NORTHERN STAR FINANCIAL, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made effective as of this day of August, 1998, by and
between NORTHERN STAR FINANCIAL, INC., a Minnesota corporation (the "Company"),
and ------------ ("Optionee").
W I T N E S S E T H:
WHEREAS, Optionee is one of the five organizers (the "Organizers") of
the Company and its wholly-owned subsidiary Northern Star Bank (the "Bank"); and
WHEREAS, the Optionee has subscribed to purchase shares of the
Company's Common Stock, at $10.00 per share pursuant to the Company's private
offering to the Organizers (the "Private Offering"). The Company conducted the
Private Offering in order to comply with the state of Minnesota, Department of
Commerce application requirements for a Minnesota State Charter. As a result of
the Optionee's participation in the Private Offering, instead of the Company's
proposed public offering, the Optionee will receive "restricted securities"
subject to the resale limitations of Rule 144 of the Securities Act of 1933, as
amended;
WHEREAS, in order to organize the Company and the Bank, the Organizers
agreed to pay the Company's and the Bank's organizational expenses pro rata in
proportion to each Organizers' respective proposed ownership;
WHEREAS, in consideration of the Optionee's participation in the
Private Offering, rather than the Company's proposed public offering, and for
taking the risks associated with financing Company's and Bank's organizational
expenses, the Company wishes to grant a nonqualified stock option to Optionee to
purchase shares of the Company's Common Stock, which option is granted outside
of any of the Company's current stock option plans; and
WHEREAS, the Board has authorized the grant of a nonqualified stock
option to Optionee and has determined that, as of the effective date of this
Agreement, the fair market value of the Company's Common Stock is $10.00 per
share.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee on the date
set forth above (the "Date of Grant"), the right and option (the "Option") to
purchase all or portions of an aggregate of (____) shares of Common Stock at a
per share price of $10.00 (the "Option Exercise Price") on the terms and
conditions set forth herein, subject to the antidilution provisions of this
Option. This Option is not intended to be an incentive stock option
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within the meaning of Section 422, or any successor provision, of the Code, and
the regulations thereunder Option.
The shares which may be acquired upon exercise of this Option are referred to
herein as the "Option Shares." As used herein, the term "Common Stock" means and
includes the Company's presently authorized common stock, $.01 par value, and
shall also include any capital stock of any class of the Company hereafter
authorized which shall not be limited to a fixed sum or percentage in respect of
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution, or winding up of the Company; and the term "Convertible Securities"
means any stock or other securities convertible into, or exchangeable for,
Common Stock. .
2. DURATION AND EXERCISABILITY.
a. TERM AND VESTING SCHEDULE. The term during which this Option
may be exercised shall terminate on August 10, 2008. This Option shall vest and
become immediately exercisable, as of the effective date of this Agreement.
Optionee may continue to exercise this Option under the terms and conditions of
this Agreement until the termination of the Option as provided herein. If
Optionee does not purchase upon an exercise of this Option the full number of
shares which Optionee is then entitled to purchase, Optionee may purchase upon
any subsequent exercise prior to this Option's termination such previously
unpurchased shares in addition to those Optionee is otherwise entitled to
purchase.
3. MANNER OF EXERCISE.
a. GENERAL. The Option may be exercised by Optionee (or other
proper party) by delivering prior to the expiration of this option the attached
form ("Exercise Notice") to the Company at its principal office. The Exercise
Notice shall state the number of shares as to which the Option is being
exercised and shall be accompanied by payment in full of the Option price for
all shares designated in the notice. The exercise of the Option shall be deemed
effective upon receipt of such notice by the Company and upon payment that
complies with the terms of this Agreement. The Option may be exercised with
respect to any number or all of the shares as to which it can then be exercised
and, if partially exercised, may be so exercised as to the unexercised shares
any number of times prior to the expiration of this option as provided herein.
b. FORM OF PAYMENT. Payment of the Option price by Optionee shall
be in the form of cash, personal check, certified check or previously acquired
shares of Common Stock of the Company, or any combination thereof. Any stock so
tendered as part of such payment shall be valued at its Fair Market Value (as
defined in Paragraph 5(c) below) on the date of exercise of the Option. For
purposes of this Agreement, "previously acquired shares of Common Stock" shall
include shares of Common Stock that are already owned by Optionee at the time of
exercise.
c. ADDITIONAL RIGHT TO CONVERT OPTION.
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(i) The Optionee shall have the right to require the Company to convert
this Option (the "Conversion Right") at any time, but prior to its expiration,
into shares of Company Common Stock as provided for in this Section 3(c). Upon
exercise of the Conversion Right, the Company shall deliver to the Optionee
(without payment by the Optionee of any Option Exercise Price) that number of
shares of Company Common Stock equal to the quotient obtained by dividing (x)
the value of the Option at the time the Conversion Right is exercised
(determined by subtracting the aggregate Option Exercise Price for the Option
Shares in effect immediately prior to the exercise of the Conversion Right from
the aggregate Fair Market Value for the Option Shares immediately prior to the
exercise of the Conversion Right) by (y) the Fair Market Value of one share of
Company Common Stock immediately prior to the exercise of the Conversion Right.
(ii) The Conversion Right may be exercised by the Optionee, at any time
or from time to time, prior to its expiration, on any business day by delivering
a written notice in the form attached hereto (the "Conversion Notice") to the
Company at the offices of the Company exercising the Conversion Right and
specifying (i) the total number of shares of Stock the Optionee will purchase
pursuant to such conversion and (ii) a place and date not less than one or more
than 20 business days from the date of the Conversion Notice for the closing of
such purchase.
(iii) At any closing under Section 3(c) hereof, (i) the Optionee will
surrender the Option and (ii) the Company will deliver to the Optionee a
certificate or certificates for the number of shares of Company Common stock
issuable upon such conversion, together with cash, in lieu of any fraction of a
share, and (iii) the Company will deliver to the Optionee a new warrant
representing the number of shares, if any, with respect to which the option
shall not have been exercised.
(iv) Fair Market Value of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") National Market System, then the average
closing or last sale prices, respectively, reported for the ten (10)
business days immediately preceding the Determination Date, and
(ii) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System but is traded on the
over-the-counter market, then the average closing bid and asked prices
reported for the ten (10) business days immediately preceding the
Determination Date.
d. STOCK TRANSFER RECORDS. As soon as practicable after the
effective exercise of all or any part of the Option, Optionee shall be recorded
on the stock transfer books of the Company as the owner of the shares purchased,
and the Company shall deliver to Optionee one or more duly issued stock
certificates evidencing such ownership. All requisite original issue or transfer
documentary stamp taxes shall be paid by the Company.
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4. ANTIDILUTION ADJUSTMENTS. The provisions of this Option are subject
to adjustment as provided in this Section 5.
(a) The Option Exercise Price shall be adjusted from time to time such
that in case the Company shall hereafter:
(i) pay any dividends on any class of stock of the Company payable
in Common Stock or securities convertible into Common Stock;
(ii) subdivide its then outstanding shares of Common Stock into a
greater number of shares; or
(iii) combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Option Exercise Price in effect immediately prior
to such event shall (until adjusted again pursuant hereto) be adjusted
immediately after such event to a price (calculated to the nearest full cent)
determined by dividing (a) the number of shares of Common Stock outstanding
immediately prior to such event, multiplied by the then existing Option Exercise
Price, by (b) the total number of shares of Common Stock outstanding immediately
after such event (including the maximum number of shares of Common Stock
issuable in respect of any securities convertible into Common Stock), and the
resulting quotient shall be the adjusted Option Exercise Price per share. An
adjustment made pursuant to this Subsection shall become effective immediately
after the record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made pursuant
to this Subsection, the Holder of any Option thereafter surrendered for exercise
shall become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive) shall determine the
allocation of the adjusted Option Exercise Price between or among shares of such
classes of capital stock or shares of Common Stock and other capital stock. All
calculations under this Subsection shall be made to the nearest cent or to the
nearest 1/100 of a share, as the case may be. In the event that at any time as a
result of an adjustment made pursuant to this Subsection, the holder of any
Option thereafter surrendered for exercise shall become entitled to receive any
shares of the Company other than shares of Common Stock, thereafter the Option
Exercise Price of such other shares so receivable upon exercise of any Option
shall 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 Common Stock
contained in this Section.
(b) Upon each adjustment of the Option Exercise Price pursuant to
Section 4(a) above, the Holder of each Option shall thereafter (until another
such adjustment) be entitled to purchase at the adjusted Option Exercise Price
the number of shares, calculated to the nearest full share, obtained by
multiplying the number of shares specified in such Option (as adjusted as a
result of all adjustments in the Option Exercise Price in effect prior to such
adjustment) by the Option Exercise Price in effect prior to such adjustment and
dividing the product so obtained by the adjusted Option Exercise Price.
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(c) In case of any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
continuing corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), there shall be no adjustment under
Subsection (a) of this Section above but the Holder of each Option then
outstanding shall have the right thereafter to convert such Option into the kind
and amount of shares of stock and other securities and property which he would
have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale, or conveyance had such Option
been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale, or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section with respect to the rights and interests
thereafter of any Holders of the Option, to the end that the provisions set
forth in this Section shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock and other
securities and property thereafter deliverable on the exercise of the Option.
The provisions of this Subsection shall similarly apply to successive
consolidations, mergers, statutory exchanges, sales or conveyances.
(d) Upon any adjustment of the Option Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the Holder as shown on the books of the Company,
which notice shall state the Option Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of
Common Stock purchasable at such price upon the exercise of this Option, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
5. MISCELLANEOUS.
a. RIGHTS AS SHAREHOLDER. Optionee shall have no rights as a
shareholder with respect to shares subject to this Option until such shares have
been issued to Optionee upon exercise of this Option. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date such shares are issued, except as provided in Paragraph 4
above.
b. SECURITIES LAW COMPLIANCE; TRANSFERABILITY. The exercise of all
or any parts of this Option shall only be effective at such time as counsel to
the Company shall have determined that the issuance and delivery of Common Stock
pursuant to such exercise will not violate any state or federal securities or
other laws. Optionee may be required by the Company, as a condition of the
effectiveness of any exercise of this Option, to agree in writing that all
Common Stock to be acquired pursuant to such exercise shall be held, until such
time that such Common Stock is registered and freely tradable under applicable
state and federal securities laws, for Optionee's own account without a view to
any further distribution thereof, that the certificates for such shares shall
bear an appropriate legend to that effect and that such shares will not be
transferred or disposed of except in compliance with applicable state and
federal securities laws.
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c. FAIR MARKET VALUE. "Fair Market Value" shall mean (i) if the
Company's Common Stock is reported by the Nasdaq National Market or Nasdaq
SmallCap Market or is listed upon an established stock exchange or exchanges,
the reported closing price of such stock by the Nasdaq National Market or Nasdaq
SmallCap Market or on such stock exchange or exchanges on a certain date or, if
no sale of such stock shall have occurred on such date, on the next preceding
day on which there was a sale of stock; (ii) if such stock is not so reported by
the Nasdaq National Market or Nasdaq SmallCap Market or listed upon an
established stock exchange, the average of the closing "bid" and "asked" prices
quoted by the National Quotation Bureau, Inc. (or any comparable reporting
service) on such date, or if there are no quoted "bid" and "asked" prices on
such date, on the next preceding date for which there are such quotes; or (iii)
if such stock is not publicly traded as of such date, the per share value as
determined by the Board, or the Committee, in its sole discretion by applying
principles of valuation with respect to all such stock.
d. WITHHOLDING TAXES. In order to permit the Company to receive a
tax deduction in connection with the exercise of this Option, the Optionee
agrees that as a condition to any exercise of this Option, the Optionee will
also pay to the Company, or make arrangements satisfactory to the Company or
make arrangements satisfactory to the Company regarding payment of, any federal,
state local or other taxes required by law to be withheld with respect to the
Option's exercise.
e. NONTRANSFERABILITY. During the lifetime of Optionee, the
accrued Option shall be exercisable only by Optionee or by the Optionee's
guardian or other legal representative, and shall not be assignable or
transferable by Optionee, in whole or in part, other than by will or by the laws
of descent and distribution.
f. LOCKUP PERIOD LIMITATION. Optionee agrees that in the event the
Company advises Optionee that it plans an underwritten public offering of its
Common Stock in compliance with the Securities Act of 1933, as amended, and that
the underwriter(s) seek to impose restrictions under which certain shareholders
may not sell or contract to sell or grant any option to buy or otherwise dispose
of part or all of their stock purchase rights of the underlying Common Stock,
Optionee hereby agrees that for a period not to exceed 180 days from the date of
the prospectus, Optionee will not sell or contract to sell or grant an option to
buy or otherwise dispose of this Option or any of the underlying shares of
Common Stock without the prior written consent of the underwriter(s) or its
representative(s).
g. FRACTIONAL SHARES. Fractional shares shall not be issued upon
the exercise of this Option, but in any case where the holder would, except for
the provisions of this Section, be entitled under the terms hereof to receive a
fractional share, the Company shall, upon the exercise of this Option for the
largest number of whole shares then called for, pay a sum in cash equal to the
sum of (a) the excess, if any, of the Market Price of such fractional share over
the proportional part of the Option Exercise Price represented by such
fractional share, plus (b) the proportional part of the Option Exercise Price
represented by such fractional share. For purposes of this Section, the term
"Market Price" with respect to shares of Common Stock of any class or series
means the last reported sale price or, if none, the average of the last reported
closing bid and asked prices on any national securities exchange or quoted in
the National Association of
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Securities Dealers, Inc.'s Automated Quotations System (NASDAQ), or if not
listed on a national securities exchange or quoted in NASDAQ, the average of the
last reported closing bid and asked prices as reported by Metro Data Company,
Inc. from quotations by market makers in such Common Stock on the
Minneapolis-St. ▇▇▇▇ local over-the-counter market.
h. ACCOUNTING COMPLIANCE. Optionee agrees that, in the event a
"change of control transaction" of the Company is treated as a "pooling of
interests" under generally accepted accounting principles and Optionee is an
"affiliate" of the Company or any Subsidiary (as defined in applicable legal and
accounting principles) at the time of such change of control transaction,
Optionee will comply with all requirements of Rule 145 of the Securities Act of
1933, as amended, and the requirements of such other legal or accounting
principles, and will execute any documents necessary to ensure such compliance.
i. STOCK LEGEND. If applicable, the Company may put an appropriate
legend on the certificates for any shares of Common Stock purchased by Optionee
(or, in the case of death, Optionee's successors).
j. SCOPE OF AGREEMENT. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and Optionee and any
successor or successors of Optionee.
k. ARBITRATION. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an attorney
who has practiced securities or business litigation for at least ten years. If
the parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Hennepin County, Minnesota,
select an arbitrator. Arbitration will be conducted pursuant to the provisions
of this Agreement, and the commercial arbitration rules of the American
Arbitration Association, unless such rules are inconsistent with the provisions
of this Agreement. Limited civil discovery shall be permitted for the production
of documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator's fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys' fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
NORTHERN STAR FINANCIAL, INC.
By:_____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
COMPANY
________________________________________
OPTIONEE
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OPTION EXERCISE FORM
--------------------
To: Northern Star Financial, Inc.
I hereby exercise stock options granted to purchase shares of Common
Stock of Northern Star Financial, Inc. (the "Company") as follows:
Date of Options Exercise Number of
Grant Awarded Price Shares Exercised
----- ------- ----- ----------------
As payment for the exercise of the above listed stock options and for
the amount of federal, state and local tax which the Company is required by law
or believes appropriate to withhold and the cost of any applicable state or
federal documentary tax stamps, I am enclosing and elect the following method of
payment (check appropriate box):
[ ] Check (cashier's, certified or personal) in the amount of $________________
[ ] Shares of the Company's Common Stock which have been held by me for at
least six months and which are valued at fair market value listed below.
Certificate No. Acquisition Date Number of Shares Fair Market Value
--------------- ---------------- ---------------- -----------------
NOTE: All shares of Common Stock must be properly assigned to Northern Star
Financial, Inc.
[ ] Irrevocable instructions, a copy of which is attached hereto and is
subject to the Company's approval, to my broker who must be acceptable to
you to promptly deliver to the Company an amount sufficient to pay such
amounts from either (i) the proceeds of sale through the broker of a
sufficient number of shares purchased by me upon exercise of the Option as
set forth above or (ii) the loan proceeds from borrowings by me from the
broker, and the Company is hereby instructed to issue and deliver the shares
purchased by me upon exercise of the option as set forth above directly to
and in the name of the broker.
Unless the third payment option above is selected, in which case the shares
will be issued and delivered as described therein, please have _____
certificates issued in blocks of ________ shares per certificate registered as
follows:
Name___________________________________________________________________
Mailing Address________________________________________________________
________________________________________________________
Social Security Number_________________________________________________
Very truly yours,
__________________________________________
Signature of Optionee
__________________________________________
Printed Name of Optionee
CASHLESS EXERCISE FORM
(To be executed upon exercise of Option
pursuant to Section 3(c)
The undersigned hereby irrevocably elects a cashless exercise of the
right of purchase represented by the within Option Certificate for, and to
purchase thereunder, ______________ shares of Common Stock, as provided for in
Section 3(c) therein.
Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional share to:
Name___________________________________
(Please print Name)
Address________________________________
_______________________________________
Tax Identification No. or Social
Security No._______________________
Signature______________________________
NOTE: The above signature should correspond exactly with the name on
the first page of this Option Certificate or with the name of the assignee
appearing on a duly executed assignment form.
And if said number of shares shall not be all the shares purchasable
under the within Option Certificate, a new Option Certificate is to be issued in
the name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher number of shares.
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