STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made as of May 28, 2003,
by and between Xxxxxx Natural Corporation, a Delaware corporation (the
"Company"), and Hilton X. Xxxxxxxxxx ("Holder").
Preliminary Recitals
A. Holder is an employee of the Company or one of its subsidiaries or
affiliates.
B. Pursuant to the Xxxxxx Natural Corporation 2001 Stock Option Plan
(the "Plan"), the Company desires to xxxxx Xxxxxx an incentive stock option
to purchase shares of the Company's common stock, par value $.005 per share
(the "Common Stock"), subject to the terms and conditions of the Plan and
subject further to the terms and conditions set forth below.
NOW, THEREFORE, the Company and Holder agree as follows:
1. Grant of Incentive Stock Option. The Company hereby grants to
Holder, subject to the terms and conditions set forth herein, the incentive
stock option ("ISO") to purchase up to 150,000 shares of Common Stock, at
the purchase price of $4.20 per share, such ISO to be exercisable and
exercised as hereinafter provided.
2. Exercise Period. The ISO shall expire three months after the
termination of the Holder's employment with the Company and its
subsidiaries and affiliates (the "Xxxxxx Group") unless the employment is
terminated by a member of the Xxxxxx Group for Cause (as defined below) or
unless the employment is terminated by reason of the death or Total
Disability (as defined below) of Holder. If the Holder's employment is
terminated by a member of the Xxxxxx Group for Cause, the ISO shall expire
as of the date employment terminates. If the Holder's employment terminates
due to his death or Total Disability, then the ISO may be exercised by
Holder or the person or persons to which Holder's rights under this
Agreement pass by will, or if no such person has such right, by his
executors or administrators, within six months after the date of death or
Total Disability, but no later than the expiration date specified in
Section 3(d) below. "Cause" means the Holder's act of fraud or dishonesty,
knowing material failure to comply with applicable laws or regulations,
drug or alcohol abuse, as determined by the Committee of the Xxxxxx Natural
Corporation Stock Option Plan (the "Committee"). "Total Disability" means
the complete and permanent inability of Holder to perform all of his duties
of employment with the Company, as determined by the Committee upon the
basis of such evidence, including independent medical reports and data, as
the Committee deems appropriate or necessary.
3. Exercise of Option
(a) Subject to the other terms of this Agreement regarding the
exercisability of the ISO, the ISO may only be exercised in respect of
the number of shares listed in column A from and after the exercise
dates listed in column X,
Xxxxxx "X" Xxxxxx "X"
Number of Shares Exercise Date
---------------- ---------------
30,000 January 1, 2004
30,000 January 1, 2005
30,000 January 1, 2006
30,000 January 1, 2007
30,000 January 1, 2008
(b) This ISO may be exercised, to the extent exercisable by its
terms, from time to time in whole or in part at any time prior to the
expiration thereof. Any exercise shall be accompanied by a written
notice to the Company specifying the number of shares as to which this
ISO is being exercised (the "Option Shares"). Notations of any partial
exercise or installment exercise, shall be made by the Company on
Schedule A hereto.
(c) Notwithstanding the above, this ISO shall be fully
exercisable in the event Holder's employment with the Xxxxxx Group is
terminated by Holder for "Good Reason" (as defined below), or a member
of the Xxxxxx Group terminates his employment without "Cause" (as
defined above). "Good Reason" means the Holder's termination of
employment with the Xxxxxx Group on or after a reduction in his
compensation or benefits, his removal as the Company's Vice Chairman
of the Board of Directors, President, Chief Operating Officer, Chief
Financial Officer or Secretary, or his being assigned duties or
responsibilities that are inconsistent with the dignity, importance or
scope of his position with the Company.
(d) Notwithstanding anything else herein to the contrary, this
ISO shall expire ten years from the date of this agreement.
(e) The Holder hereby agrees to notify the Company in writing in
the event shares acquired pursuant to the exercise of this ISO are
transferred, other than by will or by the laws of descent and
distribution, within two years after the date indicated above or
within one year after the issuance of such shares pursuant to such
exercise.
4. Payment of Purchase Price Upon Exercise. At the time of any
exercise of the ISO the purchase price of the ISO shall be paid in full to
the Company in either of the following ways or in any combination of the
following ways:
(a) By check or other immediately available funds.
(b) With property consisting of shares of Common Stock. (The
shares of Common Stock to be used as payment shall be valued as of the
date of exercise of the ISO at the Closing Price as defined below. For
example, if Holder exercises the option for 4,000 shares at a total
Exercise Price of $7,000, assuming exercise price of $1.75 per share,
and the Closing Price is $5.00, he may pay for the 4,000 Option Shares
by transferring 1,400 shares of Common Stock to the Company.)
(c) For purposes of this Agreement, the term "Closing Price"
means, with respect to the Company's Common Stock, the last sale price
regular-way or, in case no such sale takes place on such date, the
average of the closing bid and asked prices regular-way on the
principal national securities exchange on which the securities are
listed or admitted to trading; or, if they are not listed or admitted
to trading on any national securities exchange, the last sale price of
the securities on the consolidated transaction reporting system of the
National Association of Securities Dealers (NASD"), if such last sale
information is reported on such system or, if not so reported, the
average of the closing bid and asked prices of the securities on the
National Association of Securities Dealers Automatic Quotation System
("NASDAQ") or any comparable system or, if the securities are not
listed on NASDAQ or a comparable system, the average of the closing
bid and asked prices as furnished by two members of NASD selected from
time to time by the Company for that purpose.
5. Purchase for Investment; Resale Restrictions. Unless at the time of
exercise of the ISO there shall be a valid and effective registration
statement under the Securities Act of 1933 ("'33 Act") and appropriate
qualification and registration under applicable state securities laws
relating to the Option Shares being acquired, Holder shall upon exercise of
the ISO give a representation that he is acquiring such shares for his own
account for investment and not with a view to, or for sale in connection
with, the resale or distribution of any such shares. In the absence of such
registration statement, Holder shall execute a written affirmation, in a
form reasonably satisfactory to the Company, of such investment intent.
Holder further agrees that he will not sell or transfer any Option Shares
until he requests and receives an opinion of the Company's counsel or other
counsel reasonably satisfactory to the Company to the effect that such
proposed sale or transfer will not result in a violation o the '33 Act, or
a registration statement covering the sale or transfer of the shares has
been declared effective by the Securities and Exchange Commission, or he
obtains a no-action letter from the Securities and Exchange Commission with
respect to the proposed transfer.
6. Nontransferability. This ISO shall not be transferable other than
by will or by the laws of descent and distribution. During the lifetime of
Holder, this ISO shall be exercisable only by Holder.
7. Adjustments.
(a) If the Company hereafter (i) declares a distribution on its
shares in shares, (ii) splits its outstanding shares, (iii) combines
its outstanding shares into a smaller number of securities or (iv)
issues any shares or other securities by reclassification of its
shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
entity), the purchase price in effect at the time of the record date
for such distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the purchase price by a
fraction, the denominator of which shall be the number of shares
outstanding immediately after giving effect to such action, and the
numerator of which shall be the number of shares outstanding
immediately prior to such action. Whenever the purchase price payable
upon exercise of the ISO is adjusted pursuant to the preceding
sentence above, number of shares purchasable upon exercise of the ISO
shall simultaneously be adjusted by multiplying the number of shares
issuable upon exercise of the ISO immediately prior to the event which
causes the adjustment by the purchase price in effect immediately
prior to the event which causes the adjustment and dividing the
product so obtained by the purchase price, as adjusted. Such
adjustments shall be made successively whenever any event listed above
shall occur.
(b) If, at any time, as a result of an adjustment made pursuant
to paragraph 7(a) above, the Holder shall become entitled to receive
any securities of the Company other than shares, the number of such
other securities so receivable upon exercise of the ISO shall
thereafter be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with
respect to the shares contained in paragraph 7(a) above.
(c) If any other event contemplated in Section 10(a) of the Plan
occurs, adjustments to the number and kind of shares subject to this
ISO and/or to the purchase price for each share subject to this ISO
may be made in accordance with Section 10(a) of the Plan.
(d) No adjustments shall be made under this Section 7 that would
have the effect of modifying this ISO under Internal Revenue Code 422
or 424.
(e) Whenever the purchase price or the number of shares is
adjusted, as herein provided, Xxxxxx shall within 10 business days of
the event causing such adjustment give a notice setting forth the
adjusted purchase price and adjusted number of shares issuable upon
exercise of the ISO to be mailed to the Holder.
(f) Notwithstanding anything else herein to the contrary, upon
the occurrence of a change in control (as defined in (g) below), the
option or any portion thereof not theretofore exercisable, shall
immediately become exercisable in its entirety and the option (being
the option to purchase shares of Common Stock subject to the
applicable provisions of the Plan and awarded in accordance with the
Plan in terms of section 1 above) may, with the consent of Holder, be
purchased by the Company for cash at a price equal to the fair market
value (as defined in 7(g) below) less the purchase price payable by
Holder to exercise the option as set out in Article 1 above for one
(1) share of Common Stock of the Company multiplied by the number of
shares of Common Stock which Holder has the option to purchase in
terms of Article 1 above.
(g) For the purposes of this agreement
(i) "Change in Control" means;
(A) the acquisition of "Beneficial Ownership" by any
person (as defined in rule 13 (d) - 3 under the Securities
Exchange Act 1934), corporation or other entity other than
the Company or a wholly owned subsidiary of the Company of
20% or more of the outstanding Stock,
(B) the sale or disposition of substantially all of the
assets of the Company, or
(C) the merger of the Company with another corporation
in which the Common Stock of the Company is no longer
outstanding after such merger.
(ii) "Fair Market Value" means, as of any date, the Closing
Price for one share of the Common Stock of the Company on such
date.
8. The provisions of Section 5(b) (iii) of the Plan, regarding the
execution of a shareholder's agreement as a condition precedent to the Company's
obligation to issue shares under the Plan, shall not apply to the ISO or any
shares issued pursuant to the ISO.
9. The Company represents and warrants to Holder that (a) there are no
options to purchase the Company's Common Stock, containing the same or
substantially the same terms as the ISO, which are actively traded on an
established market within the meaning of Internal Revenue Code 83 and the
regulations promulgated thereunder; and (b) the shares of the Company's Common
Stock issued upon exercise of the ISO, when issued in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and nonassessable.
The Company shall reserve and keep reserved out of its authorized shares of
Common Stock the number of shares of Common Stock that may be issuable from time
to time upon exercise of the ISO.
10. No Rights as Stockholder. Holder shall have no rights as a stockholder
with respect to any shares of Common Stock subject to this ISO prior to the date
of issuance to him of a certificate or certificates for such shares.
11. No Right to Continue Employment. This Agreement shall not confer upon
Holder any right with respect to continuance of employment with any member of
the Xxxxxx Group nor shall it interfere in any way with the right of any such
member to terminate his employment at any time.
12. Compliance With Law and Regulation. This Agreement and the obligation
of the Company to sell and deliver shares of Common Stock hereunder 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. If at
any time the Board of Directors of the Company shall determine that (i) the
listing, registration or qualification of the shares of Common Stock subject or
related thereto upon any securities exchange or under any state or federal law,
or (ii) the consent or approval of any government regulatory body, is necessary
or desirable as a condition of or in connection with the issue or purchase of
shares of Common Stock hereunder, this ISO may not be exercised in whole or in
part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. The Company agrees to use its reasonable
efforts to obtain any necessary listing, registration, qualification, consent,
approval or agreement as expeditiously as possible, and the term of this ISO
shall be extended until 30 days following the date such listing, registration,
qualification, consent, approval or agreement is effected or obtained. Moreover,
this ISO may not be exercised if its exercise or the receipt of shares of Common
Stock pursuant thereto would be contrary to applicable law.
13. Tax Withholding Requirements. The Company shall have the right to
require Holder to remit to the Company an amount sufficient to satisfy any
federal, state or local withholding tax requirements prior to the delivery of
any certificate or certificates for Common Stock.
14. Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of stock shall be issued upon the exercise of
this ISO and the Company shall not be under any obligation to compensate Holder
in any way for such fractional shares.
15. Notices. Any notice hereunder to the Company shall be addressed to it
at its office at 0000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxxx Xxxxx with a copy to Xxxxxxxx Xxxx, Xxxxxxx & Xxxxxx, 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, and any notice hereunder to Holder shall be addressed
to him at 0 Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000, subject to the right of either
party to designate at any time hereafter in writing some other address.
16. Amendment. No modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing specifically
referring hereto, and signed by both parties.
17. Governing Law. This Agreement shall be construed according to the laws
of the State of Delaware and all provisions hereof shall be administered
according to and its validity shall be determined under, the laws of such State,
except where preempted by federal laws.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Xxxxxx Natural Corporation has caused this Agreement to
be executed by a duly authorized officer and Holder has executed this Agreement
both as of the day and year first above written.
XXXXXX NATURAL CORPORATION
By:/s/ XXXXXX X. XXXXX
-------------------
Title: Chairman and CEO
/s/ HILTON X. XXXXXXXXXX
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Hilton X. Xxxxxxxxxx
