SPECIAL METALS CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), is made effective as of the 16th day
April, 1999, (hereinafter called the "Date of Grant"), between Special Metals
Corporation, a Delaware corporation (hereinafter called the "Company"), and Dr.
T. Xxxxx Xxxx (hereinafter called the "Optionee"):
R E C I T A L S:
WHEREAS, the Company has adopted the Special Metals Corporation 1997
Long Term Stock Incentive Plan (the "Plan"), which Plan is incorporated herein
by reference and made a part of this Agreement. Capitalized terms not otherwise
defined herein shall have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its stockholders to grant the option provided for
herein (the "Option") to the Optionee pursuant to the Plan and the terms set
forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:
1. Grant of the Option. The Company hereby grants to the Optionee the
right and option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of 40,000 Shares, subject
to adjustment as set forth in the Plan. The purchase price of the Shares subject
to the Option shall be $5.375 per Share (the "Exercise Price"). The Option is
intended to be a non-qualified stock option, and is not intended to be treated
as an option that complies with Section 422 of the Internal Revenue Code of
1986, as amended.
2. Vesting.
(a) Except as otherwise provided in this Section 2 or in Section 4, the
Option shall vest and become exercisable (i) with respect to one third (1/3) of
the aggregate number of Shares initially covered by the Option on the first
anniversary of the Date of Grant; (ii) with respect to one third (1/3) of the
aggregate number of Shares initially covered by the Option on the second
anniversary of the Date of Grant; and (iii) with respect to the remaining one
third (1/3) of the aggregate number of Shares initially covered by the Option on
the third anniversary of the Date of Grant.
(b) At any given time, the portion of the Option which has become vested
and exercisable as described above (or pursuant to Section 2(d), 2(e) or 2(f)
below) is hereinafter referred to as the "Vested Portion."
(c) If, prior to the third anniversary of the Date of Grant, the
Optionee's employment with the Company is terminated for any of the following
reasons including:
(i) the Optionee is terminated as a result of his death or
"Disability";
(ii) the Optionee is terminated by the Company for "Cause";
(iii) the Company does not extend the Optionee's employment
period;
(iv) the Optionee terminates his employment with the Company
upon a Change of Control (as defined in the employment agreement dated
April 15, 1999) of the Company, and, as a result, there is a material
change in the Optionee's authority or job responsibilities which
results in lower salary or less responsibility than Optionee's
assignment as Executive Vice President;
(v) the Optionee is terminated for any reason other than as
described in subsections 2(d) or (e) below;
the Option shall to the extent not then vested, be canceled by the Company
without consideration and the Vested Portion of the Option shall remain
exercisable for the period set forth in Section 3(a).
(d) If at any time prior to the third anniversary of the Date of Grant:
(i) the Optionee is terminated by the Company upon ninety
(90) days advance written notice for any reason other than for reasons
listed in clauses 2(c)(i-v), above or is terminated by the Company for
no reason;
(ii) the Optionee's employment is terminated by the Optionee
upon ninety (90) days advance written notice for "Good Reason" (and
the Company's failure to cure the "Good Reason" within the ninety (90)
day period);
the Option shall, to the extent not then vested, immediately become fully vested
and exercisable and shall remain exercisable for the period set forth in Section
3(a).
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(e) If the Optionee's employment with the Company is terminated because
of the Optionee's Retirement or Early Retirement prior to the third anniversary
of the Date of Grant, the Option shall, to the extent not then vested, continue
to vest in accordance with the schedule set forth in Section 2(a) and, once
vested, shall remain exercisable for the period set forth in Section 3(a).
(f) Notwithstanding any other provision of this Agreement to the
contrary, in the event of a Change of Control (as defined in the employment
agreement between the Optionee and the Company dated April 16, 1999) the Option
shall, to the extent then outstanding but not then vested, immediately become
fully vested and exercisable.
3. Exercise of Option.
(a) Period of Exercise. Subject to the provisions of the Plan, the
Optionee may exercise all or any part of the Vested Portion of the Option at any
time only prior to the earliest to occur of:
(i) one year following the date of the Optionee's
termination of employment due to death;
(ii) one year following the date of the Optionee's
termination of employment due to Disability;
(iii) the date of the Optionee's termination of employment
by the Company for Cause;
(iv) one year following the date of the Optionee's
termination of employment by the Company without Cause or the
Optionee's resignation of employment by the Optionee for any reason
other than Retirement or Early Retirement; and
(v) the tenth anniversary of the Date of Grant in all other
cases.
For purposes of this agreement:
"Cause" shall mean "Cause" as defined in the employment agreement
between the Optionee and the Company dated April 16, 1999 (the "Employment
Agreement") or if not then in effect, any employment agreement then in effect
between the Optionee and the Company or if not defined therein or, if there
shall be no such agreement, (i) Optionee's engagement in misconduct which is
materially injurious to the Company or its affiliates, (ii) Optionee's continued
failure to substantially perform his or her duties to the Company, (iii)
Optionee's repeated dishonesty in the performance of his or her duties to the
Company, (iv) Optionee's commission of an act or acts constituting (x) a fraud
against, or misappropriation or
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embezzlement from, the Company or any of its affiliates, (y) a crime involving
moral turpitude, or (z) an offense that could result in a jail sentence of at
least 30 days or (v) Optionee's material breach of any confidentiality or
non-competition covenant entered into between the Optionee and the Company. The
determination of the existence of Cause shall be made by the Committee in good
faith, which determination shall be conclusive for purposes of this Agreement;
"Disability" shall mean "disability" as defined in the Employment
Agreement or, if not then in effect, any employment agreement then in effect
between the Optionee and the Company or if not defined therein or if there shall
be no such agreement, as defined in the Company's long-term disability plan as
in effect from time to time, or if there shall be no plan or if not defined
therein, the Optionee's becoming physically or mentally incapacitated and
consequent inability for a period of six (6) months in any twelve (12)
consecutive month period to perform his or her duties to the Company;
"Good Reason" shall mean "Good Reason" as defined in the Employment
Agreement; and
"Retirement" and "Early Retirement" shall mean "retirement" and "early
retirement" as respectively defined under the Company's pension plan for
salaried employees, as amended from time to time, or if there shall be no such
plan or if not defined therein, as provided for in any successor plan or
employee policy of the Company.
(b) Method of Exercise.
(i) Subject to Section 3(a) and Section 8, the Vested Portion of the
Option may be exercised by delivering to the Company at its principal office
written notice of intent to so exercise; provided that, the Option may be
exercised with respect to whole Shares only. Such notice shall specify the
number of Shares for which the Option is being exercised and shall be
accompanied by payment in full of the Exercise Price. The payment of the
Exercise Price shall be made in cash or its equivalent, or (i) by exchanging
Shares owned by the Optionee (which are not the subject of any pledge or other
security interest and which have been owned by the Optionee for at least 6
months), or (ii) through delivery to the Company of irrevocable instructions to
a broker to sell the securities issued upon exercise of the Option and to
deliver promptly to the Company an amount equal to the aggregate exercise price
upon the sale of such securities, subject to such limitations and prohibitions
as the Committee may adopt from time to time, or by a combination of the
foregoing, provided that the combined value of all cash and cash equivalents and
the Fair Market Value of any such Shares so tendered to the Company as of the
date of such tender is at least equal to the aggregate Exercise Price.
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(ii) Notwithstanding any other provision of the Plan or this Agreement
to the contrary, the Option may not be exercised prior to the completion of any
registration or qualification of the Option or the Shares under applicable state
and federal securities or other laws, or under any ruling or regulation of any
governmental body or national securities exchange that the Committee shall in
its sole discretion determine to be necessary or advisable.
(iii) Upon the Company's determination that the Option has been validly
exercised as to any of the Shares, the Company shall issue certificates in the
Optionee's name for such Shares. However, the Company shall not be liable to the
Optionee for damages relating to any delays in issuing the certificates to him
or her, any loss of the certificates, or any mistakes or errors in the issuance
of the certificates or in the certificates themselves.
(iv) In the event of the Optionee's death, the Vested Portion of the
Option shall remain exercisable by the Optionee's executor or administrator, or
the person or persons to whom the Optionee's rights under this Agreement shall
pass by will or by the laws of descent and distribution as the case may be, to
the extent set forth in Section 3(a). Any heir or legatee of the Optionee shall
take rights herein granted subject to the terms and conditions hereof.
4. Cancellation of Option. Notwithstanding any other provision of the
Plan or this Agreement to the contrary, the Committee may cancel any unexercised
portion of the Option (whether or not vested) at any time if the Optionee is not
in compliance with the following conditions:
(a) Optionee shall not render services for any organization or engage
directly or indirectly in any business which, in the judgment of the Committee,
is or becomes competitive with the Company, or which organization or business,
or the rendering of services to such organization or business, is or becomes
otherwise prejudicial to or in conflict with the interests of the Company (such
organization is referred to herein as a "competing organization"). For an
Optionee whose employment has terminated, the judgment of the Committee shall be
based on the Optionee's position and responsibilities while employed by the
Company, the Optionee's post-employment responsibilities and position with the
competing organization or business, the extent of past, current and potential
competition or conflict between the Company and the competing organization or
business, the effect on the Company's customers, suppliers and competitors of
the Optionee's assuming the post-employment position, the guidelines established
in any then current employment policies of the Company and such other
considerations as are deemed relevant given the applicable facts and
circumstances. An Optionee shall be free, however, to (i) purchase as an
investment or otherwise, stock or other securities of such competing
organization or business so long as they are listed upon a recognized securities
exchange or traded over-the-counter, and such investment does not represent a
substantial investment to the Optionee or a greater than 5 percent equity
interest in
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the competing organization or business and (ii) serve as a director of such
competing organization if such service is approved by the Committee.
(b) Optionee shall not, without prior written authorization from the
Company, disclose to anyone outside the Company, or use in other than the
Company's business, any confidential information or material relating to the
business of the Company, acquired by the Optionee either during or after
employment with the Company.
(c) Optionee shall disclose promptly and assign to the Company all
right, title, and interest in any invention or idea, patentable or not, made or
conceived by the Optionee during employment by the Company, relating in any
manner to the actual or anticipated business, research or development work of
the Company and shall do anything reasonably necessary to enable the Company to
secure a patent where appropriate in the United States and in other countries.
(d) Optionee shall comply with the terms and conditions of any
other written agreement between the Company and the Optionee relating to non-
competition, confidentiality, intellectual property and non-solicitation.
(e) Upon exercise or other settlement of all or any portion of the
Option pursuant to this Agreement, the Optionee shall certify on a form
acceptable to the Committee that he or she is in compliance with the terms and
conditions of this Agreement and the Plan. Failure to comply with the provisions
of paragraph (a), (b), (c) or (d) above prior to, or during the six months
after, any exercise or other settlement of the Option shall cause such exercise
or other settlement to be rescinded. The Company shall notify the Optionee in
writing of any such rescission within two years after such exercise or other
settlement. Within 90 days after receiving such a notice from the Company, the
Optionee shall pay to the Company the amount of any gain realized or payment
received as a result of the rescinded exercise or other settlement. Such payment
shall be made either in cash or by returning to the Company the number of Shares
or other consideration that the Optionee received in connection with the
rescinded exercise or other settlement.
5. No Right to Continued Employment. Neither the Plan nor this Agreement
shall be construed as giving the Optionee the right to be retained in the employ
of, or in any consulting relationship to, the Company or any Affiliate. Further,
the Company or an Affiliate may at any time dismiss the Optionee or remove the
Optionee as a director, free from any liability or any claim under the Plan or
this Agreement, except as otherwise expressly provided herein.
6. Transferability of Option. The Option may not be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by the Optionee
otherwise than by will or by the laws of descent and distribution, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance
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shall be void and unenforceable against the Company or any Affiliate; provided
that the designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance. No such permitted
transfer of the Option to heirs or legatees of the Optionee shall be effective
to bind the Company unless the Committee shall have been furnished with written
notice thereof and a copy of such evidence as the Committee may deem necessary
to establish the validity of the transfer and the acceptance by the transferee
or transferees of the terms and conditions hereof. During the Optionee's
lifetime, the Option is exercisable only by the Optionee, or if permissible
under applicable law, by the Participant's legal guardian or representative.
7. Transferability of Option Shares. Neither the Optionee nor any
transferee of the Optionee (including any beneficiary, executor or
administrator) shall sell or otherwise transfer any Shares received upon
exercise of the Option, except in accordance with the following procedure. The
Optionee shall deliver to the Secretary of the Company a notice of sale (the
"Notice of Sale") stating the Optionee's name and the number of Shares he or she
desires to sell. Upon receipt of a Notice of Sale, the Company shall have the
right and option, for a period ending at 3:30 P.M., Eastern time, on the next
business day following receipt of the Notice of Sale, to purchase all or a
portion of the Shares referred to in the Notice of Sale at the Fair Market Value
of the Shares on the day that the Notice of Sale is received by the Company. In
the event that the Company exercises its right to purchase any or all of the
Shares referred to in the Notice of Sale, such purchase shall be made at the
offices of the Company on the third business day following the day on which the
Company notifies Optionee of the exercise of its right hereunder or on another
mutually satisfactory business day, provided that Optionee has received all
necessary consents and other approvals and is able to transfer good title to the
Shares to be purchased by the Company. Delivery of certificates or other
instruments evidencing such Shares, duly endorsed for transfer, shall be made on
such date against payment of the purchase price therefor due at the closing. In
the event that the Company does not exercise its right to purchase all or a
portion of the Shares referred to in the Notice of Sale, Optionee shall be free
to sell or otherwise transfer such Shares at any time within 10 business days
after the date on which the Notice of Sale was given. If all of the Shares
referred to in the Notice of Sale are not sold within such 10 day period, then
the right of the Optionee to sell such Shares without providing a further Notice
of Sale shall expire and the obligations of this Section 7 shall be reinstated.
8. Withholding. The Optionee agrees as a condition to the exercise of
the Option to make appropriate arrangements with the Company for satisfaction of
any applicable federal, state or local income tax, withholding requirements or
like requirements, including the payment to the Company at the time of exercise
of, or other settlement in respect of, the Option of all such taxes and
requirements and the Company shall be authorized to take such action as may be
necessary in the opinion of the Company's counsel (including, without
limitation, withholding Shares otherwise deliverable to the Optionee hereunder
and/or withholding amounts from any
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compensation or other amount owing from the Company to the Optionee) to satisfy
all obligations for the payment of such taxes.
9. Securities Laws. Upon the acquisition of any Shares pursuant to the
exercise of the Option, Optionee will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
10. Legend on Certificates. The certificates representing the Shares
purchased by exercise of the Option shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under this
Agreement, the Plan or the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which such Shares
are listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
11. Notices. Any notice necessary under this Agreement shall be
addressed to the Company in care of its Secretary at the principal executive
office of the Company and to the Optionee at the address appearing in the
personnel records of the Company for such Optionee or to either party at such
other address as either party hereto may hereafter designate in writing to the
other. Any such notice shall be deemed effective upon receipt thereof by the
addressee.
12. Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
13. Option Subject to Plan. By entering into this Agreement the Optionee
agrees and acknowledges that the Optionee has received and read a copy of the
Plan. The Option is subject to the Plan. The terms and provisions of the Plan as
it may be amended from time to time are hereby incorporated herein by reference.
In the event of a conflict between any term or provision contained herein and a
term or provision of the Plan, the applicable terms and provisions of the Plan
will govern and prevail.
14. Signature in Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
SPECIAL METALS CORPORATION
By:_________________________________
/s/ Dr. T. Xxxxx Xxxx
---------------------
Dr. T. Xxxxx Xxxx
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