EXHIBIT 10.11.1
HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
1997 EXECUTIVE AND NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Xxxxxx X. Xxxxxxxxx
(Name of Grantee)
Hanover Capital Mortgage Holdings, Inc., a Maryland corporation (the
"Company"), hereby grants to Xxxxxx X. Xxxxxxxxx (the "Grantee"), effective as
of July 1, 2002 (the "Grant Date"), an option (the "Option") to purchase 18,630
shares of the Company's Common Stock pursuant to the Company's 1997 Executive
and Non-Employee Director Stock Option Plan (the "Plan"), a copy of which is
attached hereto and is incorporated herein in its entirety by this reference.
Except as otherwise provided herein, all capitalized terms used but not defined
herein have the meanings they have in the Plan.
The Grantee hereby accepts the Option granted subject to the terms and
provisions set forth in the Plan and the following additional terms and
provisions:
1. The Option is NOT intended to qualify as an incentive stock option
within the meaning of Code section 422.
2. The price at which shares of Common Stock may be purchased pursuant
to the Option is $15.75 per share, both the price and the number of shares being
subject to adjustment only as provided in the Plan.
3. (a) Subject to Sections 3(b) through 3(e) below, this Option may be
exercised to the extent vested in accordance with the following vesting
schedule: for each of the five Earn-Out Measuring Dates (as defined in Section 9
below) through which the Total Return Per Unit (as defined in Section 9 below)
equals at least a 15% annualized return on the Base Stock Price (as defined in
Section 9 below), one-third (1/3) of the rights evidenced by this Option shall
vest on such Earn-Out Measuring Date until the Option is fully vested; PROVIDED,
HOWEVER, that if the Total Return per Unit is at least equal to $17.9705 as of
any Earn-Out Measuring Date, then, to the extent not already vested, all of the
rights evidenced by this Option shall vest on such Earn-Out Measuring Date. Any
portion of the Option that shall not have vested on or before the last Earn-Out
Measuring Date, shall expire on such Earn-Out Measuring Date. THE VESTING
SCHEDULE SET FORTH IN THIS SECTION 3(A) IS IN LIEU OF THE VESTING SCHEDULE SET
FORTH IN SECTION 6.3.2 OF THE PLAN, AND THE GRANTEE ACKNOWLEDGES AND AGREES THAT
VESTING OF THE OPTION SHALL NOT BE SUBJECT TO THE PROVISIONS OF SECTION 6.3.2 OF
THE PLAN.
(b) Subject to Sections 3(c) through 3(e) below, if the
employment of the Grantee by the Company or any Parent or Subsidiary of the
Company terminates for any reason (and the Grantee does not continue to be
employed by any member of the group consisting of the Company, the Company's
Parent, if any, and the Company's Subsidiaries), this Option shall be
exercisable by the Grantee only during the three months following such
termination and only as to the number of shares, if any, as to which it was
exercisable immediately prior to such termination.
(c) Notwithstanding Section 3(b) but subject to Section 3(e),
if the employment of the Grantee by the Company or any Parent or Subsidiary of
the Company terminates as a result of the Grantee's death or permanent and total
disability (as defined in Section 22(e)(3) of the Code), this Option shall be
exercisable (in the case of the Grantee's death, either by the Xxxxxxx's
executor or administrator or, if not so exercised, for the legatees or
distributees of the Grantee's estate) only during the one year following such
termination. During such one-year period, this Option shall be exercisable only
as to the number of shares, if any, as to which it was exercisable immediately
prior to such termination.
(d) Notwithstanding Section 3(b), if the employment of the
Grantee by the Company or any Parent or Subsidiary of the Company is terminated
by the Company or any Parent or Subsidiary of the Company for "good cause" (and
the Grantee does not continue to be employed by any member of the group
consisting of the Company, the Company's Parent, if any, and the Company's
Subsidiaries), the Option shall terminate immediately. For purposes of this
Agreement, "good cause" shall mean (i) the willful or reckless failure by the
Grantee to perform his or her duties under, or the willful or reckless violation
by the Grantee of, any written employment agreement, which failure or violation
shall not have been cured within the cure period, if any, provided in such
agreement, (ii) the commission by the Grantee of an act of fraud or theft
against the Company, the Company's Parent, if any, or any Subsidiary of the
Company or (iii) the conviction of the Grantee of, or the plea by the Grantee of
NOLO CONTENDERE to, any felony.
(e) Notwithstanding any other provision of this Agreement
other than Section 3(a), the Option shall expire at the close of the day
immediately preceding the tenth anniversary of the Grant Date.
WARNING: THE OPTION EXERCISE PERIOD MAY BE CUT SHORT IN THE EVENT OF A CHANGE
IN CONTROL OF THE COMPANY. SEE SECTION 12.4 OF THE PLAN.
4. The Option shall not be exercisable unless either (a) a registration
statement under the Securities Act of 1933, as amended, with respect to the
Option and the shares to be issued on the exercise thereof shall have become,
and continues to be, effective, or (b) the Grantee (i) shall have represented,
warranted and agreed, in form and substance satisfactory to the Company, at the
time of exercising the Option, that he or she is acquiring the shares for his or
her own account, for investment and not with a view to or in connection with any
distribution, (ii) shall have agreed to restrictions on transfer in form and
substance satisfactory to the Company and (iii) shall have
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agreed to an endorsement which makes appropriate reference to such
representations, warranties, agreements and restrictions on the certificate(s)
representing the shares.
SHARES ISSUED UPON EXERCISE OF THE OPTION WILL BE SUBJECT TO ALL
RESTRICTIONS ON TRANSFER IMPOSED BY THE COMPANY'S ARTICLES OF INCORPORATION OR
BY-LAWS AND BY APPLICABLE STATE OR FEDERAL SECURITIES LAWS.
5. The Option may be exercised, subject to such conditions as the
Committee may require in accordance with the Plan, by the delivery, by certified
or registered mail, to the Company's Treasurer at its principal executive office
in Edison, New Jersey, of a Notice of Exercise in the form attached hereto as
EXHIBIT A, which notice shall specify, among other things, the number of Shares
to be so purchased, and shall be accompanied by full payment for the Shares
purchased, together with any tax or excise due in respect of issue of such
Shares, in cash or by certified or bank cashier's check, or in the Committee's
discretion, through (i) the tender of "mature" Shares, as determined under
generally accepted accounting principles, having a Fair Market Value on the date
of tender equal to the purchase price of the Shares to be acquired pursuant to
the exercise of the Option or (ii) delivery of irrevocable instructions to
exercise a broker-assisted cashless exercise in accordance with Regulation T of
the Board of Governors of the Federal Reserve System through a brokerage firm
approved by the Committee and pursuant to such rules and procedures as the
Committee may specify, or a combination of the foregoing.
6. Notwithstanding anything to the contrary contained herein, no shares
shall be issued to the Grantee pursuant to the Option until the Company and the
Grantee have made appropriate arrangements for the withholding of applicable
income taxes, if any, attributable to the exercise of the Option with respect to
such shares or, in the sole discretion of the Company, the disposition by the
Grantee of such shares, and the Company may require the Grantee to make a cash
payment to the Company or to provide the Company with other security in respect
of such taxes. In addition, the Grantee shall inform the Company promptly of any
disposition of shares acquired by the Grantee pursuant to the Option.
7. The Option is not transferable by the Grantee otherwise than by will
or the laws of descent and distribution and, during the lifetime of the Grantee,
may be exercised only by the Grantee.
8. THE GRANT AND EFFECTIVENESS OF THIS OPTION IS CONDITIONED UPON THE
GRANTEE'S CONSENT TO THE CANCELLATION AND SURRENDER OF THE STOCK OPTION GRANTED
TO THE GRANTEE ON SEPTEMBER 28, 1997 FOR THE PURCHASE OF 18,630 SHARES OF THE
COMPANY'S COMMON STOCK AT A PURCHASE PRICE OF $15.75 PER SHARE (THE "PRIOR
OPTION"), AND THE GRANTEE, BY EXECUTION OF THIS STOCK OPTION AGREEMENT, DOES
HEREBY EXPRESSLY CONSENT TO SUCH CANCELLATION AND SURRENDER OF THE PRIOR OPTION
AS OF THE DATE HEREOF.
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9. Solely for purposes of this Stock Option Agreement, the following
terms shall have the meanings set forth below in lieu of any definition which
may be set forth in the Plan for such terms.
(a) "Average Spread" means, on any Earn-Out Measuring Date,
(i) the average of the Daily Market Price per Share, as reported in the Wall
Street Journal, for the twenty (20) consecutive trading days immediately
preceding the date with respect to which "Average Spread" must be determined
hereunder (or, if such date is not a business day, the immediately preceding
business day), on the principal exchange for the Shares or the Nasdaq National
Market (or, if Shares are not publicly traded, the fair market value of such
Share as determined by the Committee in accordance with a valuation methodology
approved by the Committee in good faith) minus (ii) the Base Stock Price.
(b) "Base Stock Price" means $8.9345.
(c) "Daily Market Price" for any trading day shall mean (i) if
the Shares are listed or admitted to trading on any securities exchange or the
Nasdaq National Market, the closing price, regular way, on such day, or if no
such sale takes place on such day, the average of the closing bid and asked
prices on such day, and (ii) if the Shares are not listed or admitted to trading
on any securities exchange or the Nasdaq National Market, the fair market value
per Share as determined by the Committee in accordance with a valuation
methodology approved by the Committee in good faith.
(d) "Earn-Out Measuring Date" means each July 1, beginning
with July 1, 2003 and ending with July 1, 2007.
(e) "Total Return per Unit" means, as of any Earn-Out
Measuring Date, (i) the Average Spread, plus (ii) the sum of all distributions
that have been made by the Company with respect to a Share during the period
measured from the Grant Date through and including such Earn-Out Measuring Date.
[Signature page to follow]
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WITNESS the execution hereof under seal as of the 26 day of June,
2002.
"GRANTEE"
/s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxxxx
"COMPANY"
Hanover Capital Mortgage Holdings, Inc.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer and President
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EXHIBIT A
HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
1997 EXECUTIVE AND NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NOTICE OF EXERCISE
TO: Treasurer, Hanover Capital Mortgage Holdings, Inc.
FROM: ________________________________________
Optionholder's Name
I elect to exercise my option to purchase shares of Hanover Capital
Mortgage Holdings, Inc. common stock as follows:
Date of Option Grant: ______________
Exercise Price: $_______/share
Number of Shares to Be Purchased: ___________
Total Exercise Price Enclosed: $__________
Full payment, in cash or certified or bank cashier's check, for the shares I am
electing to purchase is enclosed with this notice. I understand that issuance of
the purchased shares may be conditioned on my payment of any tax or excise due
thereon and on fulfillment of requirements specified in the Stock Option
Agreement, dated as of _____________, 2002, between Hanover Capital Mortgage
Holdings, Inc. and me.
___________________________________
Optionholder's Signature
______________________
Date
Received by:
______________________________________
Date:_____________
