Exhibit 10.12
OPTIONEE: Xxxxxxx X. Xxxxxx
DATE OF EXERCISE: November 9, 1998
OPTION PRICE: $15.00
COVERED SHARES: 20,000
AMERICAN CAPITAL STRATEGIES, LTD.
1997 STOCK OPTION PLAN
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STOCK OPTION EXERCISE AGREEMENT
1. Definitions. In this Agreement, except where the context otherwise
indicates, the following definitions apply:
1.1. "Affiliate" means parent or subsidiary corporations of the
Company, as defined in Sections 424(e) and (f) of the Code (but substituting
"the Company" for "employer corporation").
1.2. "Aggregate Purchase Price" shall have the meaning set forth in
Section 4.
1.3. "Agreement" means this Stock Option Exercise Agreement.
1.4. "Board" means the Board of Directors of the Company.
1.5. "Code" means the Internal Revenue Code of 1986, as amended.
1.6. "Collateral" has the meaning set forth in Section 5.3(b).
1.7. "Collateral Value" has the meaning set forth in Section 5.3(b).
1.8. "Committee" means the committee charged, pursuant to the
provisions of the Plan, with the administration of the Plan. Unless otherwise
determined by the Board, the Compensation Committee of the Board shall be the
Committee.
1.9. "Common Stock" means the common stock, par value $0.01 per share,
of the Company.
1.10. "Company" means American Capital Strategies, Ltd., a Delaware
corporation.
1.11. "Covered Shares" means the number of Shares subject to the Option
set forth as the "Covered Shares" on page 1 of this Agreement.
1.12. "Date of Exercise" means the date hereof.
1.13. "Employment" means the Optionee's employment with the Company and
its Affiliates.
1.14. "Events of Default". An Event of Default shall mean the
occurrence of one or more of the following described events:
(a) the Optionee shall default in the payment of (i) interest on
the Purchase Note within five (5) days of its due date or (ii) principal of the
Purchase Note within five (5) days of its due date, whether at maturity, upon
any scheduled payment date or by acceleration or otherwise; and
(b) the principal amount of the Purchase Note shall, for more
than thirty (30) successive days, exceed the aggregate Collateral Value of all
of the Collateral.
1.15. "Exchange Act" means the Securities Exchange Act of 1934, as
\amended.
1.16. "Exercise Shares" shall have the meaning set forth in Section 2.
1.17. "Fair Market Value" means, as of any particular date, the most
recent closing price for a Share on the NASDAQ National Market System as
reported by such source as the Committee may select or, if such price is not so
reported, then the fair market value of a Share as determined by the Committee
pursuant to a reasonable method adopted in good faith for such purpose.
1.18. "Investment Company Act" means the Investment Company Act of
1940, as amended.
1.19. "Net Aggregate Purchase Price" shall have the meaning set forth
in Section 4.
1.20. "Net Asset Value" means the net asset value of a Share, as
determined by the Company for purposes of the Exchange Act and the Investment
Company Act.
1.21. "Note Interest Rate" shall have the meaning set forth in Section
5.1.
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1.22. "Option" means the stock options granted to the Optionee pursuant
to the Plan.
1.23. "Option Price" means the dollar amount per Share set forth as the
"Option Price" on page 1 of this Agreement.
1.24. "Optionee" means the person identified as the "Optionee" on page
1 of this Agreement.
1.25. "Plan" means the American Capital Strategies, Ltd., 1997 Stock
Option Plan.
1.26. "Purchase Note" means the promissory note substantially in the
form of Exhibit A hereto subject to the terms and conditions set forth in this
Agreement.
1.27. "Securities Act" means the Securities Act of 1933, as amended.
1.28. "Share" means a share of Common Stock.
1.29. "UCC" means the Uniform Commercial Code as in effect at any time
in the State of Maryland.
2. Exercise of Option. Pursuant to the Plan and subject to the terms of
this Agreement, the Optionee hereby exercises the Option to purchase 20,000 of
the Covered Shares (the "Exercise Shares"). This exercise shall not affect the
other Covered Shares subject to the Option.
3. Early Exercise. The Optionee acknowledges that this is an early exercise
of the Option with regard to 13,333 Shares and that in the event that the
Optionee should terminate Employment prior to the dates indicated below,
notwithstanding any other provisions hereto, the Company shall have the option
to purchase such Shares at the Option Price. The Company may pay such purchase
price by offsetting such amount against the amount then due under the Purchase
Note. The Company may exercise such option at any time within thirty days
following such termination of Employment.
Through Date Shares Subject to Company Repurchase Option
------------ -------------------------------------------
August 29, 1999 13,333
September 14, 1999 7,500
August 29, 2000 6,944
September 14, 2000 1,111
September 14, 2001 556
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4. Payment of Exercise Price. The "Aggregate Purchase Price" for the
Exercise Shares shall be the Option Price multiplied by the Exercise Shares. The
Aggregate Purchase Price shall be payable by the cash payment to the Company of
the aggregate par value of the Exercise Shares and by the delivery of the
Purchase Note for the balance of the Aggregate Purchase Price (the "Net
Aggregate Purchase Price").
5. Purchase Note. The Purchase Note shall have the terms and conditions as
set forth in this Section 5.
5.1. Principal Amount and Terms. The principal amount of the Purchase
Note shall be $300,000, which shall equal the Net Aggregate Purchase Price.
Optionee will provide an affidavit or other evidence reasonably satisfactory to
the Committee of the basis for computing the amount set forth in clause (ii) of
the preceding sentence. Following consultation with the Optionee, the Company
shall be entitled to withhold from the loan proceeds (and if sufficient loan
proceeds in excess of the Net Aggregate Purchase Price do not exist, from
Optionee's salary) and to deliver to taxing authorities such tax withholding
amounts as may be required by law. The Purchase Note shall accrue interest at
the rate of 5.27% per annum (the "Note Interest Rate"), payable in cash,
quarterly in arrears, on each March 31, June 30, September 30 and December 31,
beginning June 30, 1999, until the principal amount and all other amounts due
under the Purchase Note are paid in full. Interest shall be computed on the
basis of a year with twelve 30-day months, and the actual days elapsed. The
principal amount of the Purchase Note, together with all accrued but unpaid
interest and all other amounts due thereunder, shall be payable in full on June
7, 2008 unless earlier accelerated in accordance with the terms of this
Agreement or the Purchase Note. Upon the request of the Optionee, and at the
sole and absolute discretion of the Committee, such date may be extended, but
shall not in any case be extended beyond the tenth anniversary of the Date of
Exercise hereof. The payment of the Purchase Note shall be accelerated and all
amounts due thereunder shall be immediately payable (i) sixty days following the
termination of the Optionee's Employment or (ii) in the event the Fair Market
Value of the Exercise Shares shall, for twenty consecutive trading days, equal
or exceed $50.00 per share, as adjusted for stock splits, stock dividends or
similar occurrences, as determined by the Committee, after the date hereof.
5.2. Acceleration. If an Event of Default shall occur, the unpaid
balance of the Purchase Note and interest accrued thereon and all other
liabilities of the Optionee to the Company hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived.
5.3. Collateral. The Purchase Note shall be secured by the Collateral
as provided in this Section 5.3.
(a) In order to secure the full and timely payment in full of the
Purchase Note, the Optionee hereby grants, assigns and conveys unto the Company
a lien on and continuing security interest in and to, the Collateral together
with all products, proceeds, dividends, distributions, or returns of capital or
other moneys and other rights,
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moneys, property or securities of any nature (including, without limitation,
rights, voting rights, moneys or securities arising from consolidation or
subdivision of capital, redemption or conversion of shares, reduction of
capital, liquidation or a similar plan or arrangement), all of which at any time
(whether now or in the future) are attributable to or are arising from the
Collateral.
(b) The "Collateral" shall be deemed to consist of the sum of (i)
the Exercise Shares, and (ii) any other property designated by the Optionee and
accepted by the Company as Collateral hereunder. In determining the "Collateral
Value" of the Collateral, the Company shall consider the value (i) of the
Exercise Shares at any time to be the greater of their Fair Market Value and
their Net Asset Value, (ii) of any other Collateral to be that determined in
good faith from time to time by the Committee.
(c) Upon execution and delivery of this Agreement, the Company
will instruct its transfer agent to issue stock certificates evidencing the
Exercise Shares (which shall contain appropriate legends regarding the
restrictions set forth in this Agreement) and the Optionee shall deliver to the
Company or its designated agent such certificates with a transfer executed in
blank. If at any time the Company shall issue any additional or substitute
shares of stock or stock certificates, or any other instruments evidencing an
interest in such entity or an obligation of such entity, the Optionee shall
promptly pledge, mortgage and deposit (or cause to be pledged, mortgaged or
deposited) in favor of or with the Company such additional certificates,
instruments or documents as additional Collateral.
(d) Unless an Event of Default shall have occurred and be
continuing (and in such case, all dividends and distributions described herein
shall be Collateral), notwithstanding Section 5.3(a), the Optionee shall have
the right to receive and to retain cash dividends and other cash distributions
that are paid on account of the Exercise Shares; provided, however, that if at
any time the aggregate Collateral Value is 105% or less of the principal amount
of the Purchase Note, all such dividends and other distributions shall be
delivered directly to the Company for application: first, to any interest then
accrued and unpaid under the Purchase Note; second, for the payment of any
income taxes then owed by the Optionee as a result of such dividend; and third,
at the direction of the Optionee, for the payment of principal on the Purchase
Note. If any such dividends or other distributions are paid to the Optionee
following an Event of Default or in circumstances subject to the proviso in the
preceding sentence, such dividends or other distributions shall be held in trust
by the Optionee for the benefit of the Company, and the Optionee shall
immediately notify the Company in writing, and shall, if the Company so
instructs, immediately pay over such dividends or other distributions to the
Company as Collateral.
(e) Upon the occurrence of and during the continuation of any
Event of Default:
(i) The Company shall have all rights and remedies of a
secured creditor under the UCC and other applicable laws including the right to
sell, use, utilize or otherwise dispose of the Collateral as permitted
thereunder; provided, however,
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that in any foreclosure of the Optionee's interest of the Exercise Shares, the
proceeds realized by the Company therefrom shall be deemed to be not less than
the greater of the Fair Market Value and the Net Asset Value as of the date of
foreclosure.
(ii) The Company, in its discretion, and without notice to
the Optionee, may take any one or more of the following actions without
liability except to account for property actually received by it: (A) transfer
to or register in its name or the name of its nominee any stock certificates or
any other evidence of the Collateral, with or without indication of the security
interest herein created, and whether or not so transferred or registered,
receive the income, dividends and other distributions thereon and hold them as
additional Collateral or apply them to the obligations of the Optionee secured
hereby in any order of priority; (B) exercise or cause to be exercised all
voting and corporate powers with respect to any of the Collateral, including (1)
all rights to call or require stockholders meetings and to remove or elect
directors, and (2) all rights of proxy appointments, conversion, exchange,
subscription or any other rights, privileges or options pertaining to such
Collateral, as if the absolute owner thereof; (C) exchange any of the Collateral
for other property upon a reorganization, recapitalization, reclassification or
other readjustment and, in connection therewith, deposit any of the Collateral
with any depository upon such terms as the Company may determine; and (D) in its
name or in the name of the Optionee, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in exchange
for any of the Collateral, and Company further shall have the right during any
time to sign and endorse the name of the Optionee upon any such stock
certificate, stock power, check, draft, money order, or any other documents of
title or evidence of payment with respect to the Collateral, in the name of the
Optionee, it being the intention of the Optionee to grant to the Company the
right to sell any portion or all of the Collateral and the proceeds therefrom,
upon the occurrence of an Event of Default hereunder.
(iii) If Company in good faith believes that the Securities
Act, or any other state or federal law prohibits or restricts the customary
manner of sale or distribution of any of the Collateral, the Company may sell
such Collateral privately or in any other manner deemed advisable by the Company
at such price or prices as the Company determines in its sole discretion. The
Optionee recognizes that such prohibition or restriction may cause the
Collateral to have less value than it otherwise would have and that,
consequently, such sale or disposition by the Company may result in a lower
sales price than if the sale were otherwise held. The Company may sell the
Collateral in Bethesda, Maryland or elsewhere, in one or more sales or parcels,
for cash, credit or future delivery, and with or without the use of a
stockbroker, as the Company may deem advisable. The Company may be the purchaser
of any or all of the Collateral.
6. Restrictions on Transfer. Except by will or the laws of descent and
distribution, for so long as the Purchase Note is outstanding, neither the
Exercise Shares nor any other Collateral may be sold, transferred, assigned,
pledged or otherwise disposed of or encumbered by the Optionee, and any attempt
to do so shall be null and void.. The Company has filed a registration statement
on Form S-8 under the Securities Act with regard to the Exercise Shares and to
the extent legally necessary to allow for resale of the Exercise Shares by
Optionee, the Company agrees to take reasonable steps
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to keep such registration statement effective. Other than as specified in the
preceding sentence, the Company is not obligated hereby to file any such
registrations or applicable notifications with regard to the Exercise Shares or
their disposition. The Optionee further agrees that under such circumstances the
Company may place a legend embodying such restriction on the certificates
evidencing such shares.
7. Employment. The exercise of the Option as contemplated by this
Agreement, the acceptance of the Purchase Note by the Company or any term or
provision of this Agreement shall not constitute or, except as is specifically
provided in a Supplemental Employment Agreement, be evidence of any
understanding, express or implied, on the part of the Company or any of its
Affiliates to employ the Optionee (or have the Optionee serve as a director) for
any period.
8. Notice. All notices or other communications that are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
by facsimile or sent by overnight express or by registered or certified mail,
postage prepaid, addressed as follows:
If to the Company to:
American Capital Strategies, Ltd.
0 Xxxxxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
If to the Optionee, to the address set forth beneath the Optionee's signature on
the signature page hereof.
All deliveries of notice shall be deemed effective when received by the
person entitled to such receipt or when delivery has been attempted but refused
by such person. Any party may change the person or address to which such
deliveries shall be made with respect to such party by delivering notice thereof
to the other party hereto in accordance with this Section 7.
9. Termination. This Agreement shall terminate and the security interest of
the Company in the Collateral shall be released upon the payment and
satisfaction in full of the Optionee's obligations relating to the Purchase
Notes.
10. Governing Law; Submission to Jurisdiction. This Agreement and the
Purchase Note shall be governed by and construed and interpreted in accordance
with the laws of the State of Maryland, without regard to its conflict of laws
principles. All judicial actions, suits or proceedings brought against the
Optionee with respect to its obligations, liabilities or any other matter under
or arising out of or in connection with this Agreement or any transaction
contemplated hereby or for recognition or enforcement of any judgment rendered
in any such proceedings may be brought in a state or federal court of competent
jurisdiction in the State of Maryland. By execution and delivery of
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this Agreement, the Optionee accepts, generally and unconditionally, the
jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any
final judgment rendered thereby in connection with this Agreement or any
transaction contemplated hereby from which no appeal has been taken or is
available. The Optionee irrevocably agrees that all process in any proceeding or
any court arising out of or in connection with this Agreement may be effected by
mailing a copy thereof by registered or certified mail or any substantially
similar form of mail, postage prepaid, to the Optionee at the addresses referred
to in Section 7 or such other address of which the Company shall have been
notified pursuant to said paragraph. Such service shall be effective five (5)
days after such mailing. The Optionee hereby acknowledges that such service will
be effective and binding service in every respect.
11. Complete Agreement; Conflicts. This Agreement, the Plan and the
Employment Agreement contain the entire agreement between the parties hereto
with respect to the transactions contemplated herein and supersede all previous
oral and written and all contemporaneous oral negotiations, commitments,
writings and understandings. In the event of a conflict between the terms of
this Agreement and the Plan or the Employment Agreement, the terms of this
Agreement shall control.
12. Amendments and Waivers. This Agreement may be amended only by a writing
signed by the Optionee and the Company. No delay or omission on the part of any
party hereto in exercising any right hereunder shall operate as a waiver of such
right or any other right hereunder or operate to constrain the rights of any
other parties hereunder. No waiver of any one right shall operate as a waiver of
any subsequent right.
13. Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14. Severability. If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable in any material respect, such provision shall
be replaced with a provision which is as close as possible in effect to such
invalid, illegal or unenforceable provision, and still be valid, legal and
enforceable, and the validity, legality and enforceability of the remainder of
this Agreement shall not in any way be affected or impaired thereby, unless the
parties otherwise so provide.
15. Further Assurances. The parties agree to execute and deliver promptly
such further instruments and documents and to take such other actions as
reasonably necessary to implement the terms of this Agreement. Without limiting
the foregoing, the Optionee agrees, from time to time, at the Company's expense,
to execute and deliver promptly all further instruments and documents as the
Company may reasonably require in order to perfect, confirm and ratify the
security interests granted hereby, including, without limitation, the execution
and delivery of such financing statements or continuation statements, and
amendments thereto, as may be necessary or desirable, or as the Company may
request in order to perfect and preserve the security interests granted hereby.
The Optionee hereby authorizes the Company or its agent to file such financing
statements and/or such continuation statements and amendments thereto relating
to all or
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any part of the Collateral without its signature, where permitted by law. A
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the collateral granted hereby or any part thereof shall be
sufficient as a financing statement where permitted by law.
16. Indemnification. The Company agrees to indemnify, defend and hold
harmless the Optionee from any loss, liability or expense incurred by Optionee
as a result of a breach by the Company of its specific obligations under this
Agreement. At the election of the Company, the Company may satisfy its
obligations under this Section 17 by delivering to the Optionee additional
Options pursuant to the Plan in an amount equal to the Company's liabilities
hereunder. The Company shall be deemed to have satisfied its right and
obligation to deliver additional Options pursuant to the preceding sentence if
it shall have used its best efforts to do so by the date thirty (30) days
following the next succeeding annual meeting of the stockholders of the Company
that it is at least three months after the liability of the Company under this
Section 17 is determined.
IN WITNESS WHEREOF, the Optionee and the Company have caused this
Agreement to be signed on its behalf effective as of the Date of Exercise.
AMERICAN CAPITAL STRATEGIES, LTD.
By: /s/
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/s/
-----------------------------------------
OPTIONEE
Address: 0 Xxxxxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
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EXHIBIT A
PURCHASE NOTE
November 9, 1998
$300,000
FOR VALUE RECEIVED, the undersigned, Xxxxxxx X. Xxxxxx (the
"Optionee"), hereby promises to pay to AMERICAN CAPITAL STRATEGIES, LTD., and
its successors and assigns (the "Holder"), the principal sum of THREE HUNDRED
THOUSAND DOLLARS ($300,000), with interest thereon, on the terms and conditions
set forth in the Exercise Agreement (as defined herein).
Payments of the principal of and interest on this Note are to be made
in lawful money of the United States of America by check mailed and addressed to
the Holder hereof at the address shown in the Exercise Agreement or such other
address as may be provided thereunder.
Notwithstanding any provision to the contrary in this Note, the
Exercise Agreement or any other agreement, the Optionee shall not be required to
pay, and the Holder shall not be permitted to contract for, take, reserve,
charge or receive, any compensation which constitutes interest under applicable
law in excess of the maximum amount of interest permitted by law.
This Note is the Purchase Note (herein called the "Note") issued
pursuant to the Stock Option Exercise Agreement, dated as of June 7, 1999 (as
from time to time amended, the "Exercise Agreement"), between the Holder and the
Optionee and is entitled to the benefits thereof. All terms used herein shall
have the meanings ascribed to them in the Exercise Agreement.
If an Event of Default as defined in the Exercise Agreement occurs and
is continuing, the unpaid principal of this Note shall become due and payable in
the manner, at the price and with the effect provided in the Exercise Agreement.
This Note and the rights and obligations of the parties hereto shall be
deemed to be contracts under the laws of the State of Maryland and for all
purposes shall be governed by and construed and enforced in accordance with the
laws of said State, except for its rules relating to the conflict of laws.
IN WITNESS WHEREOF, this Note is delivered as of the date set forth
above.
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