U.S. ENERGY SYSTEMS, INC.
STOCK OPTION AGREEMENT
Name of Optionee: Xxxxx Xxxxxxx
Date of Grant: May 10, 2000
Number of Shares Subject to Option: 187,500
Exercise Price Per Share: $3.00
Type of Option: Non-qualified Stock Option
Expiration Date: May 9, 2010 (subject to earlier termination)
1. Grant of Option. U.S. Energy Systems, Inc. (the "Company") hereby
grants to the Optionee identified above (the "Optionee") an option (the
"Option") to purchase up to the number of shares of the Company's
Common Stock, $0.01 par value per share set forth above (the "Shares"),
at an exercise price per share equal to the exercise price set forth
above (the "Exercise Price"). The Option is not intended to qualify as
an incentive stock option within the meaning of Section 422 of the
Code. The Option was issued pursuant to the (a) Company's 1998
Executive Incentive Compensation Plan (the "Plan") and (b) employment
agreement dated as of May 10, 2000 between the Company and the Optionee
(the "Employment Agreement"), both of which are incorporated herein for
all purposes. The Option shall be subject to the terms and conditions
set forth herein, the Plan and the Employment Agreement. The Optionee
hereby acknowledges receipt of a copy of the Plan and the Employment
Agreement and agrees to be bound by all of the terms and conditions
hereof and thereof. In the event of any inconsistency between the
Employment Agreement on the one hand and the Plan or this Stock Option
Agreement on the other hand, the Employment Agreement shall govern.
In the event of any inconsistency between the Plan and this Stock
Option Agreement, the Plan shall govern.
2. Definitions. Unless otherwise provided herein, terms used herein that
are defined in the Plan or the Employment Agreement and not defined
herein shall have the meanings attributed thereto in the Plan or the
Employment Agreement, as the case may be.
3. Exercise Schedule. The Option shall be exercisable in whole or in part
commencing as of the Date of Grant set forth above. The term "exercise"
or "exercisable" as used herein shall include the conversion of the
Option in the manner contemplated by Section 12 hereof.
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4. Method of Exercise. This Option shall be exercisable in whole or in
part by written notice which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being
exercised, and such other representations and agreements as to the
holder's investment intent with respect to such Shares as may be
required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered
in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price in
the manner contemplated by Section 5 hereof. This Option shall be
deemed to be exercised after both (a) receipt by the Company of such
written notice accompanied by the exercise price and the Option and (b)
arrangements that are reasonably satisfactory to the Committee have
been made for Optionee's payment to the Company of the amount that is
necessary to be withheld in accordance with applicable Federal or state
withholding requirements. The Company and the Optionee shall work
cooperatively, expeditiously and in good faith to make such withholding
arrangments. No Shares will be issued pursuant to the Option unless
and until such issuance and such exercise shall comply with all
relevant provisions of applicable law, including the requirements of
any stock exchange (including any automated system of quotation) upon
which the Shares then may be traded or quoted.
5. Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a) cash; (b) check; (c) with Shares that have been held by the
Optionee for at least 6 months (or such other Shares as the Company
determines will not cause the Company to realize a financial account
charge); (d) as provided in Section 12 of this Stock Option Agreement;
or (e) such other consideration or in such other manner as may be
determined by the Board or the Committee in its absolute discretion.
6. Termination of Option. Subject to earlier termination as provided in
the following sentence, the Option shall terminate on, and in no event
shall the Option be exercisable after May 9, 2010. Any unexercised
portion of the Option shall automatically terminate and become null and
void on the terms and conditions and at the time(s) set forth in the
Employment Agreement.
7. Transferability. The Option is not transferable otherwise than by will
or the laws of descent and distribution, and during the lifetime of the
Optionee the Option shall be exercisable only by the Optionee. The
terms of the Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. No Rights of a Stockholder Nor Rights to Continued Employment. Neither
the Optionee nor any personal representative (or beneficiary) shall be,
or shall have any of the rights and privileges of, a stockholder of the
Company with respect to any shares of Stock purchasable or issuable
upon the exercise of the Option, in whole or in part, prior to the date
the Option is deemed to have been exercised. Notwithstanding Section 1
of this Stock Option Agreement, neither the Option nor this Stock
Option Agreement shall confer upon the Optionee any right to continued
employment or service with the Company.
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9. Inapplicability of Section 9 of the Plan. The provisions of Section 9
of the Plan shall not be applicable to the Option.
10. Law Governing. This Agreement shall be governed in accordance with and
governed by the internal laws of the State of Delaware.
11. Notices. Any notice under this Agreement shall be in writing and shall
be given in the manner specified in Section 13 of the Employment
Agreement.
12. Conversion. (a) In lieu of exercise of any portion of the Option as
provided herein, and the payment of the exercise price therefor in the
manner contemplated by Sections 5(a), 5(b), 5(c) and 5(e) hereof, the
Option (or any portion thereof) may, at the election of the Optionee,
be converted into the nearest whole number of Shares determined
pursuant to the following formula:
Number of Shares = NOS multiplied by (MVPS minus EP)
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( MVPS )
where:
NOS is the number of Options to be exercised;
MVPS is the Market Value Per Share on the date of
exercise, which shall be determined in the manner set
forth in Section 12(c); and
EP is the Exercise Price in effect on the business
day next preceding the date of exercise.
(b) Notwithstanding anything to the contrary herein, the
conversion privilege afforded under this Section 12 may only
be used if, at the date of exercise, the Market Value Per
Share is greater than the Exercise Price then in effect.
(c) For purposes of the Option and this Stock Option
Agreement, Market Value Per Share shall be the closing price
of a Share as of the day in question, as reported with respect
to the principal market or quotation system in which Shares
are then traded or quoted, or, if no such closing prices are
reported, on the basis of the closing bid price as of the day
in question on the principal market or quotation system on
which Shares are then traded or quoted, or, if not so traded
or quoted, as furnished by a professional securities dealer
making a market in such stock selected by the Committee.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of May 10,
2000.
COMPANY:
U.S. ENERGY SYSTEMS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxxx
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Xxxxxxxx X. Xxxxxxxxx,
Chief Executive Officer
Optionee acknowledges receipt of a copy of the Plan and the Employment
Agreement and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option, and fully understands all provisions of the Option.
Dated: May 10, 2000 OPTIONEE:
/s/ Goran Mornhead
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Xxxxx Xxxxxxx
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