1
EXHIBIT 10.4
NATCO STOCK OPTION ARRANGEMENT
THIS STOCK OPTION ARRANGEMENT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THE OPTIONS GRANTED HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS STOCK OPTION ARRANGEMENT, dated as of this ____ day of
__________, ____, by and between NATCO Group Inc.,a corporation existing under
the laws of the State of Delaware (hereinafter referred to as "NATCO" or,
together with any and all subsidiaries of NATCO, the "Company") and
___________________ (hereinafter referred to as "the Executive").
W I T N E S S E T H
WHEREAS, the Executive received certain Rights under the 1994
Stock Appreciation Rights Plan (the "Plan") of National Tank Company, Inc., and
under Section 10(B) of the Plan, such Rights have been cancelled and, as
contemplated in this Stock Option Agreement, replaced by Options with terms and
conditions which, as closely as possible, produce the same overall economic
result to the Executive as the cancelled Rights;
and WHEREAS, in order to provide the Executive with an
incentive to devote his best skills and efforts to the success of NATCO, the
Company deems it to be in its best interests to provide the Executive with
Options to purchase shares of NATCO;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and conditions herein, the parties hereto hereby agree as
follows:
1. OPTIONS.
(a) Subject to the terms and upon the conditions
contained herein including the vesting requirement contained in Section 6, the
Executive shall have the right, privilege, and option to purchase __________
shares of common stock of NATCO at a purchase price of $____ per share (the
"Options").
(b) If, subsequent to the date of this Agreement, the
Company shall declare and pay any stock dividend or shall divide or combine the
outstanding common stock of NATCO through any stock split, stock combination or
other recapitalization, the number of shares and purchase price for shares
under the Options shall be appropriately adjusted to reflect such stock
dividend, stock split, stock combination or other recapitalization. Such
adjustments shall be made by the Committee, whose determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.
1
2
(c) If, subsequent to the date of this Agreement, as long
as the Company's common stock is not listed or admitted to trade on a national
securities exchange, in which case this Section 1(c) does not apply, the
Company shall declare and pay a cash dividend on the outstanding common stock
of NATCO, then the purchase price in Section 1(a) above shall be appropriately
adjusted to reflect such cash dividend. Such adjustment shall be made by the
committee, whose determination as to what adjustment shall be made, and the
extent thereof, shall be final, binding and conclusive.
2. OPTION PERIOD.
Subject to the terms and upon the conditions contained herein,
Vested Options may be exercised at any time prior to the earlier to occur of
termination of the Options pursuant to Section 5 hereof and the Expiration Date
(the "Option Period").
3. METHOD OF EXERCISE.
(a) The Options may be exercised only within the Option
Period and only (1) by notice in writing of the Executive's exercise of the
Options, delivered to the Chief Financial Officer of NATCO or mailed by
registered or certified mail, return receipt requested, postage pre-paid,
addressed to the Chief Financial Officer of NATCO, c/o National Tank Company,
Brookhollow Central III, Suite 750, 0000 Xxxxx Xxxx Xxxx, Xxxxxxx, Xxxxx 00000,
and (2) by contemporaneous payment to NATCO of the full amount of the purchase
price of the common stock being purchased by the Executive pursuant to these
Options (together with any amount which is necessary to satisfy any applicable
federal, state or local tax requirements), by certified check or official bank
check payable to the order of NATCO.
(b) The Company may require of the Executive at the time
the Options are exercised, that the Executive make or enter into
representations and agreements as may be necessary or desirable, in the opinion
of the Company, in order to assure compliance with the terms of this Stock
Option Agreement and all applicable federal and state securities laws and stock
exchange regulations.
(c) The Company shall make immediate delivery of all
shares purchased by the Executive upon the exercise of the Option, provided
that if any law or regulation requires the Company to take any action with
respect to the shares being purchased by the Executive pursuant to these
Options, then the date of delivery of such shares shall be extended for the
period necessary to take such action.
4. STOCKHOLDERS AGREEMENT.
In the event the Executive exercises the Options and purchases
shares of common stock of NATCO, the shares held by the Executive shall be
subject to the terms of the Stockholders Agreement dated the 30th day of June,
1997, by and among Capricorn Investors, L.P., Capricorn Investors II, L.P. and
Xxxxxxxx Point Industries, Inc., attached hereto as Exhibit A.
2
3
5. TERMINATION OF OPTIONS.
(a) The Options, to the extent not heretofore exercised,
shall terminate and cease to be exercisable on the date on which the first of
the following events occurs:
(1) the termination of the Executive's employment
with the Company for Cause;
(2) thirty (30) days after the termination of the
Executive's employment with the Company for any reason other than
Cause;
(3) thirty (30) days after an Alteration in the
employment of the Executive by the Company;
(4) expiration of the Option Period as provided
in Section 2 of this Stock Option Agreement.
(b) The Company may at its election cause the Options to
terminate in the event of a Sale of the Company provided that the Company gives
the Executive written notice at least thirty (30) days prior to any
transaction that would result in the termination of the Executive's
Options pursuant to this Section 5(b).
6. VESTING.
(a) Except as otherwise set forth herein, as long as the
Executive continues as an officer or employee of the Company or a subsidiary,
the Options will vest over _____ years, with _________ (______%) vesting at the
end of each anniversary year after the Award Date, and no additional fractional
amount vesting until the completion of each anniversary year. The Executive
shall have no right to purchase shares pursuant to the Options until or unless
the Options are vested.
(b) Notwithstanding Section 6(a) above, in the event of a
Sale of the Company, the Options shall become fully vested in the following
circumstances:
(1) Upon notice by the Company of termination of
the Options pursuant to Section 5(b). Notwithstanding anything herein
to the contrary, however, termination of the Options pursuant to
Section 5(b) shall not result in the vesting of otherwise unvested
Options if the Company in the case of a Change of Control, or the
surviving corporation in the case of a merger, or any purchasing
corporation in the case of a sale of all or substantially all of the
assets of the Company, agrees to provide the Executive with a
combination of options, deferred compensation, bonuses or other
incentive programs, with terms and conditions which, as closely as
possible, produce the same overall economic result to the Executive as
the terminated but unvested Options;
(2) The Company does not terminate the Options
pursuant to Section 5(b), but a Change of Control has occurred and
there is an Alteration in the employment of
3
4
the Executive. Notwithstanding anything herein to the contrary,
however, an Alteration shall not be deemed to have occurred in
connection with a Change of Control for purposes of this Paragraph
6(b) if (i) the Company, in the case of a Change of Control, or the
surviving corporation in the case of a merger, or the purchasing
corporation in the case of a sale of all or substantially all the
assets of the Company, agrees to employ the Executive on terms
substantially similar to the terms of Executive's employment with the
Company prior to such Change of Control (or as otherwise agreed by
such entity and the Executive), or (ii) the Alteration was for Cause.
(c) The Options shall become fully vested in the event
of: (i) death of the Executive while employed by the Company, or (ii)
termination by reason of disability (as defined from time to time by the
Committee) of the Executive while employed by the Company.
7. PURCHASE OF VESTED OPTIONS BY THE COMPANY.
(a) The Executive will be entitled to tender and NATCO
will be obligated to purchase Vested Options held by the Executive on the
following occasions ("Option Purchase Periods"):
(1) for a period of thirty (30) days after the
termination of the Executive's employment with the Company for any
reason other than Cause;
(2) for a period of thirty (30) days after an
Alteration in the employment of the Executive;
(3) for a period of thirty (30) days after notice
provided by the Company that the Options will be terminated pursuant
to Section 5(b) herein; and
(4) for a period of six (6) months prior to the
Expiration Date.
(b) The Executive will only be entitled to tender Vested
Options to the Company during an Option Purchase Period and will do so by
notice in writing, specifying the number of Vested Options being tendered,
delivered to the Chief Financial Officer of NATCO or mailed by registered or
certified mail, return receipt requested, postage pre-paid, addressed to the
Chief Financial Officer of NATCO, c/o National Tank Company, Brookhollow
Central III, Suite 750, 0000 Xxxxx Xxxx Xxxx, Xxxxxxx, Xxxxx 00000. The above
notwithstanding, in the event of the Executive's death, the Executive's estate
shall be deemed to have tendered the Executive's Vested Options to the Company
as of the day following the date of the Executive's death.
(c) NATCO shall purchase Vested Options properly tendered
under this Section 7 for cash. The amount in cash will be determined by
multiplying (i) the number of Vested Options being tendered times (ii) the
difference between (x) the Fair Market Value per share of the Company's common
stock on the tender date and (y) the price set forth in Section 1(a).
4
5
(d) At the company's option, the amount paid to the
Executive to purchase Vested Options under this Section 7 may be in a lump sum,
which will be paid no later than 90 days from the date of the tender, or in 12
equal quarterly payments over a three year period bearing interest at the
Reference Rate.
(e) For purposes of Section 7(c), the Fair Market Value
per share of the Company's common stock shall mean:
(1) if the stock is listed or admitted to trade
on a national securities exchange, the average price of the stock over
the last ten trading days on the composite tape of the principal
national securities exchange on which the stock is so listed or
admitted to trade;
(2) if the stock is not listed or admitted to
trade on a national securities exchange, the mean between the last
reported bid and asked price for the stock over the last ten trading
days as furnished by (a) the National Association of Securities
Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is no
longer reporting such information, or (b) a service such as the
national Quotation Bureau if such bid and asked price is regularly
quoted therein; or
(3) if conditions (1) and (2) do not apply, the
Fair Market Value of the Company's Common Stock shall mean the value
established by the Committee. To the extent possible, in determining
such value, the Committee shall analyze present value of projected
cash flow, multiples in relation to comparable companies (reflecting
such liquidity discounts as are appropriate), and other such
methodologies as are typical in valuing private companies.
(f) The Company shall have the right to deduct from any
payments to be made to the Executive hereunder any amounts that federal, state
or local tax law requires to be withheld with respect to amounts payable to the
Executive upon the tender of any Vested Option.
(g) Anything herein to the contrary notwithstanding, if
at the time of the tender of a Vested Option, the Company is in default under
any loan agreements to which the Company is a party, or if any payment to
Executive under this Section 7 would cause the Company to be in default under
any such agreement, then amounts otherwise payable to an Executive hereunder
shall not be paid, and the Company shall have no obligation to make such
payment, as long as such default continues. Amounts not paid by reason of the
provisions of this Paragraph 7(g) shall accrue interest from the time such
amounts would otherwise have been paid until the time such amounts are actually
paid at a rate per annum equal to the Reference Rate.
(h) Anything herein to the contrary notwithstanding, at
such time as the shares of Class A common stock of the Company are listed on a
national securities exchange, all the provisions of this Article 7 shall become
null and void and shall cease to have any force or effect.
8. NON-TRANSFERABILITY OF OPTIONS.
The Options may not be sold, hypothecated, transferred or
otherwise disposed of, and may only be exercised by the Executive, or his
estate. If the Executive's estate exercises the
5
6
Options, the estate shall be bound by all conditions, restrictions, and
limitations that otherwise would have applied to the Executive had the
Executive exercised the Options.
9. NO RIGHTS AS STOCKHOLDER.
The Executive shall have none of the rights of a stockholder
of NATCO with respect to any of the shares of common stock issuable under the
Options unless and until such shares of common stock have been purchased by the
Executive in accordance with the terms and conditions of this Stock Option
Agreement.
10. RIGHT TO TERMINATE EMPLOYMENT.
Nothing herein shall be construed to confer upon an Executive
the right to continue in the employment of the Company or affect the right of
the Company to terminate the Executive's employment at any time.
11. NO RIGHTS AS SECURED CREDITOR.
Anything herein to the contrary expressed or implied
notwithstanding, if an Executive otherwise entitled to payment under Section 7
above does not receive payment by reason of the provisions of Section 7(g), or
for any other reason, the rights of the Executive with regard to such payment
and any accrued interest as provided herein shall be those of an unsecured
creditor of the Company and such rights shall be subordinate and junior to all
senior and institutional indebtedness, all indebtedness for borrowed money and
all secured indebtedness of the Company.
12. REPRESENTATION AS TO INVESTMENT.
The Executive represents and warrants to NATCO that all shares
purchased under this Stock Option Agreement shall be acquired for the
Executive's own account and not with a view to distribution. The Executive
acknowledges that the Executive may not sell, assign, transfer or otherwise
dispose of any shares purchased under this Stock Option Agreement, or of any of
his right, title or interest therein, in the absence of either a registration
statement under the Securities Act of 1933, as amended (the "Act") or an
exemption from the registration provisions of the Act, and agrees that
certificates representing the shares may contain a legend to such effect. The
exercise of these Options and the delivery of shares hereunder is contingent
upon the Company being furnished by the Executive with a statement in writing
at the time of such exercise confirming the accuracy of the foregoing
representation and warranty.
6
7
13. NOTICE.
All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive, to him at:
_______________________________
_______________________________
If to NATCO, to it at:
NATCO Group Inc.
Brookhollow Central III
0000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: President
With a copy to:
Xxxxxx & Xxxxxx
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Xxxx
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications hereunder shall be
effective when actually received by the addressee.
14. AMENDMENT.
This Stock Option Agreement may only be modified, supplemented
or amended by a written instrument executed by the party against whom which
enforcement of such modification, supplement or amendment is sought.
15. HEADINGS.
The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Stock Option
Agreement.
16. GOVERNING LAW.
This Stock Option Agreement shall be governed by and construed
in accordance with the laws of the State of New York without reference to
principles of conflict of laws.
7
8
17. INTERPRETATION OF THE AGREEMENT.
(a) Any determination required by or resolution of any
dispute arising out of this Option Agreement, and Sections 1(b), 5(b), 6(b),
7(e), or any other Section without limitation, shall be made by a Committee
(the "Committee") consisting of two members of the Board of Directors of the
Company. The determinations of the Committee shall be conclusive.
(b) No member of the Committee shall be liable for any
action, failure to act, determination or interpretation made in good faith with
respect to this Option Agreement. The Company hereby agrees to indemnify each
member of the Committee to the extent permitted by applicable law and the
By-laws of the Company for all costs, charges, expenses, liabilities and losses
incurred or arising in connection with the member's actions in interpreting
this Option Agreement.
(c) The Board of Directors, at any time it so desires,
may increase or decrease the number of members of the Committee, may remove
from membership on the Committee all or any portion of its members, and may
appoint such person or persons as it desire to fill any vacancy existing on the
Committee, whether caused by removal, resignation or otherwise.
18. DEFINITIONS.
"Affiliate" means any corporation that would be a member of a
controlled group of corporations with the Company within the meaning of Section
1563(a) of the Internal Revenue Code of 1986, as amended.
"Alteration" in the employment of the Executive means,
following a Change of Control, (a) the Executive's employment with the Company
is terminated; (b) the Company, without the Executive's consent, reduces the
annual base salary of the Executive in effect immediately prior to the Change
of Control; or (c) the Company, without the Executive's consent, reassigns the
Executive to a location which is more than fifty (50) miles from the principal
location at which the Executive worked for the Company immediately prior to the
Change of Control.
"Award Date" means ___________________.
"Cause" means the Executive engages in theft, dishonesty,
neglect of duty or misconduct in the discharge of the Executive's duties and
responsibilities.
"Change of Control" shall be deemed to have occurred in the
event and only in the event of a Sale of the Company.
"Expiration Date" means ___________________.
"Reference Rate" means the prime rate of interest as published
in the Wall Street Journal.
8
9
"Sale of the Company" means (a) sale of all or substantially
all of the common stock of NATCO to any party or parties other than the
Executive, regardless of whether such sale is effected in a single transaction
or a series of related transactions, provided that as a result Capricorn
Investors, L.P., Capricorn Investors II, L.P., and any Affiliate of the
Company, taken together ("Capricorn"), would thereafter own less than twenty
percent (20%) of the common stock of the Company, (b) a sale of all or
substantially all of the Company's assets or (c) a merger or consolidation of
the Company with and into another corporation if immediately after the merger
Capricorn owns less than twenty percent (20%) of the common stock of such other
corporation.
"Vested Options" means Options which are vested as provided in
Section 6(a), 6 (b) or 6(c).
In witness whereof, the parties hereto have executed this
Agreement as of the date first above written.
NATCO GROUP INC.
By /s/ /s/
------------------------------ --------------------------------
Name: Xxxxxxxxx X. Xxxxxxx
--------------------------- --------------------------------
Title: Chairman of the Board and
Chief Executive Officer
--------------------------
9
