STOCK OPTION REPLACEMENT AGREEMENT
This Agreement ("Agreement") dated this 14 day of April , 1998, is
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made among X. XXXXXX HOMES, INC., a Delaware corporation ("Homes"), MAUNA LOA
MACADAMIA PARTNERS, L.P., a Delaware limited partnership ("Partnership"), and
XXXX W.A. BUYERS ("Optionee").
R E C I T A L S:
1. Homes maintains the X. Xxxxxx Homes, Inc. 1993 Stock Option/Stock
Issuance Plan ("Homes Option Plan") under which Optionee has been issued a
certain outstanding option.
2. Pursuant to the Amended and Restated Agreement and Plan of Merger
effective as of December 18, 1997, by and between the Partnership and Homes
("Merger Agreement") which provides for the merger of Homes into the Partnership
("Merger"), no outstanding options under the Homes Option Plan shall be assumed
by the Partnership or otherwise converted into a right to receive any interest
in the Partnership.
3. The parties desire to enter into this Agreement in order to
provide for the cancellation of the Optionee's stock option under the Homes
Option Plan and the replacement of a comparable unit option under the Unit
Option Plan, subject to approval of the Unit Option Plan by the unitholders of
the Partnership and consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the parties,
intending to be legally bound, agree and covenant as follows:
1. NONEXERCISE AND CANCELLATION OF OPTION.
The Optionee is currently the holder of a certain unexercised stock
option granted under the Homes Option Plan ("Option") as follows:
a. Date of Grant: August 29, 1997
b. Expiration Date: August 28, 2007
c. Aggregate Number of Shares Subject
to the Option: 5,000
d. Per Share Exercise Price for the Option: $2.4375
e. Aggregate Exercise Price for the Option: $12,187.50
The Optionee hereby agrees not to exercise the Option prior to the Effective
Time and, pursuant to the terms of the Homes Option Plan and this Agreement, the
Option shall be canceled and shall be null and void as of the Effective Time
("Canceled Stock Option").
2. REPLACEMENT OPTION.
In the manner described hereunder, the Partnership hereby agrees to
grant a replacement unit option ("Replacement Unit Option") under the Unit
Option Plan contingent upon (a) the consummation of the Merger, (b) the approval
of the Unit Option Plan by a majority of the unitholders of the Partnership, and
(c) the Optionee's continued service as a director of Homes until immediately
prior to the Effective Time and Optionee's agreement to serve as a director of
the Partnership's general partner after the Effective Time. Specifically, as a
replacement of the Canceled Stock Option, on an aggregate basis, the Partnership
shall issue to Optionee a Replacement Unit Option to purchase the number of
Class A Units of the Partnership equal to the product of the "Conversion Ratio"
(as defined in the Merger Agreement) multiplied by the aggregate number of
shares of Homes common stock that are subject to the Canceled Stock Option. The
exercise price per unit of the Replacement Unit Option shall be equal to the
exercise price per share of the Canceled Stock Option divided by the Conversion
Ratio. In the event that the grant of the Replacement Unit Option would result
in an option to acquire a fractional Class A Unit, such fractional Class A Unit
shall not be issued, and the aggregate exercise price for the Replacement Unit
Option shall be reduced by the proportionate amount of the aggregate exercise
price attributable to the fractional Class A Unit.
The Replacement Unit Option shall be exercisable in accordance with
the same vesting dates and expiration date as exist under the Canceled Stock
Option, disregarding acceleration of such dates attributable to the Merger.
Thus, the Replacement Unit Option shall have an expiration date of ten years
from the date of grant of the Canceled Stock Option, and shall be exercisable
in 18 equal and successive monthly installments over the Optionee's period of
service as a member of the Board of Directors of Homes or the Managing
Partner or as an employee of Homes or the Partnership, with the first
installment to commence upon the completion of six months of service measured
from the date of grant of the Canceled Stock Option. However, unless as
otherwise provided herein, the benefits, rights, and
features of the Replacement Unit Option shall be governed by the terms and
conditions of the Unit Option Plan. New unit option agreements granting the
Replacement Unit Option under the Unit Option Plan shall be distributed to the
Optionee as soon as practicable following the Effective Time.
The Replacement Unit Option as determined and granted in accordance
with this Section 2 as of the Effective Time shall be as follows:
a. Date of Grant: Effective Time
b. Expiration Date: August 28, 2007
c. Aggregate Number of
Partnership Units Subject to the Option: 3,333
d. Per Share Exercise Price for the Option: $3.6563
e. Aggregate Exercise Price for the Option: $12,186.45
3. DEEMED CANCELLATION OF OPTION.
If conditions (a) and (c) of the first paragraph of Paragraph 2 are
met, but the Unit Option Plan is not approved by a majority of the unitholders
of the Partnership, then Homes and the Optionee agree that (a) Optionee shall
not exercise the Option, (b) the Option shall become null and void at the
Effective Time, and (c) in settlement of the cancellation of the Option, Homes
shall make a cash or cash equivalent payment ("Option Settlement Amount") to the
Optionee, in an amount, if any, equal to: (a) the aggregate number of shares of
Homes common stock that are subject to the canceled Option, (b) multiplied by
the average of the closing selling price per share of such common stock as
reported on the NASDAQ National Market System for the 20 consecutive trading
days ending on the third trading day immediately prior to the Effective Time,
and (c) less the aggregate option exercise price for the Option. For this
purpose, if the Homes common stock is not traded on an applicable trading date,
the closing price on that date shall be equal to the closing selling price per
share on the last preceding date for which such quotation exists. The Option
Settlement Amount as described in this paragraph shall be paid to Optionee as of
the Effective Time by the Partnership as soon as reasonably practicable after
the Effective Time.
4. TERMINATION.
This Agreement shall terminate automatically without further action in
the event that the Merger is not consummated by August 31, 1998. Upon such
termination of this
3.
Agreement, the respective obligations of the parties hereto shall immediately
become void and have no further force and effect.
5. NO RELIANCE.
Optionee acknowledges that neither Homes nor the Partnership has
provided Optionee with advice, warranties or representations regarding any of
the legal or tax effects of this Agreement or the transactions contemplated
hereby. Optionee represents that he has obtained such legal and tax advice with
respect thereto from Optionee's own legal and tax advisors as Optionee has
deemed appropriate.
6. REPRESENTATIONS OF OPTIONEE.
Optionee represents that the above Section 1 accurately sets forth, as
to Optionee, the number of shares of Homes common stock subject to the Option
held by Optionee and the exercise price and expiration date thereof. Optionee
represents that Optionee is the sole legal and beneficial owner, and has good
title to, the Option indicated as owned by Optionee, and that such Option is
owned by Optionee free and clear of liens, security interests, charges or other
encumbrances. Optionee represents that Optionee has the legal right, power,
capacity and authority to execute, deliver and perform this Agreement, and that
this Agreement is the valid and binding obligation of Optionee enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
general principles of equity. Optionee represents that the execution, delivery
and performance of this Agreement will not (a) conflict with or result in the
breach of, or default or actual or potential loss of any benefit under, any
provision of any agreement, instrument or obligation to which the Optionee or
the Optionee's spouse is a party or by which any of Optionee's properties or the
Optionee's spouse's properties are bound, or give any other party to any such
agreement, instrument or obligation a right to terminate or modify any term
thereof; (b) require the consent or approval of any third party; (c) result in
the creation or imposition of any lien, mortgage or encumbrance on the Option or
any other assets of the Optionee or the Optionee's spouse; or (d) violate any
law, rule or regulation to which the Optionee or the Optionee's spouse is
subject.
7. INTEGRATION.
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings of the parties in connection therewith.
8. HEADINGS.
The descriptive headings of the Sections of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
4.
9. NOTICES.
Any notice or communication required or permitted hereunder, shall be
deemed to have been given if in writing and (a) delivered in person, (b)
delivered by confirmed facsimile transmission (c) sent by overnight carrier,
postage prepaid with return receipt requested or (d) mailed by certified or
registered mail, postage prepaid with return receipt requested, addressed as
follows:
If to Homes, addressed to:
X. Xxxxxx Homes, Inc.
Attention: Xxxx X. Xxxxx
000-X Xxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxx 00000
Fax No.: (000) 000-0000
If to the Partnership, addressed to:
Mauna Loa Macadamia Partners, L.P.
Attention: Xxxxxxx X. Xxxxxxxx
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Fax No.: (000) 000-0000
If to Optionee, addressed to:
Xxxx W.A. Buyers
X.X. Xxx 0000
Xxxxxxx, Xxxxxx 00000-0000
Fax No.: (000) 000-0000
or at such other address and to the attention of such other person as a party
may notice to the others in accordance with this Section 8. Any such notice or
communication shall be deemed received on the date delivered personally or
delivered by confirmed facsimile transmission, on the first business day after
it was sent by overnight carrier, postage prepaid with return receipt requested,
or on the fourth business day after it was sent by certified or registered mail,
postage prepaid with return receipt requested.
5.
10. GOVERNING LAW.
This Agreement and the legal relations between the parties shall be
governed by and construed in accordance with the laws of the State of Hawaii
applicable to contracts between Hawaii parties made and performed in such State.
11. EXPENSES.
Each party hereto shall pay its own costs and expenses, including, but
not limited to, those of its attorneys, in connection with this Agreement and
transactions covered and contemplated hereby.
12. ATTORNEYS' FEES.
In the event either of the parties to this Agreement brings an action
or suit against the other party by reason of any breach of any covenant,
agreement, representation, warranty or other provision hereof, or any breach by
such other party of any duty or obligation created hereunder, the prevailing
party in whose favor final judgment is entered shall be entitled to have and
recover of and from the losing party all reasonable costs and expenses incurred
or sustained by such prevailing party in connection with such suit or action,
including without limitation, legal fees and court costs (whether or not taxable
as such).
13. NO ASSIGNMENT.
Neither this Agreement nor any rights, duties or obligations hereunder
shall be assignable by Homes, the Partnership, or Optionee, in whole or in part,
except that Homes may assign any of its rights, duties or obligations hereunder
to the Partnership. Any attempted assignment in violation of this prohibition
shall be null and void. Subject to the foregoing, all of the terms and
provisions hereof shall be binding upon, and inure to the benefit of, the
successors of the parties hereto.
14. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other party. Such delivery may be accomplished by and be
effective upon facsimile transmission to the other party, provided an originally
executed copy of this Agreement is subsequently furnished to such party.
6.
15. JURY WAIVER.
The parties hereto agree to waive trial by jury in any dispute over
this Agreement or related thereto in any manner.
The undersigned agree to the terms of this Agreement and voluntarily
enter into it with the intent to be bound thereby.
X. XXXXXX HOMES, INC.
Dated: By /s/ Xxxx X. Xxxxx
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Its: President & CEO
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"Homes"
MAUNA LOA MACADAMIA PARTNERS, L.P.
By Mauna Loa Resources, Inc.
Its General Partner
Dated: April 14, 1998 By Xxxx X. Xxxxxx
Its: President
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"Partnership"
Dated: April 14, 1998 /s/ Xxxx W. A. Buyers
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XXXX W.A. BUYERS
"Optionee"
7.
