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EXHIBIT 10.5
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Stock Option Agreement
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1.0 DATE AND PARTIES
1.1 Date. This stock option agreement ("agreement") is dated and
effective April 27, 1998.
1.2 Parties. The parties to this agreement are:
X. Xxxxxx X. Xxxxxx ("Xxxxxx")
000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
B. Kitty Hawk, Inc. ("Kitty Hawk")
Attention: Chief Executive Officer
P. O. Box 612787
0000 Xxxx 00xx
XXX Xxxxxxx, XX 00000
2.0 RECITATIONS
2.1 Xxxxxx. Xxxxxx is president of Kitty Hawk, a member of its
board of directors, and its chief operating officer.
2.2 Consideration. Xxxxx Xxxx'x covenants hereunder are in
consideration of Xxxxxx past services and contributions to Xxxxx Xxxx'x
success, and to supply additional incentives for his continuing contributions
to Xxxxx Xxxx'x success.
3.0 OPTION TERMS
3.1 Grant of Option. Kitty Hawk grants to Xxxxxx an option (the
"option") to purchase from Kitty Hawk 400,000 shares (the "optioned shares") of
Xxxxx Xxxx'x common stock, whose par value is $.01 per share, subject to the
terms and conditions of this agreement.
3.2 Term of Option; Vesting. The option shall be effective from
the effective date of this agreement until the earliest of (i) the date at
which all optioned shares have been delivered hereunder, (ii) December 31,
2005, or (iii) the date 12 months after Xxxxxx' death; but the option is
subject to early termination under paragraph 3.10(D) and paragraph 5.2. Xxxxxx'
rights to exercise the option are subject to the vesting schedule and
conditions expressed in paragraph 3.7.
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3.3 Exercise. Xxxxxx may exercise the option at any time, and
from time to time, in whole or in part, as to any optioned shares for which his
rights are vested under the provisions of paragraph 3.7, in whole-share
increments of not less than 20,000 shares at a time, by giving notice of
exercise to Kitty Hawk, stating the number of shares to be purchased and
confirming that the representations and warranties in paragraph 4.1 remain true
as of the date of the notice with respect to the shares to be purchased under
such notice.
3.4 Exercise Price. The exercise price shall be $16.75 per share,
which is the price per share on April 27, 1998, the day on which the
Compensation Committee of Xxxxx Xxxx'x board of directors approved the terms of
this agreement. The exercise price of the optioned shares being exercised must
be tendered in cash with the notice of exercise, or if Xxxxxx elects in the
notice of exercise, may be paid by deducting from the shares to be delivered
the number of such shares whose value would equal the exercise price at the
average last trade value of such shares for the five business days preceding
the date of the notice of exercise.
3.5 Issuance. Kitty Hawk shall issue and deliver to Xxxxxx the
shares stated in a notice of exercise complying with this agreement, no later
than 10 business days after receiving the notice.
3.6 Income Tax Withholding. If Kitty Hawk is required or entitled
by applicable law to withhold taxes in connection with the delivery of any
shares hereunder, at the time and as a condition of the delivery of such shares
Xxxxxx shall either (i) tender to Kitty Hawk the amount of such withholding in
cash, or (ii) if then permitted by applicable law and with Xxxxx Xxxx'x consent
(which Kitty Hawk may not withhold unreasonably), authorize Kitty Hawk to
deduct from the number of shares to be delivered a number of shares of a value,
determined by their then fair market value, equal to the amount of such
withholding. Any shares deducted for withholding shall be deemed issued and
delivered in determining the number of optioned shares that have been delivered
hereunder.
3.7 Vesting and Conditions. Xxxxxx' rights hereunder vest over
time and are conditional. Xxxxxx' rights to exercise the option vest as to
100,000 shares upon the effective date of this agreement, and as to the
remaining 300,000 shares will vest at the rate of 100,000 shares on each
anniversary of the effective date of this agreement; although Xxxxxx' rights to
exercise the option are subject to earlier vesting under paragraph 3.10(C) and
paragraph 3.10(D), and under the following sentence. Termination of Xxxxxx'
employment by Kitty Hawk without cause, or because of Xxxxxx' death or
disability, will not affect Xxxxxx' vested rights, and notwithstanding the
preceding sentence, will cause all then unvested rights to fully vest at the
time of such termination. Termination of Xxxxxx' employment by Xxxxxx'
voluntary resignation or retirement before reaching age 65 (other than for
disability) will terminate Xxxxxx' vested but unexercised rights and his
unvested rights at the time of such termination. Termination of Xxxxxx'
employment by Kitty Hawk for cause will terminate Xxxxxx' vested but
unexercised rights and his unvested rights at the time of such termination.
Kitty Hawk may by notice to Xxxxxx terminate Xxxxxx' vested but unexercised
rights and his unvested rights if during or after Xxxxxx' employment by Kitty
Hawk Xxxxxx directly or indirectly engages in competition with Kitty Hawk or
discloses any proprietary and confidential business information of Kitty Hawk
or its affiliates in breach or violation of any agreement with or implied
obligation to Kitty Hawk; but such termination of rights is not intended or to
be construed as a waiver or relinquishment by Kitty Hawk of any other claim or
remedy against Xxxxxx for any such breach or violation.
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3.8 Rights as Stockholder. Xxxxxx shall have no rights as a
stockholder with respect to any optioned shares that have not been delivered.
3.9 Rights as Employee. This agreement neither confers upon
Xxxxxx any rights to continue in Xxxxx Xxxx'x employ, nor modifies any of
Xxxxxx' rights or obligations under his employment or other agreements with
Kitty Hawk.
3.10 Changes in Capitalization.
A. This agreement does not affect in any way the right or power
of Kitty Hawk to make adjustments, reclassifications,
reorganizations, or changes of its capital structure, to
merge or consolidate, to dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
B. If before the termination hereof, outstanding shares of Xxxxx
Xxxx'x common stock are changed into, or exchanged for a
different number or kind of shares or securities of Kitty
Hawk through reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split, stock
dividend, or similar transaction, the description of the
undelivered optioned shares shall be deemed modified so that
the undelivered optioned shares shall be of the same class
and character as the holder of the optioned shares would have
been entitled to receive had such undelivered optioned shares
been delivered and outstanding before the change was
effected.
C. If Kitty Hawk is dissolved or liquidated, or is reorganized,
merged, or consolidated with one or more other entities so
that Kitty Hawk is not the surviving corporation; or if
substantially all of Xxxxx Xxxx'x property is sold; then all
unvested rights hereunder as to optioned shares will
immediately vest, and upon exercise of the option Xxxxxx will
be entitled to receive for each undelivered optioned share,
the cash, securities or property that Xxxxxx would have been
entitled to receive with respect to such optioned share had
such optioned share been delivered and outstanding when the
event was effected.
D. Kitty Hawk may terminate this agreement as of the effective
date of any reorganization, merger, consolidation,
dissolution, liquidation or other change of capitalization of
the types identified in paragraphs 3.10(B) or (C), but if
Kitty Hawk elects to do so, Kitty Hawk must notify Xxxxxx or
his personal representative of such election at least 30
days before the effective date of such event, all unvested
rights hereunder as to optioned shares will immediately vest,
and Kitty Hawk must permit the exercise of the option as to
all undelivered optioned shares during the 30-day period
immediately preceding the effective date of such event.
3.11 Registration. If at any time Kitty Hawk registers any
material portion of its common shares under the Securities Act of 1933, the
Securities Exchange Act of 1934, any other federal securities-regulation
statute, or any state securities act, or obtains exemption
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from such registration for the public offer or sale of such share, Kitty Hawk
shall include in such registration or exemption Xxxxxx' delivered shares and
undelivered optioned shares hereunder in at least the same ratio as Xxxxx
Xxxx'x common shares then held by or for M. Xxx Xxxxxxxxxxx are included in
such registration or exemption.
4.0 REPRESENTATIONS, WARRANTIES AND OTHER COVENANTS
4.1 Xxxxxx' Representations and WarrantieS. Xxxxxx represents
and warrants to Kitty Hawk that:
X. Xxxxxx holds his rights hereunder for his own account,
without the participation of any other person, and with the
intent of holding this agreement and all shares delivered
hereunder ("delivered shares") for investment, and without
the intent of participating, directly or indirectly, in a
distribution of Kitty Hawk shares, and not with a view to, or
for resale in connection with, any distribution of any part
of the delivered shares or undelivered optioned shares.
B. As a principal executive officer and member of the board of
directors of Kitty Hawk and its air-carrier subsidiary,
Xxxxxx has had full access to all material information
relating to the business and affairs of Kitty Hawk, and has
received all information and data with respect to Kitty Hawk
and the optioned shares that he has requested and has deemed
relevant in connection with his receipt of his rights
hereunder. Xxxxxx does not rely upon any representation or
warranty by any person or entity with respect to the future
value of, or income from, the optioned shares, but rather
relies upon his own independent examination and judgment as
to Xxxxx Xxxx'x prospects.
4.2 Xxxxxx' Special Covenants. Xxxxxx acknowledges, covenants
and agrees with Kitty Hawk that:
A. Neither this agreement nor the optioned shares are registered
under any federal or state law relating to the registration
of securities for sale, and this agreement is, and the
optioned shares will be, issued and delivered in reliance on
exemptions from registration under such laws.
X. Xxxxxx shall not offer for sale, sell or transfer any rights
hereunder or any delivered shares except in accordance with
applicable securities laws and with the provisions hereof.
C. Except as provided in paragraph 3.11, Kitty Hawk shall have no
obligation to register delivered shares or to comply with any
exemption available for Xxxxxx' sale of delivered shares
without registration, and Kitty Hawk shall have no obligation
to act in any manner so as to make Rule 144 under the
Securities Act of 1933 available with respect to the sale of
delivered shares by Xxxxxx.
D. A legend indicating that delivered shares have not been
registered under the applicable securities laws, and
referring to any applicable restrictions on
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transferability and sale of delivered shares, may be placed
on any certificate delivered to Xxxxxx with respect to any
delivered shares, and any transfer agent of Kitty Hawk may be
instructed to require compliance with any such legend.
X. Xxxxxx' exercise of this option as to any optioned shares,
and acceptance of delivery of any delivered shares shall
constitute Xxxxxx' confirmation that all of his
representations, warranties and covenants under ss.4.0 are
true, correct and effective as of such time.
5.0 GENERAL PROVISIONS
5.1 Assignment. Xxxxxx may not transfer, assign or grant any
security interest in any rights hereunder.
5.2 AmendmentS. To terminate, amend, modify, supplement or waive
any provision hereof, both parties must sign a written amendment that
identifies by paragraph number the provision that it purports to amend. No
noncomplying course of dealing shall be construed to amend this agreement.
5.3 Notices. Notices hereunder must be in writing. A notice may
be given by United States certified mail, postage prepaid, return receipt
requested, addressed to the intended recipient at its address in paragraph 1.2,
or to such other notice address as that party designates by notice to the other
party. If given by mail, a notice shall be effective three business days after
mailing. A business day is any day other than a Saturday, Sunday or legal
holiday in Texas. A notice given by other means shall be effective only when
received by the addressee.
5.4 WAIVER OF PUNITIVE AND CONSEQUENTIAL DAMAGES. BOTH PARTIES
WAIVE, RELEASE, AND AGREE NOT TO XXX OR ASSERT ANY CLAIM (INCLUDING A CLAIM
SUBJECT TO ARBITRATION) AGAINST ANY PARTY TO THIS AGREEMENT, OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS OR AGENTS, FOR PUNITIVE OR
CONSEQUENTIAL DAMAGES IN RESPECT OF ANY CLAIM IN CONNECTION WITH, ARISING OUT
OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT.
5.5 Construction.
A. This agreement has been executed and delivered in Texas,
whose substantive law (excluding conflict of laws rules that
might apply the substantive law of another jurisdiction)
shall govern its effect and construction, except that
Delaware corporate law shall govern the internal affairs of
Kitty Hawk and other corporate matters where applicable. This
agreement merges and supersedes all prior oral or written
agreements with respect to the subject matter. It binds the
parties and their respective heirs, personal representatives,
successors and assigns.
B. Representations and warranties expressed herein shall survive
investigation by either party and delivery of shares or other
performance.
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C. No waiver of a noncompliance hereunder shall be construed to
be a waiver of any other noncompliance.
D. Titles and headings are only for convenient reference and are
not to be construed in interpretation.
E. When used herein, defined terms (in quotation marks within
parentheses immediately following the defining term or
phrase) have the defined meanings unless the context clearly
indicates otherwise. Defined terms may be used in the
singular or plural. The words "hereof," "herein," and
"hereunder" always refer to this agreement as a whole, and
never to a particular provision. Unless otherwise clearly
indicated, section ("section") and paragraph ("paragraph ")
references are to sections and paragraphs hereof.
5.6 Binding Agreement to Arbitrate Disputes. All disputes under
or relating to this agreement must be resolved exclusively by binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") in effect at the time the arbitration proceeding
commences; except that (i) the locale of any arbitration shall be Dallas,
Texas, (ii) the arbitrator or arbitrators shall with any final award supply
written findings of fact and conclusions of law, and (iii) any party may seek
from a court of competent jurisdiction any provisional remedy that may be
necessary to protect its rights or assets pending the commencement of the
arbitration or its determination of the merits of the controversy. The
arbitration award shall be final and binding on all parties, and judgment upon
such arbitration award may be entered in any court having jurisdiction. A
prevailing party in arbitration or litigation about this agreement shall be
entitled to recover its reasonable attorneys' fees and costs.
KITTY HAWK:
KITTY HAWK, INC.
By:
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M. Xxx Xxxxxxxxxxx
Chairman of the Board and
Chief Executive Officer
XXXXXX:
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Xxxxxx X. Xxxxxx
