
legal representatives, heirs and legatees of the Optionee’s estate.
14. Notices.
Any
notice required to be given under this Option Agreement shall be in writing
and
shall be deemed effective upon personal delivery or three (3) days after deposit
in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice. Any notice required to be given
to the Company under the terms of this Option Agreement shall be in writing
and
addressed to the Company at its principal corporate offices. Any notice required
to be given or delivered to the Optionee shall be in writing and addressed
to
the Optionee at the address indicated below the Optionee’s signature line on the
Grant Notice or at such other address as the Optionee may designate by ten
(10)
days advance written notice under this paragraph to all other parties to this
Option Agreement.
15. Construction.
This
Option Agreement and the Option evidenced hereby are made and granted pursuant
to the Plan and are in all respects limited by and subject to the terms of
the
Plan.
16. Governing
Law; Venue.
The
interpretation, performance and enforcement of this Option Agreement shall
be
governed by the laws of the State of Nevada without resort to that State’s
conflict-of-laws rules. For the purpose of litigating any dispute that arises
under this Option Agreement, the parties hereby consent to exclusive
jurisdiction in California and agree that such litigation shall be conducted
in
the federal or state courts located in Orange County,
California.
17. Discretionary
Plan; Employment.
The
Plan is discretionary in nature and may be suspended or terminated by the
Company at any time. With respect to the Plan, (a) each grant of an Option
is a
one-time benefit which does not create any contractual or other right to receive
future grants of Options, or benefits in lieu of Options; (b) all determinations
with respect to any such future grants, including, but not limited to, the
times
when the Option shall be granted, the number of Shares subject to each Option,
the Option Price, and the times when each Option shall be exercisable, will
be
at the sole discretion of the Company; (c) if the Optionee is an Employee,
the
Optionee’s participation in the Plan shall not create a right to further or
continued employment with the Optionee’s employer and shall not interfere with
the ability of the Optionee’s employer to terminate the Optionee’s employment
relationship at any time with or without cause; (d) the Optionee’s participation
in the Plan is voluntary; (e) the Option is not part of normal and expected
compensation for purposes of calculating any severance, resignation, redundancy,
end of service payment, bonuses, long-service awards, pension or retirement
benefits, or similar payments; (f) the future value of the Shares underlying
the
Options is unknown and cannot be predicted with certainty; (g) if the underlying
Shares do not increase in value, the Option will have no value; and (h) the
ability of the Optionee to sell Shares acquired pursuant to this Option may
be
limited by applicable securities laws.
18. Grant/Exercise
Subject to Applicable Regulatory Approvals.
Any
grant of Options under the Plan is specifically conditioned on, and subject
to,
any required regulatory approvals. If necessary approvals for the grant or
exercise are not obtained, the Options may be cancelled or rescinded, or they
may expire, as determined by the Company in its sole and absolute discretion.
The Company may restrict the exercise of any Option if the Shares issuable
pursuant to the Option have not yet been registered pursuant to the Securities
Act of 1933, as amended; provided, however, this limitation shall not apply
during the six (6) months immediately prior to the Expiration Date or if the
Optionee agrees in writing that the Shares issuable upon the exercise will
be
restricted securities and bear a restrictive legend.
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19. Electronic
Signatures.
Delivery of a copy of this Option Agreement bearing an original signature by
facsimile transmission (whether directly from one facsimile device to another
by
means of a dial-up connection or whether mediated by the worldwide web), by
electronic mail in “portable document format” (“.pdf”) form, or by any other
electronic means intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as physical delivery of
the
paper document bearing the original signature. “Originally signed” or “original
signature” means or refers to a signature that has not been mechanically or
electronically reproduced.
[Remainder
of page intentionally left blank; signature page to
follow]
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IN
WITNESS WHEREOF, the parties have executed this Option Agreement on the Date
of
Grant first written above.
COMPANY:
UNITED
FUEL & ENERGY CORPORATION
a
Nevada
corporation
By:
/s/
Xxxxx X.
Xxxxxxx
Name:
Xxxxx X. Xxxxxxx
Title:
President and Chief Executive Officer
OPTIONEE:
/s/
Xxxxxxx X.
Xxxxxxx
XXXXXXX
X. XXXXXXX
Address:
______________________________
_______________________________
_______________________________
[Signature
page to Incentive Stock Option Agreement]
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