EXHIBIT 10.05
EL PASO ELECTRIC COMPANY
STOCK OPTION AGREEMENT
FOR EMPLOYEES
(NON-QUALIFIED STOCK OPTIONS)
El Paso Electric Company, a Texas corporation (the "Company"), hereby
-------
grants to Xxxxx X. Xxxxxx, Xx. (the "Optionee") as of March 18, 1999 (the
"Option Date"), pursuant to the provisions of the El Paso Electric Company 1996
------------
Long-Term Incentive Plan (the "Plan"), a non-qualified option to purchase from
----
the Company (the "Option") 50,000 shares of its Common Stock, no par value
("Stock"), at the price of $7.3750 per share upon and subject to the terms and
-------
conditions set forth below.
1. Option Subject to Acceptance of Agreement. The Option shall be
-----------------------------------------
null and void unless the Optionee shall accept this Agreement by executing it in
the space provided below and returning such original execution copy to the
Company.
2. Time and Manner of Exercise of Option.
-------------------------------------
2.1. Maximum Term of Option. In no event may the Option be
----------------------
exercised, in whole or in part, after March 17, 2009 (the "Expiration Date").
---------------
2.2. Exercise of Option. (a) Except as otherwise provided by
------------------
Sections 2.2(b) and 2.2(c) hereof and by Section 6.8 of the Plan, the Option
shall become exercisable on March 18, 1999.
(b) If the Optionee's employment by the Company terminates by reason
of "Total Disability", the Option may thereafter be exercised by the Optionee or
the Optionee's Legal Representative until and including the earliest to occur of
(i) the date which is 120 days after the effective date of the Optionee's
termination of employment and (ii) the Expiration Date.
(c) If the Optionee's employment by the Company terminates by reason
of voluntary retirement, the Option may thereafter be exercised by the Optionee
or the Optionee's Legal Representative until and including the earliest to occur
of (i) the date which is 120 days after the effective date of the Optionee's
termination of employment and (ii) the Expiration Date.
(d) If the Optionee's employment by the Company terminates by reason
of death, the Option may thereafter be exercised by the Optionee or the
Optionee's Legal Representative or Permitted Transferees, as the case may be,
until and including the earliest to occur of (i) the date which is 120 days
after the date of death and (ii) the Expiration Date.
(e) If the Optionee's employment by the Company terminates for any
reason other than "Total Disability", retirement or death, the Option may
thereafter be exercised by the Optionee or the Optionee's Legal Representative
until and including the earliest to occur of (i) the date which is 120 days
after the effective date of the Optionee's termination of employment and (ii)
the Expiration Date.
(f) If the Optionee dies during the period set forth in Section
2.2(b) following termination of employment by reason of "Total Disability", or
if the Optionee dies during the period set forth in Section 2.2(c) following
termination of employment, by reason of voluntary retirement, or if the Optionee
dies during the period set forth in Section 2.2(e) following termination of
employment for any reason other than "Total Disability" or retirement, the
Option may thereafter be exercised by the Optionee's Legal Representative or
Permitted Transferees, as the case may be, until and including the earliest to
occur of (i) the date which is 120 days after the date of death and (ii) the
Expiration Date.
2.3 Method of Exercise. Subject to the limitations set forth in this
------------------
Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company specifying the number of whole shares of Stock to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and for which the Optionee has good title, free and
clear of all liens and encumbrances) having a Fair Market Value, determined as
of the date of exercise, equal to the aggregate purchase price payable pursuant
to the Option by reason of such exercise, (iii) in cash by a broker-dealer
acceptable to the Company to whom the Optionee has submitted an irrevocable
notice of exercise or (iv) a combination of (i) and (ii), and (2) by executing
such documents as the Company may reasonably request. The Committee may
disapprove an election pursuant to any of clauses (ii) - (iv) if the Committee
determines, based on the opinion of recognized securities counsel, that the
method of exercise so elected would result in liability to the Optionee under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the regulations promulgated thereunder. Any fraction of a share of
Stock which would be required to pay such purchase price shall be disregarded
and the remaining amount due shall be paid in cash by the Optionee. No
certificate representing a share of Stock shall be delivered until the full
purchase price therefor has been paid.
2.4 Termination of Option. (a) In no event may the Option be
---------------------
exercised after it terminates as set forth in this Section 2.4. The Option
shall terminate, to the extent not exercised pursuant to Section 2.3 or earlier
terminated pursuant to Section 2.2, on the Expiration Date.
(b) In the event that rights to purchase all or a portion of the
shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for
-2-
full or partial cancellation, as the case may be. Such cancellation shall be
effective regardless of whether the Optionee returns this Agreement. If the
Optionee continues to have rights to purchase shares of Stock hereunder, the
Company shall, within 10 days of the Optionee's delivery of this Agreement to
the Company, either (i) xxxx this Agreement to indicate the extent to which the
Option has expired or been exercised, cancelled or forfeited or (ii) issue to
the Optionee a substitute option agreement applicable to such rights, which
agreement shall otherwise be substantially similar to this Agreement in form and
substance.
2.5 Dividend Equivalents. The Company hereby grants to Optionee
---------------------
50,000 dividend equivalents (the "Dividend Equivalents"). Each Dividend
Equivalent shall entitle Optionee to receive a cash payment on each dividend
payment date after March 18, 1999 equal to the product of (i) of the amount any
dividend declared with respect to a share of Stock and (ii) the number of shares
of Stock subject to unexercised Non-Qualified Options hereunder that have not
expired or terminated on the date of payment of such dividend.
3. Additional Terms and Conditions of Option.
-----------------------------------------
3.1. Nontransferability of Option. The Option may not be transferred
----------------------------
by the Optionee other than (i) by will or the laws of descent and distribution
or pursuant to beneficiary designation procedures approved by the Company or
(ii) as otherwise permitted under Rule 16b-3 under the Exchange Act as may be
set forth in an amendment to this Agreement. Except to the extent permitted by
the foregoing sentence, during the Optionee's lifetime the Option is exercisable
only by the Optionee or the Optionee's Legal Representative. Except to the
extent permitted by the foregoing, the Option may not be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of the Option, the Option and all rights hereunder
shall immediately become null and void.
3.2. Investment Representation. The Optionee hereby represents and
-------------------------
covenants that (a) any share of Stock purchased upon exercise of the Option will
be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
----------
Act"), unless such purchase has been registered under the Securities Act and any
---
applicable state securities laws; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, the Optionee shall submit a written
statement, in form satisfactory to the Company, to the effect that such
representation (x) is true and correct as of the date of purchase of any shares
hereunder or (y) is true and correct as of the date of any sale of any such
shares, as applicable. As a further condition precedent to any exercise of the
Option, the Optionee shall comply with all regulations and requirements of any
regulatory
-3-
authority having control of or supervision over the issuance or delivery of the
shares and, in connection therewith, shall execute any documents which the Board
or the Committee shall in its sole discretion deem necessary or advisable.
3.3. Withholding Taxes. (a) As a condition precedent to the
-----------------
delivery of Stock upon exercise of the Option, the Optionee shall, upon request
by the Company, pay to the Company in addition to the purchase price of the
shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect to
---------------------
such exercise of the Option. If the Optionee shall fail to advance the Required
Tax Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company pursuant to Section 3.3(a), (2) delivery to the Company
of previously owned whole shares of Stock (which the Optionee has held for at
least six months prior to the delivery of such shares or which the Optionee
purchased on the open market and for which the Optionee has good title, free and
clear of all liens and encumbrances) having a Fair Market Value, determined as
of the date the obligation to withhold or pay taxes first arises in connection
with the Option (the "Tax Date"), equal to the Required Tax Payments, (3)
--------
authorizing the Company to withhold whole shares of Stock which would otherwise
be delivered to the Optionee upon exercise of the Option having a Fair Market
Value, determined as of the Tax Date, equal to the Required Tax Payments, (4) a
cash payment by a broker-dealer acceptable to the Company to whom the Optionee
has submitted an irrevocable notice of exercise or (5) any combination of (1),
(2) and (3). The Committee may disapprove an election pursuant to any of
clauses (2)-(5) if the Committee determines, based on the opinion of recognized
securities counsel, that the method so elected would result in liability to the
Optionee under Section 16(b) of the Exchange Act or the regulations promulgated
thereunder. Shares of Stock to be delivered or withheld may not have a Fair
Market Value in excess of the minimum amount of the Required Tax Payments. Any
fraction of a share of Stock which would be required to satisfy any such
obligation shall be disregarded and the remaining amount due shall be paid in
cash by the Optionee. No certificate representing a share of Stock shall be
delivered until the Required Tax Payments have been satisfied in full.
3.4 Adjustment. In the event of any stock split, stock dividend,
----------
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Stock other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
-4-
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the Fair Market Value on the exercise date
over (B) the exercise price of the Option. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Option is subject to the
------------------------------
condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company agrees to use reasonable efforts to effect or obtain
any such listing, registration, qualification, consent or approval.
3.6. Delivery of Certificates. Upon the exercise of the Option, in
------------------------
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of shares purchased against full payment
therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee shall not
---------------------------------------
be entitled to any privileges of ownership with respect to shares of Stock
subject to the Option unless and until purchased and delivered upon the exercise
of the Option, in whole or in part, and the Optionee becomes a stockholder of
record with respect to such delivered shares; and the Optionee shall not be
considered a stockholder of the Company with respect to any such shares not so
purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no event
------------------------------------------------
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continued employment by the Company.
3.9. Decisions of Board or Committee. The Board or the Committee
-------------------------------
shall have the right to resolve all questions which may arise in connection with
the Option or its exercise. Any interpretation, determination or other action
made or taken by the Board or the Committee regarding the Plan or this Agreement
shall be final, binding and conclusive.
3.10. Company to Reserve Shares. The Company shall at all times
-------------------------
prior to the expiration or termination of the Option reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Stock,
the full number of shares subject to the Option from time to time.
-5-
3.11. Agreement Subject to the Plan. This Agreement is subject to
-----------------------------
the provisions of the Plan and shall be interpreted in accordance therewith.
The Optionee hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
------------------------
4.1. Designation as Nonqualified Stock Option. The Option is hereby
----------------------------------------
designated as not constituting an "incentive stock option" within meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.
4.2. Meaning of Certain Terms. As used herein, the term "Legal
------------------------ -----
Representative" shall include an executor, administrator, legal representative,
--------------
guardian or similar person and the term "Permitted Transferee" shall include any
--------------------
transferee (i) pursuant to a transfer permitted under Section 6.4 of the Plan
and Section 3.1 hereof or (ii) designated pursuant to beneficiary designation
procedures approved by the Company.
4.3. Successors. This Agreement shall be binding upon and inure to
----------
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights hereunder
in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications provided
-------
for in this Agreement shall be made, if to the Company, to Xxxxxx Building, 000
Xxxxx Xxxxxxx, Xx Xxxx, Xxxxx 00000, Attention: Corporate Secretary, and if to
the Optionee, to 000 Xxxxxxxxx, Xx Xxxx, XX 00000. All notices, requests or
other communications provided for in this Agreement shall be made in writing
either (a) by personal delivery to the party entitled thereto, (b) by facsimile
with confirmation of receipt, (c) by mailing in the United States mails to the
last known address of the party entitled thereto or (d) by express courier
service. The notice, request or other communication shall be deemed to be
received upon personal delivery, upon confirmation of receipt of facsimile
transmission or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
4.5. Governing Law. This Agreement, the Option and all
-------------
determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Texas and construed in accordance therewith without giving effect
to principles of conflicts of laws.
-6-
4.6. Counterparts. This Agreement may be executed in two
------------
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
EL PASO ELECTRIC COMPANY
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxx
Title: Director
Accepted this 26th day of April, 1999.
/s/ Xxxxx X. Xxxxxx, Xx.
--------------------------------------
Xxxxx X. Xxxxxx, Xx.
-7-
