EXHIBIT 10.3
NONQUALIFIED STOCK OPTION AGREEMENT
LIBERTE INVESTORS INC. 2002 LONG TERM INCENTIVE PLAN
1. Grant of Option. Pursuant to the Liberte Investors Inc. 2002 Long
Term Incentive Plan (the "PLAN") for employees, consultants and outside
directors of Liberte Investors Inc., a Delaware corporation (the "COMPANY"),
subject to approval by the Company's stockholders, the Company hereby grants to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "PARTICIPANT"),
an option to purchase shares of Common Stock ("COMMON STOCK") of the Company as
follows:
On the date hereof, the Company grants to the Participant an option
(the "OPTION" or "STOCK OPTION") to purchase 2,573,678 full shares or
such other number of full shares as adjusted in accordance with Section
4(h) of the Employment Agreement (as adjusted, the "OPTIONED SHARES")
of Common Stock at an Option Price equal to Three Dollars ($3.00) per
share (subject to adjustment as herein provided). The Date of Grant of
this Stock Option is July 9, 2002.
The "OPTION PERIOD" shall commence on the Date of Grant and shall expire on the
date immediately preceding the tenth (10th) anniversary of the Date of Grant.
The Stock Option is a Nonqualified Stock Option.
2. Capitalized Terms. The capitalized terms used herein that are
defined in the Plan shall have the same meanings assigned to them in the Plan as
in effect on the date hereof; any amendments to the Plan shall not affect this
Stock Option unless agreed to in writing by the Participant. If there is a
conflict between any of the terms and provisions of this Stock Option and the
Plan, the terms and provisions of this Stock Option shall govern.
3. Vesting; Time of Exercise.
(a) Prior to Acquisition Transaction. Except as specifically
provided in this Agreement and Section 15.6 of the Plan, prior to the
date of the Company's first Acquisition Transaction (as defined in that
certain agreement of employment entered into by and between the Company
and the Participant, dated as of July 1, 2002, as the same may be
amended from time to time (the "EMPLOYMENT AGREEMENT")), the Optioned
Shares shall be vested and the Stock Option shall be exercisable with
respect thereto as follows: as of the first day of each month following
the Date of Grant, an additional number of Optioned Shares shall be
vested in an amount equal to the product obtained by multiplying (i)
the total number of Optioned Shares granted hereunder, by (ii) a
fraction equal to one-sixtieth (1/60th), until all such Optioned Shares
are fully vested and exercisable; provided, however, that for any
Optioned Shares to vest on any particular date under this paragraph,
the Participant must be employed by the Company or a Subsidiary from
the Date of Grant to such date.
(b) After an Acquisition Transaction. Following the date of
the Company's first Acquisition Transaction, the total number of
Optioned Shares which are unvested as of the date of consummation of
such Acquisition Transaction (the "CLOSING DATE") shall be vested and
the Stock Option shall be exercisable with respect thereto as follows:
as of the first day of each month following the Closing Date, an
additional number of Optioned Shares shall be vested in an amount equal
to the product obtained by multiplying (i) the total number of Optioned
Shares granted hereunder, by (ii) a fraction equal to one-fortieth
(1/40th), until all such Optioned Shares are fully vested and
exercisable;
provided, however, that for any Optioned Shares to vest on any
particular date under this paragraph, the Participant must be employed
by the Company or a Subsidiary from the Date of Grant to such date.
(c) Accelerated Vesting Upon Certain Terminations of Service.
All of the Optioned Shares not previously vested shall immediately
become fully vested, and this Stock Option shall become fully
exercisable, if not previously exercisable, upon the effective date of
the earliest to occur of the following: (i) a Change of Control, (ii)
the Participant's Termination of Service by the Participant for Good
Reason, (iii) the Participant's Termination of Service by the Company
without Cause, or (iv) the Participant's Termination of Service due to
the Participant's permanent disability or death in accordance with the
terms of the Employment Agreement. For purposes of this Stock Option,
"GOOD REASON," and "CAUSE" shall be given the same meanings assigned to
such terms in the Employment Agreement.
4. Term; Forfeiture. Except as otherwise provided in this Agreement, to
the extent the unexercised portion of the Stock Option relates to Optioned
Shares that are not vested or do not become vested on the date of the
Participant's Termination of Service pursuant to Section 3, such unvested
portion of this Stock Option will be terminated on that date. The unexercised
portion of the Stock Option that relates to Optioned Shares which are or which
become vested will terminate at the first of the following to occur:
(a) 5 p.m. on the date the Option Period terminates;
(b) 5 p.m. on the date that is twelve (12) months following
the Participant's Termination of Service by the Company for Cause; or
(c) 5 p.m. on the date that is twenty-four (24) months
following the date of the Participant's Termination of Service for any
reason other than by the Company for Cause, including a Termination of
Service due to the Participant's death or disability, Termination of
the Service by the Participant with or without Good Reason, and
Termination of Service by the Company without Cause.
5. Who May Exercise. Subject to the terms and conditions set forth in
Sections 3 and 4 above, during the lifetime of the Participant, the Stock Option
may be exercised only by the Participant, or by the Participant's guardian or
personal or legal representative, or by any transferee as permitted under
Section 8 herein. If the Participant's Termination of Service is due to his
death prior to the date specified in Section 4(a) hereof, or Participant dies
prior to the termination dates specified in Sections 4(a) - (c) hereof, and the
Participant has not exercised the Stock Option as to the maximum number of
vested Optioned Shares as set forth in Section 3 hereof as of the date of death,
the following persons may exercise the exercisable portion of the Stock Option
on behalf of the Participant at any time prior to the earliest of the dates
specified in Section 4 hereof: the personal representative of his estate, or the
person who acquired the right to exercise the Stock Option by bequest or
inheritance or by reason of the death of the Participant or a transferee as
permitted in Section 8 herein; provided that the Stock Option shall remain
subject to the other terms of this Agreement, Section 15.6 of the Plan and
applicable laws, rules, and regulations.
6. No Fractional Shares. The Stock Option may be exercised only with
respect to full shares, and no fractional share of stock shall be issued.
7. Manner of Exercise. Subject to such administrative regulations as
the Committee may from time to time adopt, the Stock Option may be exercised by
the delivery of written notice to the Committee setting forth the number of
shares of Common Stock with respect to which the Stock Option is to be
exercised, the date of exercise thereof (the "EXERCISE DATE") which shall be the
day upon which such notice is given in accordance herewith. On the Exercise
Date, the Participant shall deliver to the Company consideration with
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a value equal to the total Option Price of the shares to be purchased, payable
as follows: (a) cash, check, bank draft, or money order payable to the order of
the Company, (b) Common Stock (including Restricted Stock) owned by the
Participant on the Exercise Date, valued at its Fair Market Value on the
Exercise Date, and which the Participant has not acquired from the Company
within six (6) months prior to the Exercise Date, (c) if the Optioned Shares are
no longer Nonpublicly Traded, by delivery (including by FAX) to the Company or
its designated agent of an executed irrevocable option exercise form together
with irrevocable instructions from the Participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of Common
Stock purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other form
of valid consideration that is acceptable to the Committee in its sole
discretion. In the event that shares of Restricted Stock are tendered as
consideration for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock Option with an Option Price equal to
the value of Restricted Stock used as consideration therefor shall be subject to
the same restrictions and provisions as the Restricted Stock so tendered. For
example, if 250 shares of Restricted Stock valued at $6.00 per share are used to
purchase 500 Optioned Shares at an Option Price of $3.00 per share, all 500
Optioned Shares shall be Restricted Stock.
Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Optioned Shares then being purchased to be delivered
to the Participant (or the person exercising the Participant's Stock Option in
the event of his death) at its principal business office as soon as practicable
(but in no case more than three (3) days) after the Exercise Date in order to
permit timely sales under applicable exchange rules or to permit timely
participation in any liquidity event. Without limitation of any of the Company's
obligations under the Employment Agreement, the obligation of the Company to
deliver shares of Common Stock shall, however, be subject to the condition that
if at any time the Company shall determine in its discretion that the listing,
registration, or qualification of the Stock Option or the Optioned Shares upon
any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary as a condition of, or
in connection with, the Stock Option or the issuance or purchase of shares of
Common Stock thereunder, then the Stock 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 reasonably
acceptable to the Committee.
8. Transfer and Assignment. Except as otherwise provided in this
Section 8, this Stock Option may not be assigned, transferred, pledged,
hypothecated, or otherwise conveyed or encumbered by the Participant, except by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
this Stock Option may be transferred, assigned or otherwise conveyed to (i) any
of the Participant's Immediate Family Members, (ii) a trust or trusts for the
exclusive benefit of such Immediate Family Members, (iii) a partnership in which
the only partners are (1) such Immediate Family Members and/or (2) entities, a
majority of the beneficial ownership of which is owned by Immediate Family
Members, (iv) an entity exempt from federal income tax pursuant to Section
501(c)(3) of the Code, or (v) a split interest trust or pooled income fund
described in Section 2522(c)(2) of the Code; provided, that (x) there shall be
no consideration for any such transfer, (y) subsequent transfers may not be made
hereunder except those by will or the laws of decent and distribution, and (z) a
Termination of Service of Participant shall continue to have the effects in
Sections 3 and 4 as if Participant had not transferred, assigned or otherwise
conveyed this Stock Option.
9. Rights as Stockholder. The Participant will have no rights as a
stockholder with respect to any shares covered by the Stock Option until the
issuance of a certificate or certificates to the Participant for the Optioned
Shares, subject to the Company's obligation to issue such certificate(s) as soon
as practicable in accordance with Section 7 above. The Optioned Shares shall be
subject to the terms and conditions of this Agreement regarding such Shares.
Except as otherwise provided in Section 10 hereof, no adjustment shall
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be made for dividends or other rights for which the record date is prior to the
issuance of such certificate or certificates.
10. Registration Rights.
(a) The Company shall use commercially reasonable efforts to
cause to be filed with the Commission, within 180 days after the date
hereof, a Registration Statement on Form S-8 (together with any
successor forms thereto, the "REGISTRATION STATEMENT") covering the
shares of Common Stock that may be delivered pursuant to Awards granted
under the Plan, including the Optioned Shares and shares of Common
Stock relating to the Additional Options (as defined in Section 12
below), if applicable, and shall use commercially reasonable efforts to
have such Registration Statement declared and remain effective as soon
as practicable thereafter.
(b) Substantially concurrently with the execution of this
Stock Option, the Company and the Participant are executing a
Registration Rights Agreement (herein so called) relating to the
Purchased Shares (as such term is defined in the Employment Agreement),
Optioned Shares and the Additional Options, if applicable, together
with any securities issued or issuable with respect to the Optioned
Shares and the Additional Options, if applicable, by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise.
11. Adjustment of Number of Optioned Shares and Related Matters. The
number of shares of Common Stock covered by the Stock Option, and the Option
Prices thereof, shall be subject to adjustment in accordance with Articles 11 -
13 of the Plan.
12. Future Offerings.
(a) The Company may engage in one or more equity offerings
(each, an "OFFERING") at some time before or after the consummation of
an Acquisition Transaction. The timing of such Offerings would be
determined by the Board of Directors of the Company. With respect to
the first $60 million of additional equity capital raised by the
Company in connection with such Offerings, Participant will receive
additional Options under the Plan so that the number of shares of
common stock issuable under this Stock Option (and/or which have been
issued and sold under this Stock Option) plus such additional Options
(but not including the "PURCHASED SHARES" (as defined in the Employment
Agreement)) represents ten percent (10%) of the fully diluted ownership
of the Company following such Offerings (with such fully diluted
calculation including all shares issued and outstanding on the date
hereof, plus all shares reserved for issuance in connection with the
exercise of this Stock Option and the other Management Equity (as such
term is defined in the Employment Agreement) and the Purchased Shares
(to the extent actually purchased by Participant), but excluding any
Excluded Shares (as defined below)). All Options so issued ("ADDITIONAL
OPTIONS") would be subject to the same rights, conditions and
limitations as the Options granted herein, including, without
limitation, applicable vesting restrictions (which would treat all
Additional Options as if they were granted on the Date of Grant of the
Options granted herein), an exercise price equal to Three Dollars
($3.00) per share (subject to adjustments for stock splits, stock
dividends and the like) and applicable adjustments pursuant to Section
11 above. Upon the grant of any Additional Options pursuant to this
Section 12, the Company and the Participant would undertake to file a
Registration Statement on Form S-8 (or any successor form thereto) to
cover the additional shares of Common Stock issuable under the Plan
following the grant of the Additional Options and any related
amendments to the Plan. The granting of the Additional Options shall be
subject to all applicable legal requirements and the
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requirements of any stock exchange or inter-dealer quotation system on
which the Company's shares are listed or traded.
(b) For all purposes herein, "EXCLUDED SHARES" shall mean any
of the following:
(i) other than the Management Equity, securities
issuable or issued pursuant to equity compensation grants to employees,
consultants or directors pursuant to plans or other arrangements
approved by the Board of Directors of the Company;
(ii) securities issuable or issued in connection with
a bona fide business acquisition of or by the Company, whether by
merger, consolidation, sale of assets, sale or exchange of stock or
otherwise, provided that such issuance is approved by the Board of
Directors of the Company;
(iii) securities issuable or issued in connection
with lease lines, bank financings or similar transactions that are
primarily of a non-equity financing nature and are approved by the
Board of Directors of the Company;
(iv) securities issuable or issued in connection with
corporate or strategic partnering agreements or agreement to license
technology, provided that such issuance is approved by the Board of
Directors of the Company; and
(v) any other securities issuable or issued by the
Company for which an adjustment would otherwise be made pursuant to
Section 11 above.
13. Nonqualified Stock Option. The Stock Option shall not be treated as
an Incentive Stock Option.
14. Voting. The Participant, as record holder of some or all of the
Optioned Shares following exercise of this Stock Option, has the exclusive right
to vote, or consent with respect to, such Optioned Shares until such time as the
Optioned Shares are transferred in accordance with this Agreement; provided,
however, that this Section shall not create any voting right where the holders
of such Optioned Shares otherwise have no such right.
15. Community Property. Each spouse individually is bound by, and such
spouse's interest, if any, in any Optioned Shares is subject to, the terms of
this Agreement. Nothing in this Agreement shall create a community property
interest where none otherwise exists.
16. Dispute Resolution. All disputes and controversies of every kind
and nature between any parties hereto arising out of or in connection with this
Agreement or the transactions described herein as to the construction, validity,
interpretation or meaning, performance, non-performance, enforcement, operation
or breach, shall be submitted to arbitration pursuant to the arbitration
procedures set forth in the Employment Agreement.
17. Participant's Representations. Notwithstanding any of the
provisions hereof, the Participant hereby agrees that he will not exercise the
Stock Option granted hereby, and that the Company will not be obligated to issue
any shares to the Participant hereunder, if the exercise thereof or the issuance
of such shares shall constitute a violation by the Participant or the Company of
any provision of any law or regulation of any governmental authority or any rule
of any stock exchange or inter-dealer quotation system on which such
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shares are listed or traded, provided that the foregoing shall not be deemed to
be a limitation of any other obligation of the Company hereunder or under the
Employment Agreement.
18. Investment Representation. Unless the Common Stock is issued to him
in a transaction registered under applicable federal and state securities laws,
by his execution hereof, the Participant represents and warrants to the Company
that all Common Stock which may be purchased hereunder will be acquired by the
Participant for investment purposes for his own account and not with any intent
for resale or distribution in violation of federal or state securities laws.
Unless the Common Stock is issued to him in a transaction registered under the
applicable federal and state securities laws, all certificates issued with
respect to the Common Stock shall bear an appropriate restrictive investment
legend and shall be held indefinitely, unless they are subsequently registered
under the applicable federal and state securities laws or the Participant
obtains an opinion of counsel, in form and substance satisfactory to the Company
and its counsel, that such registration is not required. The Company hereby
agrees that from and after the time the Participant ceases to be an employee of
the Company, it will not apply any policy or procedure to preclude hedging
transactions with respect to the shares of the Company held by the Participant
and that any policy relating to trading in the Company's capital stock shall not
apply to the Participant.
19. Lock Up. In connection with an underwritten public offering of
Common Stock, upon the request of the Company or the principal underwriter
managing such public offering, no shares of Common Stock received by the
Participant under this Award Agreement may be sold, offered for sale or
otherwise disposed of without the prior written consent of the Company or such
underwriter, as the case may be, for up to one hundred eighty (180) days after
the effectiveness of the registration statement filed in connection with such
offering, if all of the Company's directors and officers agree to be similarly
bound, and releases from any and all lock-up agreements in connection with such
offering are granted on a pro-rata basis. This Section 19 shall cease to apply
to any such shares of Common Stock sold to the public pursuant to an effective
registration statement or an exemption from the registration requirements of the
Securities Act in a transaction that otherwise complied with the terms of this
Award Agreement and the Plan, and shall no longer apply six (6) months after the
Participant ceases to be an officer, director, or 5% or more stockholder of the
Company.
20. Participant's Acknowledgments. The Participant acknowledges receipt
of a copy of the Plan, which is annexed hereto, and represents that he or she is
familiar with the terms and provisions thereof.
21. Law Governing. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Delaware (excluding any
conflict of laws rule or principle of Delaware law that might refer the
governance, construction, or interpretation of this agreement to the laws of
another state).
22. No Right to Continue Service or Employment. Nothing herein shall be
construed to confer upon the Participant the right to continue in the employ or
to provide services to the Company or any Subsidiary, whether as an employee or
as a consultant or as an Outside Director, or interfere with or restrict in any
way the right of the Company or any Subsidiary to discharge the Participant as
an employee, consultant or Outside Director at any time; provided, that the
foregoing shall in no way limit any right to which Executive is entitled under
the Employment Agreement.
23. Legal Construction. In the event that any one or more of the terms,
provisions, or agreements that are contained in this Agreement shall be held by
a Court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect for any reason, the invalid, illegal, or unenforceable term,
provision, or agreement shall not affect any other term, provision, or agreement
that is contained in this Agreement and this Agreement shall be construed in all
respects as if the invalid, illegal, or unenforceable term, provision, or
agreement had never been contained herein.
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24. Covenants and Agreements as Independent Agreements. Each of the
covenants and agreements that is set forth in this Agreement shall be construed
as a covenant and agreement independent of any other provision of this
Agreement. The existence of any claim or cause of action of the Participant
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the covenants and
agreements that are set forth in this Agreement.
25. Entire Agreement. This Agreement, together with the Employment
Agreement and the other Transaction Agreements (as defined in the Employment
Agreement) executed concurrently herewith (the "OTHER AGREEMENTS"), supersede
any and all other prior understandings and agreements, either oral or in
writing, between the parties with respect to the subject matter hereof and
constitute the sole and only agreements between the parties with respect to the
said subject matter. All prior negotiations and agreements between the parties
with respect to the subject matter hereof are merged into this Agreement and the
Other Agreements. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, orally or otherwise, have
been made by any party or by anyone acting on behalf of any party, which are not
embodied in this Agreement, the Other Agreements and that any agreement,
statement or promise that is not contained in this Agreement, the Other
Agreements shall not be valid or binding or of any force or effect.
26. Parties Bound. The terms, provisions, and agreements that are
contained in this Agreement shall apply to, be binding upon, and inure to the
benefit of the parties and their respective heirs, executors, administrators,
legal representatives, and permitted successors and assigns, subject to the
limitation on assignment expressly set forth herein.
27. Modification. No change or modification of this Agreement shall be
valid or binding upon the parties unless the change or modification is in
writing and signed by the parties.
28. Headings. The headings that are used in this Agreement are used for
reference and convenience purposes only and do not constitute substantive
matters to be considered in construing the terms and provisions of this
Agreement.
29. Gender and Number. Words of any gender used in this Agreement shall
be held and construed to include any other gender, and words in the singular
number shall be held to include the plural, and vice versa, unless the context
requires otherwise.
30. Notice. Any notice required or permitted to be delivered hereunder
shall be deemed to be delivered only when actually received by the Company or by
the Participant, as the case may be, at the addresses set forth below, or at
such other addresses as they have theretofore specified by written notice
delivered in accordance herewith:
a. Notice to the Company shall be addressed and delivered as
follows:
Liberte Investors Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Chairman
▇▇▇▇▇▇▇▇▇: (▇▇▇) ▇▇▇-▇▇▇▇
b. Notice to the Participant shall be addressed and delivered
as set forth on the signature page.
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31. Tax Requirements. The Participant, upon exercise of any portion of
the Stock Option, shall be required to pay the Company the amount of all taxes
which the Company is required to withhold as a result of the exercise of the
Stock Option; such obligation to pay such taxes may be satisfied by any of the
following or any combination thereof: (a) the delivery of cash to the Company in
an amount that equals or exceeds (to avoid the issuance of fractional shares
under (c) below) the required tax withholding obligation of the Company; (b) if
the Company, in its sole discretion, so consents in writing, the actual delivery
by the exercising Participant to the Company of shares of Common Stock other
than (i) Restricted Stock or (ii) Common Stock that the Participant owns but has
acquired from the Company within six months prior to the date of exercise, which
shares so delivered have an aggregate Fair Market Value that equals or exceeds
(to avoid the issuance of fractional shares under (c) below) the required tax
withholding payment; or (c) the Company's withholding of a number of shares to
be delivered upon the exercise of the Stock Option, which shares so withheld
have an aggregate Fair Market Value that equals (but does not exceed) the
required tax withholding payment; provided that, shares cannot be withheld in
connection with the exercise of a Stock Option in excess of the minimum number
required for tax withholding, and to permit the Stock Option to be accounted for
as a fixed award. Any such withholding payments with respect to the exercise of
any portion of the Stock Option in cash or by actual delivery of shares of
Common Stock shall be required to be made within thirty (30) days after the
delivery to the Participant of any certificate representing the shares of Common
Stock acquired upon exercise of the Stock Option. The Company may, in its
discretion, withhold such taxes from any other remuneration paid by the Company
or a Subsidiary to the Participant.
32. Option Cash-out. The Company may only make provisions for a cash
payment to the holder of this Stock Option, as contemplated by Article 11 or
Section 12.3 of the Plan, in the event and subject to the consummation of the
sale of substantially all of the assets or capital stock of the Company for
cash.
33. Failure to Pay Option Price; Notice to Participant. Section 8.3(c)
of the Plan shall not apply to this Option unless the Participant receives from
the Company written notice of an event giving rise to the forfeiture right
described in Section 8.3(c) of the Plan and the Participant fails to cure such
event within five (5) days after his receipt of such notice.
* * * * * * * *
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IN WITNESS WHEREOF, the Company has caused this Award Agreement to be
executed by its duly authorized officer, and the Participant, to evidence his
consent and approval of all the terms hereof, has duly executed this Agreement,
as of the date specified in Section 1 hereof.
LIBERTE INVESTORS INC.:
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chairman
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Signature
Address: 1857 ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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