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EXHIBIT 10.3
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, dated as of October 21, 1999, but
effective as of the 1st day of June, 1998, by and between UNIVERSAL COMPRESSION
HOLDINGS, INC., a Delaware corporation ("Holdings") and XXXXXXX X. BANNER (the
"Executive").
WHEREAS, Holdings has agreed to grant to the Executive 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 Holdings and Universal Compression, Inc., ("Compression"), a
wholly-owned subsidiary of Holdings; 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. DEFINITIONS. For purposes of this Agreement, all capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Employment Agreement between Compression, Holdings and the Executive dated
as of the date hereof.
2. GRANT OF OPTION. Effective June 1, 1998, Holdings hereby grants
to the Executive an option (the "Option") to purchase 2,206 shares of Common
Stock at $50 per share. This Option is granted under Holdings' Incentive Stock
Option Plan 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.
3. OPTION TERMS AND CONDITIONS.
(a) Exercise of Option. The Option shall become
exercisable in accordance with the following schedule:
Years from Grant Date Amount Exercisable
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1 Year 33 1/3%
2 Years 33 1/3%
3 Years 33 1/3%
(b) Termination of Employment.
(i) Termination due to Death, Disability or
Retirement. In the event the Executive's employment with Compression terminates
on account of death, disability or retirement, the vested portion of the Option
shall be and remain exercisable for the balance of the term of the Option.
(ii) Termination of Employment Without Cause. In the
event the Executive's employment with Compression shall terminate without Cause,
the vested portion of the Option shall be and remain exercisable for the balance
of the term of the Option.
(iii) Termination of Employment for Cause. In the
event the Executive's employment with Compression shall terminate for Cause
pursuant to the Employment Agreement, the Option shall terminate on the date of
such termination.
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4. NON-ASSIGNABILITY. No Option granted hereby and no right
arising thereunder shall be transferable during the lifetime of the Executive or
by will or by the laws of descent and distribution. During the lifetime of the
Executive, the Option shall be exercisable only by the Executive. Any Option
which is exercisable at the date of the Executive's death shall be exercisable
in accordance with the terms of this Agreement by the executor or administrator,
as the case may be, of the Executive's estate for the next three (3) months
following the date of the Executive's death and shall then terminate.
5. 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 Executive, such aggregate
Exercise Price may be paid: (i) in cash; (ii) with the consent of the board of
directors of Holdings (the "Board"), 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 Executive having
a Market Price (as determined by Section 6 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)
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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 Market Price of one share of Common Stock on
the date of exercise;
provided, however, that clauses (iii) and (v) shall be inapplicable if no Market
Price is applicable under clause (iv) of Section 6.
6. Market Price of Common Stock. The "Market Price" of the Common
Stock on any day shall be determined as follows: (i) if the Common Stock is
listed on a national securities exchange or quoted through the NASDAQ National
Market System, the Market Price on any day shall be the average of 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 Market Price 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 Market Price 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
Market Price as may be determined by the Board or any Committee thereof, there
being no obligation to make such determination.
7. TRANSFER RESTRICTIONS. The Executive understands that the
Common Stock issuable upon the exercise of this Option may not be registered
under the Securities Act of 1933, as amended (the "Act"). The Executive
acknowledges that the Common Stock will be purchased for investment only, and
that it may not be sold or transferred in the absence of either an effective
registration statement under the Act or an opinion of experienced securities
counsel, acceptable in form and content to Holdings in its sole discretion,
which states that registration is not required under the Act.
By executing this Agreement, the Executive agrees to refrain from
re-offering, reselling, or otherwise disposing of any of the Common Stock
acquired upon the exercise of the Option in any manner which would violate the
Act or any other Federal or state securities law.
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, WHICH CONTAINS PROVISIONS
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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."
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 even date herewith (the "Stockholders Agreement"). At the
request of Holdings, the Executive shall become a party to the Stockholders
Agreement.
8. 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
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 Executive, 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 Executive (or any person acting under
Section 4 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 Executive or such
other person to purchase any shares.
9. ANTI-DILUTION ADJUSTMENTS. In the event of any change in the
Common Stock by reason of any stock dividend, cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, 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 Board
may deem equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, the Executive.
10. CALL RIGHT. Upon any termination of the employment of the
Executive prior to a public offering of Common Stock, Holdings may purchase
Common Stock acquired upon any exercise of the Option then held by the Executive
in accordance with the terms and provisions of the Management Stock Buyback
Agreement, dated as of the date hereof, by and between Holdings and certain
other purchasers of Holdings Common Stock signatory thereto.
11. RIGHTS 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 Executive is recorded as the holder of
such shares on the records of Holdings.
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) 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 Executive; or (iii) requiring the Executive, his beneficiary or his legal
representative to pay to 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 Delaware.
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.
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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.
EXECUTIVE
/s/ XXXXXXX X. BANNER
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Xxxxxxx X. Banner
Date: 10/21/99
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UNIVERSAL COMPRESSION HOLDINGS, INC.
By: /s/ XXXXXXX X. XXXXXX
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Title: President
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Date: 10/21/99
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