FORM OF
LSC, INCORPORATED
OPTION AGREEMENT
THIS AGREEMENT is entered into and effective as of this ____ day of
_____________, ____ (the "Date of Grant"), by and between LSC, Incorporated (the
"Company") and __________ (the "Optionee").
A. The Company has adopted the 1992 Stock Option Plan (the "Plan")
authorizing the Board of Directors of the Company, or a committee as
provided for in the Plan (the Board of Directors or such a committee to
be referred to as the "Comm thee"), to grant qualified Stock Options to
employees of the Company and its Subsidiaries (as defined in the Plan).
B. The Company desires to give the Optionee an inducement to acquire a
proprietary interest in the Company and an added incentive to advance the
interests of the Company by granting to the Optionee an option to
purchase shares of Common Stock of the Company pursuant to the Plan.
Accordingly, the parties agree as follows:
ARTICLE 1. GRANT OF OPTION
The Company hereby grants to the Optionee the right, privilege and Option (the
"Option") to purchase ______ thousand (_____) shares (the "Option Shares") of
the Company's Common Stock, $.01 par value (the "Common Stock"), according to
the terms and subject to the conditions hereinafter set forth and as set forth
in the Plan. The Company intends that the Option granted hereunder shall be an
"Incentive Stock Option", as that term is used in Section 442A of the Internal
Revenue Code of 1987, as amended (the "Code") and the terms of the Plan and this
Agreement shall be interpreted to satisfy Section 442A of the Code. A copy of
the Plan is available to the Optionee upon request.
ARTICLE 2. OPTION EXERCISE PRICE
The per share price to be paid by Optionee in the event of the Option will be at
$_______.
ARTICLE 3. DURATION OF OPTION AND TIME OF EXERCISE
3.1 INITIAL PERIOD OF EXERCISABILITY
a. This Option will become exercisable in 4 equal
installments. The initial date of exercisability is
_______________, ____. Twenty-five percent (25%) of the
Option shares become exercisable on _______________, ____;
_______________, ____ on _______________, ____ and on. 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., Minneapolis,
Minnesota local time on _______________, ____ (the "Time of
Termination").
3.2 TERMINATION OF EMPLOYMENT OF OTHER SERVICE
a. In the event the Optionee's employment or other service
with the Company and all Subsidiaries is terminated by
reason of the Optionee's death, disability or retirement
(as such terms are 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 will this Option be exercisable after the
Time of Termination).
b. 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, all
rights of the Optionee under the Plan and this Agreement
will immediately terminate, without notice of any kind, and
this Option will no longer be exercisable; provided,
however, that if such termination is due to any reason
other than termination by the Company or any Subsidiary for
"cause" (as defined in the Plan), 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 will this Option be
exercisable after the Time of Termination).
3.3 CHANGE IN CONTROL
a. If any events constituting a Change in Control (as defined
in Section 8.1 of the Plan) of the Company occur, then 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 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 Option exercise price per share of
this Option.
b. Notwithstanding anything in this Section 3.3 to the
contrary, if, with respect to the Optionee, acceleration of
the vesting of this Option or the payment of cash in
exchange for all or part of this Option as provided above
(which acceleration or payment could be deemed a "payment"
within the meaning of Section 280G(b)(2) of the Code),
together with any other payments which the Optionee has the
right to receive from the Company or any corporation which
is a member of an "affiliated group"
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(as defined in Section 1504(a) of the Code, without regard
to Section 1504(b) of the Code) of which the Company is a
member, would constitute a "parachute payment" (as defined
in Section 280G(b)(2) of the Code), the payments to the
Optionee as set forth herein will be reduced to the largest
amount as will result in no portion of such payments being
subject to the excise tax imposed by Section 49999 of the
Code; provided, however, that if the Optionee is subject to
a separate agreement with the Company or a Subsidiary that
specifically provides that payments attributable to one or
more forms of employee stock incentives or to payments made
in lieu of employee stock incentives will not reduce any
other payments under such agreement, even if it would
constitute an excess parachute payment, then the
limitations of this Section 3.3(b) will, to that extent,
not apply.
ARTICLE 4. RESTRICTIONS REGARDING EMPLOYMENT, CONFIDENTIAL INFORMATION AND
INTELLECTUAL PROPERTY
4.1 In addition to the restrictions contained in the Plan, the
Committee shall have the authority to impose additional
restrictions and penalties on Options and Awards in the event an
Optionee or grantee ceases to be employed by the Company, is
employed by a competitor of the Company, or is in breach of any
covenant not to compete or other agreement with the Company
relating to confidential information of the Company, including,
but not limited to, the forfeiture of an Optionee's or grantee's
rights under an Option or Award or the repurchase by the Company
of stock purchased by an Optionee pursuant to a Stock Option or
Award Agreement.
4.2 An Optionee or grantee shall not render services for an
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. For Optionees or grantees whose employment has
terminated, the judgment of the Committee shall be based on the
Optionee's or grantee's position and responsibilities while
employed by the Company; the Optionee's or grantee's
post-employment responsibilities and position with the other
organization or business, the extent of past, current and
potential competition or conflict between the Company and the
other organization or business, the effect on the Company's
customers, suppliers and competitors due to the Optionee's or
grantee's assuming the post-employment position, and such other
considerations as are deemed relevant given the applicable facts
and circumstances.
4.3 Upon exercise, payment or delivery pursuant to an Award, the
Optionee or grantee shall certify on a form acceptable to the
Committee that he or she is in compliance with the terms and
conditions of the Plan and this Agreement. Failure to comply with
the provisions of paragraph (b) of this Article 4, prior to, or
during the six (6) months after, any exercise, payment or delivery
pursuant to an Award,
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shall cause such exercise, payment or delivery to be rescinded.
The Company shall notify the Optionee or grantee in writing of any
such rescission within two (2) years after such exercise, payment
or delivery. Within ten (10) days after receiving such a notice
from the Company, the Optionee or grantee shall pay to the Company
the amount of gain realized or payment received as a result of the
rescinded exercise, payment or delivery pursuant to an Award.
Such payment shall be either in cash or by returning to the
Company the number of shares of Common Stock that the Optionee or
grantee received in connection with the rescinded exercise,
payment or delivery.
4.4 An Optionee or grantee 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 or grantee either during or
after employment with the Company.
4.5 An Optionee or grantee 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 grantee or 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 foreign countries.
ARTICLE 5. NOTICE AND PAYMENT
5.1 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 Minneapolis, Minnesota (Attention:
Secretary), of a written notice of exercise. Such notice will in
a form satisfactory to the Committee, will identify the Option,
will specify the number of Option Shares with respect to which the
Option is being exercised, and will be signed by the person or
persons so exercising the Option. Such notice will 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 the Option. As soon as practicable after the
effective exercise of the 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.
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5.2 PAYMENT
At the time of exercise of this Option, the Optionee will pay the
total purchase price of the Option Shares to be purchased solely
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, may allow such payment to be made, in
whole or in part, by tender of a Broker Exercise Notice,
Previously Acquired Shares or by a combination of such methods.
For purposes of this Agreement, the terms "Broker Exercise Notice"
and "Previously Acquired Shares" will have the meanings set forth
in the Plan. 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 on the date of exercise of this Option.
ARTICLE 6. NONTRANSFERABILITY
Neither this Option nor the Option Shares acquired upon exercise may be
transferred by the Optionee, either voluntarily or involuntarily, or
subjected to any lien, directly or indirectly, by operation of law or
otherwise, except as provided in the Plan. Any attempt to transfer or
encumber this Option or the Option Shares other than in accordance with
this Agreement and the Plan, will null and void this Option.
ARTICLE 7. LIMITATION OF LIABILITY
Nothing in the 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, expressed 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.
ARTICLE 8. WITHHOLDING TAXES
The Company is entitled to (a) withhold and deduct from future wages of
the Optionee (or from other amounts which 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 hereby
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.
ARTICLE 9. ADJUSTMENTS
In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock
split, combination of shares, rights offering,
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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.
ARTICLE 10. SUBJECT TO PLAN
The 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.
ARTICLE 11. MISCELLANEOUS
11.1 BINDING EFFECT
This Agreement will be binding upon the heirs, executors,
administrators and successors of the parties to this Agreement.
11.2 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 Minnesota.
11.3 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 supersedes all prior agreements, arrangements, plans and
understandings relating to the grant and exercise of this Option
and the administration of the Plan.
11.4 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 hereto, or, in the case of a waiver, by the party
waiving compliance.
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The parties to this Agreement have executed this Agreement effective the day and
year first written above.
LSC, INCORPORATED
By:
--------------------------------
President and CEO
OPTIONEE
-----------------------------------
(Signature)
Employee
SSN: xxx-xx-xxxx
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