OPTION AGREEMENT
NON-STATUTORY STOCK OPTION
THIS AGREEMENT is made and entered into as of April 9, 2001, by and between
PURE CYCLE CORPORATION (the "Company") and Xxxx X. Xxxxxxx (the "Optionee")
(together, the "Parties").
RECITALS
A. The Board of Directors of the Company (the "Board") has resolved to
issue to Xx. Xxxxxxx non-statutory stock options to purchase common stock of the
Company, 1/3 of $0.01 par value per share ("Stock").
B. The Optionee is desirous of obtaining the non-statutory stock
options on the terms and conditions contained herein.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
1. Option Grant. The Company hereby confirms and acknowledges that its
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Board of Directors has granted to the Optionee, as of April 9, 2001, an option
(the "Option") to purchase up to 3,000,000 shares of Stock (the "Option Shares")
upon the terms and conditions set forth herein.
2. Exercise Price. The purchase price of the Option Shares is $0.18
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per share.
3. Option Period. The Option shall continue until August 30, 2007,
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unless sooner terminated or modified under the provisions of this Agreement, and
shall automatically expire on such date.
4. Vesting Schedule. Subject to the provisions of Section 5 and the
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right of the Company to accelerate the date upon which any or all of this Option
becomes vested, the Option may be exercised by the Optionee to purchase the
number of Option Shares specified in Section 1 as follows:
(a) 2,250,000 Option Shares shall be immediately exercisable;
(b) 250,000 Option Shares shall become exercisable on the first
anniversary of the date of grant; and
(c) An additional 250,000 Option Shares shall become exercisable
on each succeeding annual anniversary date of the grant until all such shares
are vested.
5. Limitation on Exercise; Change of Control.
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(a) Definition. For purposes of this Agreement, a "change of
control" shall be deemed to have occurred if (i) any "person" or "group" (within
the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "1934 Act")), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or Xx. Xxxxxx
X. Xxxxx is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of more than 33-1/3 percent of the then
outstanding voting stock of the Company; or (ii) at any time during any period
of three consecutive years (not including any period prior to the date of this
Agreement), individuals who at the beginning of such period constitute the Board
(and any new director whose election by the Board or whose nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority thereof;
or (iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation of
the Company which would result in the voting securities of the Company or such
surviving entity outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or (iv) a
reorganization of the Company (other than a reorganization under the United
States Bankruptcy Code). A change of control shall not include any transaction
undertaken for the purpose of reincorporating the Company under the laws of
another jurisdiction, if such transaction does not materially affect the
beneficial ownership of the Company's capital stock.
(b) Options. In the event of a change of control of the Company
as defined in Section 5(a), then the Board may, in its sole discretion, without
obtaining stockholder approval, prescribe the terms and conditions for the
exercise of, or modification of, any outstanding Options. By way of
illustration, and not by way of limitation, the Board may provide for the
complete or partial acceleration of the dates of exercise of the Options, or may
provide that such Options will be exchanged or converted into options to acquire
securities of the surviving or acquiring corporation, or may provide for the
payment or distribution in respect of outstanding Options (or the portion
thereof that is currently exercisable) in cancellation thereof. The Board may
provide that Options granted hereunder must be exercised in connection with the
closing of such transaction, and that is not so exercised such Options will
expire. The Board may not, however, adversely affect the rights of any Optionee
with respect to previously granted Options without the consent of the Optionee.
6. Adjustment for Stock Split, Stock Dividend, Etc. If the Company
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shall at any time increase or decrease the number of its outstanding shares of
Stock or change in any way the rights and privileges of such shares by means of
the payment of a stock dividend or any other distribution upon such shares
payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Stock, then in
relation to the Stock that is affected by one or more of the above events, the
numbers, rights and
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privileges of the shares of Stock included in the outstanding Option granted
hereunder shall be increased, decreased or changed in like manner as if they had
been issued and outstanding, fully paid and nonassessable at the time of such
occurrence.
7. Fractional Shares. In no event shall any fractional share of Stock
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be issued upon any exercise of this Option. If any adjustment or substitution
provided for in this Agreement shall result in the creation of a fractional
share, the Company shall, in lieu of selling or otherwise issuing such
fractional share, pay to the Optionee a cash sum in an amount equal to the
product of such fraction multiplied by the fair market value of a share of Stock
on the date the fractional share would otherwise have been issued. In the case
of any such substitution or adjustment affecting an Option, the total exercise
price for the shares of Stock then subject to an Option shall remain unchanged
but the exercise price per share shall be equitably adjusted by the Board to
reflect the greater or lesser number of shares of Stock or other securities into
which the Stock subject to the Option may have been changed.
8. Termination of Employment; Retirement; Death; Disability.
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(a) If the employment of the Optionee is terminated within the
Option Period for cause, as determined by the Company, the Option shall
thereafter be void for all purposes. As used in this Section 8, "cause" shall
mean a gross violation, as determined by the Company, of the Company's
established policies and procedures. The effect of this Section 8 shall be
limited to determining the consequences of a termination, and nothing in this
Section shall restrict or otherwise interfere with the Company's discretion with
respect to the termination of any employee.
(b) If the Optionee terminates his employment with the Company in
a manner determined by the Board, in its sole discretion, to constitute
retirement (which determination shall be communication to the Optionee within 10
days of such termination), the Option may be exercised by the Optionee within
twelve months following his or her retirement (provided that such exercise must
occur within the Option Period), but not thereafter. In any such case, the
Option may be exercised only as to Option Shares which had become exercisable on
or before the date of the Optionee's termination of employment.
(c) If the Optionee dies or becomes disabled (within the meaning
of Section 22(e) of the Internal Revenue Code) during the Option Period while
still employed, or within the twelve-month period following his or her
retirement as defined in (b) above, the Option may be exercised by those
entitled to do so under the Optionee's will or by the laws of descent and
distribution, or in the case of disability, by the Optionee's guardian or legal
representative, within twelve months following the Optionee's death or
disability, but not thereafter. In any such case, the Option may be exercised
only as to the Option Shares which had become exercisable on or before the date
of the Optionee's death or disability.
(d) If the employment of the Optionee by the Company is terminated
(which for this purpose means that the Optionee is no longer employed by the
Company or by an Affiliated Corporation) within the Option Period for any reason
other than cause, retirement as provided in (b) above, disability or the
Optionee's death, the Option may be exercised by the Optionee within the three
months following the date of such termination (provided that such
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exercise must occur within the Option Period), but not thereafter. In any case,
the Option may be exercised only as to the Option Shares which had become
exercisable on or before the date of termination of employment.
9. Transferability. The Option granted herein is not transferable by
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the Optionee except by will or pursuant to the laws of descent and distribution,
and this Option is exercisable during the Optionee's lifetime only by him, or in
the event of a disability or incapacity, by his guardian or legal
representative.
10. Exercise. The Option may be exercised in whole or in part by
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delivering to the Company written notice of exercise, together with payment in
full for the shares being purchased upon such exercise. The written notice must
specify the number of shares with respect to which such Option is exercised
(which must be in an amount evenly divisible by 100) and payment of the exercise
price. Such notice shall be in an form satisfactory to the Board and shall
specify the particular Option being exercised. The purchase of the Stock shall
take place at the principal offices of the Company upon delivery of such notice,
at which time the exercise price of the Stock shall be paid in full by any of
the methods or any combination of the methods set forth in Section 11. A
properly executed certificate or certificates representing the Stock shall be
issued by the Company and delivered to the Optionee. If Option Shares are to be
used to pay all or part of the exercise price, a certificate for the number of
shares of Stock used to pay the exercise price shall be issued by the Company
and a copy thereof delivered to the Optionee, and a separate certificate shall
be issued by the Company and delivered to the Optionee representing the shares,
in excess of the exercise price, to which the Optionee is entitled as a result
of the exercise of the Option.
11. Payment of Exercise Price. The exercise price shall be immediately
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due upon exercise of the Option and shall, subject to the tax withholding
requirements, be payable in one or more of the following forms:
(a) Cash;
(b) Cashier's check payable to the order of the Company;
(c) Delivery to the Company of certificates representing the
number of shares then owned by the Optionee, the fair market value of which
equals the purchase price of the Stock purchased pursuant to the Option,
properly endorsed for transfer to the Company. For purposes of this Agreement,
the fair market value of any shares delivered in payment of the purchase price
upon exercise of the Option shall be their fair market value as of the exercise
date. The exercise date shall be the date of delivery of the certificates for
the Stock used as payment of the exercise price; or
(d) Delivery to the Company of a properly executed notice of
exercise together with irrevocable instructions to a broker to deliver to the
Company promptly the amount of the proceeds of the sale of all or a portion of
the Stock or of a loan from the broker to the Optionee necessary to pay the
exercise price.
12. Adjustment of Options. Subject to the limitations contained in
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this Agreement, the Board may make any adjustment in the exercise price, the
number of shares subject to, or the
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terms of, an outstanding Option and a subsequent grant of an Option by amendment
or substitution of an outstanding Option. Such amendment, substitution or
re-grant may result in terms and conditions (including exercise price, number of
shares covered, vesting schedule or exercise period) that differ from the terms
and conditions of the original Option. The Board may not, however, adversely
affect the rights of any Optionee to previously granted Options without the
consent of the Optionee. If such action is effected by amendment, the effective
date of such amendment shall be the date of the original grant.
13. Securities Law Limitations. Neither this Option nor the Option
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Shares have been registered under the Securities Act of 1933, as amended (the
"1933 Act"), or under any blue sky or other state securities laws. The Optionee
therefore represents and agrees that: (a) the Option shall not be exercisable
unless the purchase of Option Shares upon the exercise of the Option is pursuant
to an applicable effective registration statement under the 1933 Act, or unless
in the opinion of counsel for the Company, the proposed purchase of such Option
Shares would be exempt from the registration requirements of the 1933 Act, and
from the qualification requirements of any state securities laws; (b) upon
exercise of the Option, it will acquire the Option Shares for its own account
for investment and not with any intent or view to any distribution, resale or
other disposition of the Option Shares; and (c) it will not sell or transfer the
Option or the Option Shares, unless the Option or the Option Shares, as
applicable, are registered under the 1933 Act, except in an transaction that is
exempt from registration under the 1933 Act, and each certificate issued to
represent any of the Option Shares shall bear a legend calling attention to the
foregoing restrictions and agreements. The Company may require as a condition of
the exercise of the Option, that the Optionee sign such further representations
and agreements as it reasonably determines to be necessary or appropriate to
assure and to evidence compliance with the requirements of the 1933 Act. Legends
evidencing such restrictions may be placed on the certificates evidencing the
Stock.
14. Stockholder Rights. The Optionee shall have no stockholder rights
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with respect to shares subject to the Option until such person shall have
exercised the Option, paid the exercise price and become the holder of record of
the purchased shares.
15. Withholding
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(a) Withholding Requirement. The Company's obligations to deliver
shares upon the exercise of an Option shall be subject to the Optionee's
satisfaction of all applicable federal, state and local income and other tax
withholding requirements.
(b) Withholding With Stock. The Optionee may, subject to Board
approval, pay all such amounts of tax withholding, or any part thereof, by
electing to transfer to the Company, or to have the Company withhold from shares
otherwise issuable to the Optionee, shares having a value equal to the amount
required to be withheld or such lesser amount as may be elected by the Optionee.
The value of the shares to be withheld shall be based on the fair market value
of the Stock on the date that the amount of tax to be withheld is determined
(the "Tax Date"). Any such elections by the Optionee to have shares withheld for
this purpose will be subject to the following restrictions:
(i) All elections must be made prior to the Tax Date;
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(ii) All elections shall be irrevocable; and
(iii) If the Optionee is an officer or director of the Company
within the meaning of Section 16 of the 1934 Act ("Section 16") , the Optionee
must satisfy the requirements of such Section 16 and any applicable rules
thereunder with respect to the use of Stock to satisfy such tax withholding
obligation.
16. General Restrictions.
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(a) Compliance with Securities Laws. Each Option grant shall be
subject to the requirement that, if at any time, counsel to the Company shall
determine that the listing, registration or qualification of the shares subject
to such grant upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental or regulatory body, is necessary as
a condition of, or in connection with, the issuance or purchase of shares
thereunder, such grant may not be accepted or exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained on conditions acceptable to the Board. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
(b) Stock Restriction Agreement. The Board may provide that
shares of Stock issuance upon the exercise of an Option shall, under certain
conditions, be subject to restrictions whereby the Company has the right of
first refusal with respect to such shares or a right or obligation to repurchase
all or a portion of such shares, which restrictions may survive an Optionee's
term of employment with the Company. The acceleration of time or times at which
an Option becomes exercisable may be conditioned upon the Optionee's agreement
to such restrictions.
17. Governing Law. This Agreement is entered into and shall be
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governed by, construed and enforced in accordance with the laws of the State of
Delaware.
18. Optionee's Affirmation. In consideration of the granting by the
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Company of the Option, the Optionee hereby affirms that he has a present
intention to remain in the employ and service of the Company for the period that
this Option continues. This affirmation, however, shall confer no right to the
Optionee to continue in the employ of the Company, nor interfere in any way with
the right of the Company to discharge the Optionee at any time for any reason
whatsoever, with or without cause.
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IN WITNESS HEREOF, the Parties have hereunto affixed their signatures in
acknowledgement and acceptance of the above terms and conditions as of the date
first written above.
COMPANY
PURE CYCLE CORPORATION
By:
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Xxxxxx X. Xxxxx,
Chief Executive Officer
OPTIONEE
By:
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Xxxx X. Xxxxxxx
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