1
EXHIBIT 10.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, executed and effective this 12th day of
April, 1999, by and between UNIVERSAL COMPRESSION HOLDINGS, INC., a Delaware
corporation ("Holdings") and XXXXXXX XXXXXXXXXX (the "Employee"), who is an
Employee of Universal Compression, Inc. ("Universal"), a wholly owned and
subsidiary of Holdings.
WHEREAS, Holdings has agreed to grant to the Employee an option to
purchase Holdings Common Stock, $.01 par value per share (the "Common Stock"),
pursuant to the terms and conditions of this Agreement in consideration for
services to Universal; and
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties agree as
follows:
1. GRANT OF OPTION. Holdings hereby grants to the Employee an option
(the "Option") to purchase 2,206 shares of Common Stock at $50 per share. This
Option shall become effective on the effective date of this Agreement as set
forth above ("Date of Grant") and unless sooner terminated under the provisions
hereof, shall expire at 12:00 midnight on April 11, 2009 (the "Expiration
Date"). This Option is granted under Holdings' Incentive Stock Option Plan (the
"Plan"), a copy of which is attached hereto as Exhibit "A" and is incorporated
herein by reference, and shall constitute, to the extent permissible, an
Incentive Stock Option under Section 422 of the Internal Revenue Code of 1986,
as amended, and otherwise shall be a Non-qualified Stock Option.
2. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become exercisable in
accordance with the following schedule:
Date Aggregate Amount Exercisable
April 12, 2000 33 1/3%
April 12, 2001 66 2/3%
April 12, 2002 100%
Notwithstanding the foregoing, Options shall become immediately
exercisable upon: (i) a public offering of Common Stock of the Corporation; (ii)
the acquisition by any Person other than an affiliate of Xxxxxx Xxxxxx Partners
III, L.P.(as defined in the Plan), of fifty one percent (51%) or more of the
Common Stock of the Corporation; or (iii) a sale of all or substantially all of
the assets of the Corporation.
(b) Termination of Employment.
(i) Termination due to Death, Disability of Retirement. In
the event the Employee's employment with Universal terminates on account of
death, Disability (as defined in the Plan) or retirement after age 65, the
Option shall terminate as of the date of Employee's termination of employment,
except for the portion of the Option which is exercisable as of the date of
termination of employment, which shall terminate unless exercised by Employee
within three months following the date of Employee's death, disability or
retirement after age 65.
1
2
(ii) Termination of Employment Without Cause. In the event the
Employee's employment with Universal shall terminate without cause, the Option
shall terminate as of the date of Employee's termination of employment except
for the portion of the Option which is exercisable as of the date of termination
of employment, which shall terminate unless exercised by Employee within 30 days
following the date of such termination of employment.
(iii) Termination of Employment for Cause. In the event the
Employee's employment with Universal shall terminate for Cause (as defined in
the Plan), the Option, whether or not exercisable as of the date of termination
of employment, shall terminate in its entirety on the date of termination.
3. NON-TRANSFERABILITY. No Option granted hereby and no right arising
thereunder shall be transferable other than by will or by the laws of descent
and distribution. During the lifetime of the Employee, the Option shall be
exercisable only by the Employee. If the Option is exercisable at the date of
the Employee's death and is transferred by will or by the laws of descent and
distribution, the Option shall be exercisable in accordance with the terms of
such Option by the executor or administrator, as the case may be, of the
Employee's estate for a period of three (3) months after the date of the
Employee's death and shall then terminate.
4. MODE OF EXERCISE. The Option shall be exercised by giving to
Holdings written notice stating (a) the number of shares with respect to which
the Option is being exercised, (b) the aggregate Exercise Price for such shares,
and (c) the method of payment. At the option of the Employee, such aggregate
Exercise Price may be paid: (i) in cash; (ii) with the consent of the Board of
Directors of Holdings (the "Board"), which consent may be given or withheld in
its sole discretion, by delivery of a promissory note to Holdings payable over a
three (3) year period and bearing interest at the prime rate, (iii) by delivery
of shares of Common Stock owned by the Employee having a Fair Market Value (as
determined by Section 5 hereof) equal in amount to the aggregate Exercise Price
of the Option being exercised; (iv) by any combination of (i), (ii) and (iii);
or (v) by cancellation of any portion of the Option,in which case the number of
shares of Common Stock to be received shall be computed using the following
formula:
X = Y x (A-$50)
-----------
A
Where: X = the number of shares of Common Stock to be issued pursuant to
clause (v) above;
Y = the number of shares of Common Stock that otherwise would
have been issuable in respect of that portion of the Option
to be exercised pursuant to clause (v) above if such
exercise had been pursuant to clause (i), (ii), (iii) or
(iv) above;
A = the Fair Market Value of one share of Common Stock on the
date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Fair
Market Value is applicable under clause (iv) of Section 5.
5. FAIR MARKET VALUE OF COMMON STOCK. The "Fair Market Value" of the
Common Stock on any day shall be determined by the Holdings Board as follows:
(i) if the Common Stock is listed on a national securities exchange or quoted
through the NASDAQ National Market System, the Fair Market Value on any day
shall be the average of
2
3
the high and low reported Consolidated Trading sales prices, or if no such sale
is made on such day, the average of the closing bid and asked prices reported on
the Consolidated Trading listing for such day; (ii) if the Common Stock is
quoted on the NASDAQ inter-dealer quotation system, the Fair Market Value on
any day shall be the average of the representative bid and asked prices at the
close of business for such day; (iii) if the Common Stock is not listed on a
national stock exchange or quoted on NASDAQ, the Fair Market Value on any day
shall be the average of the high bid and low asked prices reported by the
National Quotation Bureau, Inc. for such day; or (iv) if none of clauses (i) -
(iii) are applicable, the Fair Market Value as may be determined by the Board
or the Administrator of the Plan, there being no obligation to make such
determination.
6. STOCK CERTIFICATES. All stock certificates representing shares of
Common Stock acquired pursuant to the exercise of an Option that are issued by
Holdings shall contain a legend substantially in the following form:
"SHARES OF UNIVERSAL COMPRESSION HOLDINGS, INC. ("HOLDINGS") REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT, DATED AS OF
FEBRUARY 20, 1998, AS MAY BE AMENDED, WHICH CONTAINS PROVISIONS REGARDING
THE RESTRICTIONS ON THE TRANSFER OF SUCH SHARES AND OTHER MATTERS. A COPY
OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF
HOLDINGS. THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT REGISTERED
UNDER, AND ARE SUBJECT TO, THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OR IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT."
In the event that the shares of Common Stock issued pursuant to the
Option are (i) registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to an effective registration statement which
complies with the then applicable regulations, rules and procedures and
practices of the Securities and Exchange Commission, and are registered and/or
qualified in accordance with any applicable state laws, regulations, rules and
administrative procedures practices, or (ii) transferred pursuant to an
exemption from registration under the Securities Act and, at the request of
Holdings, Holdings has received an executed legal opinion, satisfactory to its
counsel, as to the availability of and compliance with such exemption and that
such shares need not bear the restrictive legend stating that such shares have
not been registered under the Securities Act, Holdings may issue new
certificates representing such shares omitting that portion of such restrictive
legend.
The shares of Common Stock acquired pursuant to the Option shall be
subject to the provisions regarding transfers of shares in the Stockholders
Agreement dated as of February 20, 1998, among Holdings and the partners named
on the signature pages thereto, as amended from time to time (the "Stockholders
Agreement"). At the request of Holdings, the Employee shall become a party to
the Stockholders Agreement prior to the issuance of any shares under this
Agreement.
7. OPTION SUBJECT TO SECURITIES AND OTHER REGULATIONS. The Option
granted hereunder and the obligation of Holdings to sell and deliver shares
under such Option shall be subject to all applicable federal and state laws,
rules and regulations and to such approvals by any government or regulatory
agency as may be required. Holdings, in its discretion, may postpone the
issuance or delivery of shares upon any exercise of the Option until completion
3
4
of any stock exchange listing, or other qualification of such shares under any
state or federal law, rule or regulation as Holdings may consider appropriate,
and may require the Employee, his beneficiary or his legal representative to
make such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of the shares in
compliance with applicable laws, rules and regulations.
Upon demand by the Board, the Employee (or any person acting under
Section 3 of this Agreement) shall deliver to the Board at the time of exercise
of the Option a written representation that the shares to be acquired upon the
exercise of the Option are being acquired for his own account and not with a
view to, or for resale in connection with, any distribution in violation of
federal or state securities laws. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon exercise of the
Option shall be a condition precedent to the right of the Employee or such other
person to purchase any shares.
8. ANTI-DILUTION ADJUSTMENTS. In the event of any change in the Common
Stock by reason of any stock dividend, stock split, recapitalization, merger,
consolidation, combination or exchange of shares, separation, spin-off,
reorganization, liquidation, or of any similar change affecting the Common
Stock, the number and kind of shares subject to the Option and the Option price
thereof shall be appropriately adjusted consistent with such change in such
manner as the Administrator of the Plan may deem equitable to prevent
substantial dilution or enlargement of the rights granted to, or available for,
the Employee.
9. BUYBACK RIGHT. Upon any termination of the employment of the
Employee prior to a public offering of Common Stock, Holdings or its designee
may at its option purchase all Common Stock acquired upon any exercise of the
Option then held by the Employee for a purchase price equal to the determined
value of such stock at the time of purchase. For purposes of this Section 9,
"determined value" shall mean the determined value of the shares of Common Stock
being purchased by Holdings pursuant to this Section 9, such value to be
determined annually as of March 31 of each year by a nationally recognized
investment banking or appraisal firm selected by Holdings. This valuation will
serve as the determined value for the shares until the next valuation unless the
Board determines that a significant change in Holdings performance or prospects
requires a revaluation of the shares.
The purchase by Holdings pursuant to this Section 9 shall be paid for in
cash, to the extent permitted under the loan agreements and debt instruments
relating to Holdings or any of its subsidiaries, or, to the extent cash payments
are not permitted thereunder, by means of a subordinated payment-in-kind
promissory note issued by Holdings bearing interest, payable annually, at the
lowest interest rate required to avoid imputed interest, which note shall be
repaid as soon as permitted.
10. NO RIGHTS AS STOCKHOLDER PRIOR TO EXERCISE OF OPTION. The
Participant shall not have any rights as a stockholder with respect to any
shares subject to the Option prior to the date on which the Employee is recorded
as the holder of such shares on the records of Holdings.
11. NO RIGHTS WITH RESPECT TO CONTINUANCE OF EMPLOYMENT. Neither the
grant of the Option nor any action taken with respect thereto shall be construed
as giving the Employee the right to be retained in the employ of Universal or
any subsidiary or affiliate, nor shall it interfere in any way with the
right of Universal or any such subsidiary or affiliate to terminate any
Employees's employment at any time for any reason, or for no reason at all.
12. TAXES. Holdings may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all Federal, state,
local and other taxes required by law to be withheld with respect to the Option
including, but not limited to: (i)
4
5
reducing the number of shares of Common Stock otherwise deliverable, based upon
their Fair Market Value on the date of exercise, to permit deduction of the
amount of any such withholding taxes from the amount otherwise payable under
this Agreement; (ii) deducting the amount of any such withholding taxes from
any other amount then or thereafter payable to the Employee; or (iii) requiring
the Employee, his beneficiary or his legal representative to pay Holdings the
amount required to be withheld or to execute such documents as Holdings deems
necessary or desirable to enable it to satisfy its withholding obligations as
a condition of releasing the Common Stock.
13. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to contract made
and to be performed entirely within such state.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
15. NOTICES. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally,
telecopied with confirmed receipt, sent by certified, registered, or express
mail, postage prepaid, or sent by a national next-day delivery service to the
parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, and shall be deemed given when so
delivered personally or telecopied, or if mailed, 2 days after the date of
mailing, or, if by national next-day delivery service, on the day after delivery
to such service as follows:
(i) if to Holdings, at:
Universal Compression Holdings, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Universal Compression, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Banner
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx, Esq.
5
6
(ii) if to Employee, to him or her at:
Universal Compression, Inc.
0000 Xxxxxxxxxx
Xxxxxxx, Xxxxx 00000-0000
16. HEADINGS. The headings, in this Agreement are for convenience of
reference only and shall not in any manner define or limit the scope or intent
of any provisions of this Agreement.
17. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement, or any part thereof, is held by a court of competent
jurisdiction or any foreign, federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority to be
invalid, void, unenforceable or against public policy for any reason, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
18. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges and
agrees that in the event of any breach of this Agreement, the non-breaching
party would be irreparably harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto shall and do hereby
waive the defense in any action for specific performance that a remedy at law
would be adequate and that the parties hereto, in addition to any other remedy
to which they may be entitled at law or in equity, shall be entitled to compel
specific performance of this Agreement in any action instituted in the Supreme
Court of the State of New York or the United States District Court for the
Southern District of New York, or, in the event such courts shall not have
jurisdiction of such action, in any court of the United States or any state
thereof having subject matter jurisdiction of such action.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the day and year first above
mentioned.
EMPLOYEE
By: /s/ XXXXXXX XXXXXXXXXX
------------------------------
Xxxxxxx XxxxXxxxxx
UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ XXXXXXX X. XXXXXX
------------------------------
Xxxxxxx X. Xxxxxx
President and
Chief Executive Officer
6
