NEITHER THIS OPTION NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THIS OPTION NOR THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS OPTION MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS EXPRESSLY PERMITTED UNDER THE
TERMS OF THIS OPTION.
OPTION TO PURCHASE 43,671 SHARES
OF COMMON STOCK
of
KMG-B, INC.
THIS OPTION AGREEMENT ("Option") is executed effective as of October 17, 1996
by and between XXXXXX X. XXXXXXXX ("Holder") and KMG-B, INC. ("Company"), a
Texas corporation, and pursuant to which Holder is entitled to purchase an
aggregate of Forty-three Thousand Six Hundred Seventy-one (43,671) shares of
the common stock, $.01 par value, of Company (such shares of the common stock
of Company to which an option is being granted herein called the "Option
Shares" and all shares of common stock of Company being herein called the
"Common Stock"), upon payment of the exercise price of 21.6/100 Dollars
($.216) per Option Share (the "Exercise Price"), in accordance with the terms
and conditions hereof. This Option is granted to the Holder pursuant to the
1996 Stock Option Plan ("Plan") of the Company, a copy of which has been
provided to Holder. This Option is subject to all the terms and conditions
of the Plan and this Option as set forth herein.
1. VESTING OF OPTION SHARES. Holder shall not be entitled to purchase
Option Shares until such shares shall become vested ("Vested Shares"). The
Option Shares shall vest and become Vested Shares, provided the other
conditions of this Option are met, as follows: One Hundred percent (100%) of
the Option Shares shall vest on the earlier of ("Vesting Date") (i) July 31,
1997 or (ii) the effective date of any sale, lease, exchange or other
disposition (not including any pledge, mortgage, deed of trust or trust
indenture) of all, or substantially all, the property and assets, with or
without goodwill, of the Company, if not made in the usual and regular course
of business. Holder may exercise the Option for Vested Shares within seven
(7) years after the date upon which such shares become Vested Shares ("Option
Period"). Upon the expiration of the Option Period applicable to Vested
Shares, Holder shall have no right to purchase such shares and this Option,
with respect to such shares, shall terminate. Option Shares shall not become
Vested Shares if prior to the Vesting Date applicable to such shares,
Holder's employment with the Company shall have terminated for any reason.
2. EXERCISE OF OPTION. The Option shall be exercised upon delivery of
written notice to the Company setting forth the number of Vested Shares with
respect to which this Option is being exercised, and specifying a business
day not more than fifteen (15) days nor less than five (5) days from the date
such notice is given, for the payment of the Exercise Price against delivery
of the Vested Shares being purchased. Notice shall be delivered in person or
by registered mail, return receipt requested, addressed to the Company at
00000 Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other office as the
Company may designate by written notice to the Holder, and shall be deemed
received on actual delivery or within three (3) days after the date such
notice is deposited in the mail.
Subject to the terms of this Option and the Plan, the Company shall
cause certificates for the Vested Shares so purchased to be delivered to the
Holder at the principal business office of the Company on the date specified
in the notice of exercise or as soon thereafter as is reasonably practicable,
and in any event within ten (10) days, against payment of the full Exercise
Price in cash or certified check, in form and substance satisfactory to
Company; provided, however, that in lieu of cash or certified check, the
Holder may to the extent permitted by applicable law, exercise this Option in
whole or in part, by having shares of Vested Stock being purchased withheld
or by delivering to the Company shares of Common Stock (in proper form for
transfer and accompanied by all requisite stock transfer tax stamps or cash
in lieu thereof) owned by such Holder, which in the aggregate have a fair
market value equal to the purchase price of the Vested Shares as to which the
Option is being exercised. The fair market value of the Vested Shares so
withheld or the or Common Stock so delivered shall be determined as provided
in the Plan as of the date immediately preceding the date on which the Option
is exercised, or as may be required in order to comply with or to conform to
the requirements of any applicable laws or regulations.
This Option may be exercised either in whole or in part and, if in
part, from time to time in part; provided, however, that this Option may not
be exercised for less than 1,000 Vested Shares (or such lesser number of
Vested Shares as is covered by this Option); and, provided further, that this
Option may only be exercised by the Holder for the purchase of whole Vested
Shares and not fractions thereof.
The Vested Shares so purchased shall be and are deemed to be
transferred to the Holder as the record owner of such Vested Shares as of the
close of business on the date on which this Option shall have been exercised
and payment shall have been made for such Vested Shares as aforesaid.
3. RESERVATION OF STOCK; REGISTRATION OF STOCK. The Company covenants
and agrees that (a) it has or will at all appropriate times, so long as this
Option is outstanding, reserve and keep available out of its treasury, Common
Stock or authorized but unissued Common Stock, solely for the purpose of
issuing shares, from
2
time to time, upon the exercise of this Option, an adequate number of shares
of Common Stock for delivery at the times and in the manner provided herein
upon exercise of this Option; (b) the shares delivered upon exercise of the
Option shall be validly issued and outstanding and fully paid and
nonassessable shares of Common Stock; and (c) it will pay when due any and
all Federal and state original issue or similar taxes which may be payable in
respect of the issuance of the Option or of any shares of Common Stock upon
exercise of the Option. The Company shall not, however, be required to pay
any transfer tax which may be payable with respect to any transfer of the
Option, the issuance of certificates of Common Stock in a name other than
that of the Holder or any transfer of shares, all such tax being payable by
the Holder. Subject to Section 10 of this Option, upon the exercise by the
Holder of this Option with respect to all Vested Shares, all shares of Common
Stock issued pursuant to this Option will be registered under the Securities
Act of 1933 ("Act") on Form S-8 or other appropriate registration form unless
in the opinion of the Company registration is not necessary or appropriate or
should be delayed, as to each of which the determination of the Company shall
be conclusive.
4. RESTRICTIONS ON TRANSFER. Unless this Option or the Option Shares,
as applicable, have been registered, this Option and the Certificates
representing the Option Shares purchased by Holder shall be stamped or
otherwise imprinted with a legend substantially in the following form:
"This Option has not been registered under the Securities Act of 1933,
and neither this Option nor the shares of Common Stock issuable upon
exercise of this Option may be sold, transferred or otherwise disposed of
except as expressly permitted under the terms of this Option."
This Option shall not be transferable, whether by operation of law or
otherwise, other than by will or the laws of descent and distribution, and
this Option shall be exercisable, during the lifetime of the Holder, only by
such Holder. No sale, transfer or other disposition of any of the Option
Shares shall be made by the Holder thereof unless (i) such sale, transfer or
other disposition of the Option Shares is covered by an effective
registration statement (on the then appropriate form) under the Act, or (ii)
if requested by the Company, the Holder shall have furnished an opinion of
Holder's counsel (which opinion and counsel shall be satisfactory to the
Company in its reasonable discretion) with respect to the sale, transfer or
other disposition of such Option Shares as not requiring registration under
the Act or other federal and state laws or regulations or (iii) the Holder
sells such Option Shares in full compliance with all of the provisions of
Rule 144 promulgated under the Act, as the same is then in effect, or of a
successor or similar rule ("Rule") of the Securities and Exchange Commission
("Commission"), affording an exemption from the registration requirements of
the Act in the circumstances and provides the Company with such supporting
documentation as may be required by law.
3
5. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of this
Option shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalization,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of
bonds, debentures, common stock, preferred or prior preference stock ahead of
or affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
In the event of any change in the outstanding Common Stock through
merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, split-up, split-off, spin-off, combination or exchange of
shares, or other like change in capital structure of the Company, an
adjustment shall be made to this Option such that this Option shall
thereafter be exercisable for such securities, cash and/or other property as
would have been received in respect of the Option Shares subject to this
Option had this Option been exercised in full immediately prior to such
change, and such an adjustment shall be made successively each time any such
change shall occur. The term "Option Shares" after any such change shall
refer to the securities, cash and/or property then receivable upon exercise
of this Option. In addition, in the event of any such change, the Company
shall make any further adjustment as may be appropriate to the number of
Option Shares and the Exercise Price per share as shall be equitable to
prevent dilution or enlargement of rights under this Option, and the
determination of the Company as to such matters shall be conclusive.
Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock
of any class, for cash or property, or for labor or services either upon
direct sale or upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into
such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, this Option.
6. NO RIGHTS AS STOCKHOLDER. The Holder shall not, based on his being
a Holder, be entitled to vote or receive dividends or be deemed the holder of
Common Stock or any other security of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the Holder of this Option, as such, any of
the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action
(whether upon any recapitalization, issue of stock, reclassification of
stock, change to or of par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or
4
otherwise except for that portion of Vested Shares in respect of which this
Option has been exercised and payment made.
7. NONNEGOTIABILITY. The Holder of this Option, by accepting the same,
consents and agrees with the Company that this Option is not transferable, in
whole or in part, except pursuant to the laws of descent and distribution.
8. MODIFICATIONS. This Option and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against whom enforcement of such change, waiver, discharge or
termination is sought.
9. NOTICES. Any notice to be given to the Company under the terms
hereof shall be addressed to the Company at the address set forth hereinabove
and any notice to the Holder shall be addressed to the Holder's address as
reflected on the signature page of this Option, or at such other address as
the Company and the Holder may hereafter designate in writing to the other.
Any such notice shall have been deemed given when actually received or on the
third day after it is enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, registered or certified and deposited (postage and
registry or certification fee prepaid) in a post office regularly maintained
by the United States Government.
10. VIOLATION OF LAW. In addition to any other restrictions contained
in this Option, the Holder may not exercise this Option, in whole or in part
at such times and from time to time as, in the reasonable opinion of counsel
to the Company, the issuance and sale to Holder of the Option Shares, upon
exercise of this Option, is not exempt from the registration provisions of
the Act (unless the Option and/or Option Shares, as applicable, have been
registered under the Act), or violates other applicable laws or regulations.
The Company shall use its best efforts to cure such violation and/or
potential violation so as to permit exercise of this Option.
11. TAX WITHHOLDING. The Holder further agrees that the Company may
withhold other cash compensation due to the Holder in an amount equal to any
required withholding amount under Federal or state income tax laws owing as a
result of this Option or the exercise thereof and that the Holder will pay to
the Company any additional cash, if necessary, to satisfy such withholding
requirement. The Company, at its option, may also retain and withhold Common
Stock issued upon the exercise of this Option in an amount necessary to
satisfy such withholding requirement.
12. EMPLOYMENT. Nothing within this Option shall be construed to
impose upon the Company or any affiliate any obligation to employ or to
continue to employ or maintain any other affiliation with the Holder.
5
13. FORMS OF ELECTION TO EXERCISE OPTION. Any notice of exercise shall
be in a form substantially similar to the form attached hereto as EXHIBIT A.
14. ARBITRATION. Any controversy or claim arising out of or relating
to the issuance of this Option, or the issuance or any other matter relating
to the Option Shares hereunder, or the actual or alleged breach of this
Option, or the rights or duties or obligations of the Company or the Holder
hereunder, shall be settled by arbitration conducted in the City of Houston
in accordance with and by an arbitrator appointed pursuant to the rules of
the American Arbitration Association in effect at the time, and judgment upon
the award rendered pursuant thereto may be entered in any court having
jurisdiction thereof, and all rights or remedies of the Company, the Holder
and their successors to the contrary are hereby expressly waived. The costs
in connection with any arbitration proceeding shall be assessed against the
parties in the manner decided by the arbitrator(s).
15. SUCCESSORS AND ASSIGNS. This Option and each provision herein
shall be binding upon and applicable to, and shall inure to the benefit of
the Company and the Holder, their successors, assigns, heirs and
representatives, except as otherwise specifically provided in this Option.
16. GENDER, SECTION REFERENCES. Pronouns, wherever used herein, and of
whatever gender, shall include natural persons, corporations and entities of
every kind, the singular shall include the plural wherever and as often as
may be appropriate and the plural shall include the singular wherever and as
often as may be appropriate. The section titles and subtitles ("Titles")
used in this Option are solely for convenience of reference and shall not
affect, modify nor limit the provisions of this Option. Any reference to a
particular Title in this Option shall be construed as referring to the
provisions in the indicated Title within this Option.
17. SEVERABILITY. If any provision of this Option, or the application
of such provision to any person or circumstance, shall be held invalid or
unenforceable for any reason, the remainder of this Option, or the
application of such provision to persons or circumstances other than those to
which it is held invalid or unenforceable, shall not be affected thereby.
6
18. GOVERNING LAWS. This Option shall be interpreted, construed, and
enforced in accordance with the laws of the State of Texas.
DATED effective as of the date first above written.
COMPANY:
KMG-B, INC.
By: /S/ XXXXX X. XXXXXXX
-------------------------------------
Xxxxx X. Xxxxxxx,
President
HOLDER:
/S/ XXXXXX X. XXXXXXXX
------------------------------------------
Xxxxxx X. Xxxxxxxx
Holder Address:
0000 Xxxxx
Xxxxxxx, Xxxxx 00000
7
EXHIBIT A
ELECTION TO EXERCISE OPTION
The undersigned, XXXXXX X. XXXXXXXX, pursuant to the provisions of an
Option dated effective October 17, 1996, hereby elects to purchase __________
(_____) shares of common stock of the Company covered by such Option.
Dated:
----------------- --------------------------------------
Xxxxxx X. Xxxxxxxx
Address:
0000 Xxxxx
Xxxxxxx, Xxxxx 00000
Social Security No.
