Exhibit 7.4
NON-STATUTORY STOCK OPTION AGREEMENT
------------------------------------
THIS AGREEMENT is made as of November 19, 1998 (the "Date of Grant") by
and between RDO Equipment Co. (the "Company") and Xxxxxx X. Xxxxxx (the
"Optionee").
A. The Company has adopted the RDO Equipment Co. 1996 Stock Incentive
Plan (the "Plan") authorizing the Board of Directors of the Company, or a
committee as provided for in the Plan (the Board or committee is referred to in
this Agreement as the "Committee"), to grant non statutory stock options to
employees, non-employee directors, consultants and independent contractors of
the Company and its Subsidiaries (as defined in the Plan).
B. The Company has previously granted to the Optionee the right,
privilege and option (the "Old Options") to purchase Two Hundred Thousand
(200,000) shares of the Company's Class A Common Stock, $0.01 par value,
according to the terms and subject to the conditions as set forth in
non-statutory stock option agreements dated as of January 23, 1997 and May 28,
1998 (the "Old Agreements") and the Plan.
C. The Company has made an offer to the Optionee, and Optionee has
accepted such offer, to exchange the Old Options for a new stock option on the
terms set forth in this Agreement.
D. The grant of the new stock option is expressly conditioned upon the
delivery by Optionee to the Company of an agreement acceptable to the Company
regarding confidential information, non-competition and inventions.
Accordingly, the Company and the Optionee agree as follows:
1. GRANT OF OPTION.
1.1. The Company hereby grants to the Optionee the right, privilege
and option (the "Option") to purchase One Hundred Thirty Thousand (130,000)
shares (the "Option Shares") of the Company's Class A Common Stock, $0.01 par
value (the "Common Stock"), according to the terms and subject to the conditions
set forth in this Agreement and the Plan. This Option is not intended to be an
"incentive stock option" as that term is used in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
1.2. The Old Agreements are hereby terminated, and the Old Options are
no longer exercisable. The Optionee agrees to return the Old Agreements to the
Company. Nothing in this Agreement, however, will affect any confidentiality or
non-compete agreement signed by the Optionee in connection with the Old
Agreements, and any such agreement will remain in full force and effect.
2. OPTION EXERCISE PRICE.
The price to be paid by Optionee in the event of an exercise of this Option will
be $10.00 per share.
3. DURATION OF OPTION AND TIME OF EXERCISE.
3.1. Initial Period of Exercisability. This Option will become
exercisable with respect to the Option Shares in five (5) installments. The
following table sets forth the initial dates of exercisability of each
installment and the number of Option Shares as to which this Option will become
exercisable on such dates:
Initial Date of Number of Option Shares
Exercisability Available for Exercise
-------------- ----------------------
November 19, 1998 26,000
November 19, 1998 26,000
November 19, 1998 26,000
November 19, 1998 26,000
November 19, 1998 26,000
The foregoing rights to exercise this Option will be cumulative with respect to
the Option Shares becoming exercisable on each such date, but in no event will
this Option be exercisable after, and this Option will become void and expire as
to all unexercised Option Shares at, 5:00 p.m. (Fargo, North Dakota time) on
November 18, 2008 (the "Time of Termination").
3.2. Termination of Employment or Other Service.
------------------------------------------
(a) Termination Due to Death, Disability or Retirement. In the event
that the Optionee's employment or other service with the Company and all
Subsidiaries is terminated by reason of the Optionee's death, Disability (as
defined in the Plan) or Retirement (as defined in the Plan), this Option will
become immediately exercisable in full and will remain exercisable for a period
of one year after such termination (but in no event after the Time of
Termination).
(b) Termination for Reasons Other Than Death Disability or Retirement.
In the event the Optionee's employment or other service with the Company and all
Subsidiaries is terminated for any reason other than death, Disability or
Retirement, or the Optionee is in the employ or other service of a Subsidiary
and the Subsidiary ceases to be a Subsidiary of the Company (unless the Optionee
continues in the employ or other service of the Company or another Subsidiary),
this Option will remain exercisable to the extent exercisable as of such
termination for a period of three months after such termination (but in no event
after the Time of Termination), provided, however, that if the Optionee is
terminated by the Company for "cause" (as defined in the Plan), all rights of
the Optionee under this Agreement and the Plan will immediately terminate
without notice of any kind, and this Option will thereafter no longer be
exercisable.
3.3. Breach of Confidentiality or Non-compete Agreements. If the
Optionee materially breaches the terms of any confidentiality or non-compete
agreement entered into with the Company or any Subsidiary, whether such breach
occurs before or after termination of the Optionee's employment or other service
with the Company or any Subsidiary, the Committee, in its sole discretion and
without notice of any kind and without consent of the Optionee, may immediately
terminate all rights of the Optionee under this Agreement and the Plan in which
event this Option will thereafter no longer be exercisable.
2
3.4. Change in Control.
-----------------
(a) Impact of Change in Control. If any event constituting a Change in
Control (as defined in the Plan) of the Company occurs, this Option will become
immediately exercisable in full and will remain exercisable until the Time of
Termination, regardless of whether the Optionee remains in the employ or service
of the Company or any Subsidiary. In addition, if a Change in Control of the
Company occurs, the Committee, in its sole discretion and without the consent of
the Optionee, may determine that the Optionee will receive, with respect to some
or all of the Option Shares, as of the effective date of any such Change in
Control of the Company, cash in an amount equal to the excess of the Fair Market
Value (as defined in the Plan) of such Option Shares immediately prior to the
effective date of such Change in Control of the Company over the exercise price
per share of this Option.
(b) Excess Parachute Payment Tax Gross-Up:
(i) The parties hereto acknowledge that the protections
set forth in this Paragraph 3.4(b) are important, and
it is agreed that the Optionee should not have to
bear the burden of any excise tax that might be
levied under Section 4999 of the Code in the event
that a portion of the payments or benefits payable to
the Optionee by the Company or others, either
pursuant to this Agreement or otherwise, are treated
as an excess parachute payment. The parties,
therefore, have agreed as set forth in this Paragraph
3.4(b).
(ii) Anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any
payment or benefit provided by the Company, or any
other person to or for the benefit of the Optionee
(whether paid or payable or provided or providable
pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional
payments required under this Paragraph 3.4(b)) (a
"Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or
penalties are incurred by the Optionee with respect
to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then
the Company shall pay to or on behalf of the Optionee
an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Optionee of all
taxes (including any interest or penalties imposed
with respect to such taxes), including, without
limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise
Tax, Optionee will be in the same after-tax position
as if no Excise Tax had been imposed.
4. MANNER OF OPTION EXERCISE.
4.1. Notice. This Option may be exercised by the Optionee in whole or
in part from time to time, subject to the conditions contained in the Plan and
in this Agreement, by delivery, in person, by facsimile or electronic
transmission or through the mail, to the Company at its principal executive
office in Fargo, North Dakota (Attention, Chief Financial Officer), of a written
notice of exercise. Such notice must be in a form satisfactory to the Committee,
must identify this Option, must specify
3
the number of Option Shares with respect to which this Option is being
exercised, and must be signed by the person or persons so exercising this
Option. Such notice must be accompanied by payment in full of the total purchase
price of the Option Shares purchased. In the event that the Option is being
exercised, as provided by the Plan and Section 3.2 above, by any person or
persons other than the Optionee, the notice will be accompanied by appropriate
proof of right of such person or persons to exercise this Option. As soon as
practicable after the effective exercise of this Option, the Optionee will be
recorded on the stock transfer books of the Company as the owner of the Option
Shares purchased, and the Company will deliver to the Optionee one or more duly
issued stock certificates evidencing such ownership.
4.2. Payment. At the time of exercise of this Option, the Optionee will
pay the total purchase price of the Option Shares to be purchased entirely in
cash (including a check, bank draft or money order, payable to the order of the
Company); provided, however, that the Committee, in its sole discretion and upon
terms and conditions established by the Committee, may allow such payment to be
made, in whole or in part, by tender of Previously Acquired Shares (as defined
in the Plan), or by a combination of cash and tender of Previously Acquired
Shares. In the event the Optionee is permitted to pay the total purchase price
of this Option in whole or in part with Previously Acquired Shares, the value of
such shares will be equal to their Fair Market Value (as defined in the Plan) on
the date of exercise of this Option.
5. RIGHTS OF OPTIORTEE; TRANSFERABILITY.
5.1. Employment or Service. Nothing in this Agreement will interfere
with or limit in any way the right of the Company or any Subsidiary to terminate
the employment or service of the Optionee at any time, nor confer upon the
Optionee any right to continue in the employ or service of the Company or any
Subsidiary at any particular position or rate of pay or for any particular
period of time.
5.2. Rights as a Shareholder. The Optionee will have no rights as a
shareholder unless and until all conditions to the effective exercise of this
Option (including, without limitation, the conditions set forth in Sections 4
and 6 of this Agreement) have been satisfied and the Optionee has become the
holder of record of such shares. No adjustment will be made for dividends or
distributions with respect to this Option as to which there is a record date
preceding the date the Optionee becomes the holder of record of such shares,
except as may otherwise be provided in the Plan or determined by the Committee
in its sole discretion.
5.3. Restrictions on Transfer. Except pursuant to testamentary will or
the laws of descent and distribution or as otherwise expressly permitted by the
Plan, no right or interest of the Optionee in this Option prior to exercise may
be assigned or transferred, or subjected to any lien, during the lifetime of the
Optionee, either voluntarily or involuntarily, directly or indirectly, by
operation of law or otherwise. The Optionee will, however, be entitled to
designate a beneficiary to receive this Option upon such Optionee's death, and,
in the event of the Optionee's death, exercise of this Option (to the extent
permitted pursuant to Section 3.2(a) of this Agreement) may be made by the
Optionee's legal representatives, heirs and legatees.
4
6. WITHHOLDING TAXES.
The Company is entitled to (a) withhold and deduct from future wages of
the Optionee (or from other amounts that may be due and owing to the Optionee
from the Company), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any federal, state or local withholding
and employment-related tax requirements attributable to the grant or exercise of
this Option or otherwise incurred with respect to this Option, or (b) require
the Optionee promptly to remit the amount of such withholding to the Company
before acting on the Optionee's notice of exercise of this Option. In the event
that the Company is unable to withhold such amounts, for whatever reason, the
Optionee agrees to pay to the Company an amount equal to the amount the Company
would otherwise be required to withhold under federal, state or local law.
7. ADJUSTMENTS.
In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, divestiture or extraordinary dividend
(including a spin-off), or any other change in the corporate structure or shares
of the Company, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation), in order to prevent dilution or enlargement of the rights of the
Optionee, will make appropriate adjustment (which determination will be
conclusive) as to the number, kind and exercise price of securities subject to
this Option.
8. LIMITATION OF LIABILITY.
Nothing in this Agreement will be construed to (a) limit in any way the
right of the Company to terminate the employment or service of the Optionee at
any time, or (b) be evidence of any agreement or understanding, express or
implied, that the Company will retain the Optionee in any particular position,
at any particular rate of compensation or for any particular period of time.
9. SUBJECT TO PLAN.
This Option and the Option Shares granted and issued pursuant to this
Agreement have been granted and issued under, and are subject to the terms of,
the Plan. The terms of the Plan are incorporated by reference in this Agreement
in their entirety, and the Optionee, by execution of this Agreement,
acknowledges having received a copy of the Plan. The provisions of this
Agreement will be interpreted as to be consistent with the Plan, and any
ambiguities in this Agreement will be interpreted by reference to the Plan. In
the event that any provision of this Agreement is inconsistent with the terms of
the Plan, the terms of the Plan will prevail.
10. MISCELLANEOUS.
10.1. Binding Effect. This Agreement will be binding upon the heirs,
executors, administrators and successors of the parties to this Agreement.
10.2. Governing Law. This Agreement and all rights and obligations
under this Agreement will be construed in accordance with the Plan and governed
by the laws of the State of Delaware, without regard to conflicts of laws
provisions. Any legal proceeding related to this Agreement will be brought in an
appropriate Delaware or North Dakota (which is to apply the law of
5
Delaware) court, and the parties to this Agreement consent to the exclusive
jurisdiction of the court for this purpose.
10.3. Entire Agreement. This Agreement and the Plan set forth the
entire agreement and understanding of the parties to this Agreement with respect
to the grant and exercise of this Option and the administration of the Plan and
supersede all prior agreements, arrangements, plans and understandings relating
to the grant and exercise of this Option and the administration of the Plan.
10.4. Amendment and Waiver. Other than as provided in the Plan, this
Agreement may be amended, waived, modified or canceled only by a written
instrument executed by the parties to this Agreement or, in the case of a
waiver, by the party waiving compliance.
The parties to this Agreement have executed this Agreement effective as
of the day and year first above written.
RDO EQUIPMENT CO.
By: /s/ Xxxxx X. Xxxxx
-----------------------
Xxxxx X. Xxxxx
Its:
-----------------------
Secretary
By execution of this Agreement, OPTIONEE
the Optionee acknowledges having
received a copy of the Plan.
/s/ Xxxxxx X. Xxxxxx
---------------------------
(Signature)
Xxxxxx X. Xxxxxx
---------------------------
(Print Name)
(Print Address)
---------------------------
---------------------------
6
