CHI ENERGY, INC.
1997 STOCK OPTION PLAN
1. ESTABLISHMENT OF PLAN; DEFINITIONS
1.1. Purpose. The CHI Energy, Inc. 1997 Stock Option Plan is intended to provide
an incentive to key employees of CHI Energy, Inc. (the "Corporation") who are in
a position to contribute materially to the long-term success of the Corporation,
to increase their interest in the Corporation's welfare, and to aid in
attracting and retaining employees of outstanding ability. This Plan replaces
the Consolidated Hydro, Inc. Amended and Restated 1992 Stock Option Plan, which
has been terminated and all options thereunder cancelled.
1.2. Definitions. Unless the context indicates otherwise,
the following terms shall have the meanings set forth below:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Cause" with respect to a Grantee shall mean any of the following
events:
(1) the Grantee has been convicted of, or plead guilty or nolo
contendere to, any crime or offense constituting a felony
under applicable law, including, without limitation, any act
of dishonesty such as embezzlement, theft or larceny;
(2) the Grantee's commission of a material act of fraud or
dishonesty against the Corporation or any of its Subsidiaries
or the Grantee's willful engaging in conduct which is
significantly injurious to the Corporation or any of its
Subsidiaries, monetarily or otherwise;
(3) the Grantee's abuse of illegal drugs and other controlled
substances or the Grantee's habitual intoxication, which
conduct continues after written demand for cessation of such
conduct is delivered to the Grantee by the Committee or the
Board; or
(4) the Grantee's willful or continuous neglect of or refusal to
perform the Grantee's duties or responsibilities with respect
to the Corporation or the Grantee's willful taking of actions
which directly and materially impair
the Grantee's ability to perform his duties and
responsibilities which continues after detailed written notice
thereof has been given to the Grantee.
(c) "Change in Control" shall mean the occurrence of any of the
following events:
(1) any "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) becomes, after the Effective
Date, the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Corporation representing more than 50% of the
Corporation's then outstanding securities eligible to vote for
the election of the Corporation's Board (the "Corporation
Voting Securities"); provided, that an event described in this
paragraph (1) shall not be a Change in Control if any of the
following becomes such a beneficial owner: (A) the Corporation
or any Subsidiary, (B) any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any
Subsidiary, (C) any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) any person
pursuant to a Nonqualifying Transaction (as defined in
paragraph (2)), or (E) Morgan - Stanley & Co. or Swiss Bank
Corporation or any entity controlled by, controlling or under
common control with either of such entities; or
(2) the consummation of a merger, consolidation or reorganization
of the Corporation (a "Business Combination"), unless,
following such Business Combination, the owners of the
Corporation Voting Securities immediately prior to such
Business Combination (or their affiliates) beneficially own,
directly or indirectly, 50% or more of the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of the directors of the
corporation resulting from such Business Combination (a
"Nonqualifying Transaction").
An Initial Public Offering shall not be treated as a Change in
Control hereunder.
-2-
(d) "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
(e) "Committee" shall mean the Compensation Committee of the Board or
other committee of the Board designated to administer the Plan.
(f) "Common Stock" shall mean authorized but unissued shares of the
Class A common stock, par value $.01 per share, of the Corporation,
as constituted on the Effective Date.
(g) "Disability" shall mean (i) with respect to a Nonqualified Stock
Option, a Grantee's physical or mental illness or injury as a result
of which the Grantee is unable to perform such Grantee's duties for
an aggregate of six or more months during any twelve-month period
and (ii) with respect to an Incentive Stock Option, a Grantee's
disability within the meaning of Code Section 22(e)(3).
(h) "Effective Date" shall have the same meaning as set forth in the
Plan of Reorganization.
(i) "Employee" shall mean any common law employee, including officers,
of the Corporation or any of its Subsidiaries.
(j) "Extraordinary Distribution" shall have the same meaning as set
forth in the Warrant Agreement.
(k) "Fair Market Value" shall mean (1) if the Common Stock is traded on
an established securities exchange or market, the average of the
mean between the high and low prices of the Common Stock for the
last trading date on which there was a sale of Common Stock
immediately preceding the date of determination of Fair Market
Value, as reported on the composite tape, and (2) if the Common
Stock is not so traded, the fair market value of the Common Stock as
determined by the Committee, in its sole and absolute discretion
acting in good faith, on the basis of a review of the facts and
circumstances at the time, which determination shall be final and
binding for all purpose of this Plan.
-3-
(l) "Grantee" shall mean an Employee granted an outstanding Stock
Option.
(m) "Incentive Stock Option" shall mean a Stock Option designed as an
incentive stock option, as such term is used in Section 422 of the
Code, at the time of grant under this Plan. To the extent any
Incentive Stock Option no longer qualifies as an Incentive Stock
Option it shall be treated as a Nonqualified Stock Option.
(n) "Nonqualified Stock Option" shall mean a Stock Option other than an
Incentive Stock Option.
(o) "Plan" shall mean this CHI Energy, Inc. 1997 Stock Option Plan as
set forth herein and as amended from time to time.
(p) "Plan of Reorganization" shall mean the plan of reorganization dated
[ ], 1997, under Chapter 11 of the United States Bankruptcy Code
with respect to the Corporation, as amended from time to time.
(q) "Public Offering" shall mean the consummation of the initial public
offering of Common Stock pursuant to a registration statement filed
under the Securities Act of 1933, as amended.
(r) "Stock Option" shall mean an option granted pursuant to the Plan to
purchase shares of Common Stock.
(s) "Stock Option Agreement" shall mean an option agreement executed
between the Corporation and a Grantee relating to the grant of a
Stock Option.
(t) "Stockholders' Agreement" shall mean the agreement, dated
___________, by and among the Corporation and each of the
stockholders of the Corporation, as amended from time to time.
(u) "Subsidiary" shall, with respect to the Corporation, have the
meaning ascribed to such term in Section 424 of the Code.
(v) "Ten Percent Shareholder" shall mean an Employee who at the time a
Stock Option is granted owns stock possessing more than ten percent
(10%) of the total combined voting power of all stock of the
Corporation or of its parent or Subsidiaries.
-4-
(w) "Warrant Agreement" shall mean the Series B Warrant Agreement, dated
, 1997, between the Corporation and , as Warrant Agent, as in effect
on the date hereof.
2. PLAN ADMINISTRATION AND DURATION
2.1. Administration of the Plan. The Plan shall be administered by the Committee
or by any officer to whom the Committee specifically delegates authority.
Subject to the express provisions of the Plan, the Committee shall have
authority in its sole discretion to interpret the Plan, to prescribe, amend and
rescind rules relating to the Plan, to select Employees eligible to receive
Stock Options, to designate the type of, and number of shares of Common Stock
subject to, Stock Options, to
determine the terms and provisions of Stock Option Agreements, and to make all
other determinations necessary or advisable for the administration of the Plan.
All decisions made by the Committee or any appropriately designated officer
shall be final and binding on the Company and Grantees.
2.2. Determination of Fair Market Value. In the event the Common Stock is not
traded on an established securities market or exchange, the Committee will as
soon as practicable following the Effective Date determine the Fair Market Value
that shall apply for all purposes of this Plan and for the 6-month period
following such determination; provided, however, that the Committee shall reset
such Fair Market Value during such 6-month period in the event of the occurrence
of any material event with respect to the Corporation. The determination of Fair
Market Value by the Committee shall be final and binding. Stock Options
outstanding as of such date shall not be affected or impaired by termination of
the Plan.
2.3. Duration of the Plan. The Plan shall become effective upon its approval by
the Board; provided, however, that no Stock Options shall be granted prior to
the Effective Date. Unless earlier terminated pursuant to Section 2.4 hereof,
this Plan shall terminate at the close of business on July 31, 2007. Stock
Options outstanding as of such date of termination shall not be adversely
affected or impaired by the termination of the Plan.
2.4. Amendment or Termination. At any time the Board may alter, amend, suspend,
discontinue or terminate this Plan; provided, however, that such action shall
not, without the consent of a Grantee, materially and adversely affect or
-5-
impair the rights of such Grantee with respect to Stock Options previously
granted or reduce the number of Stock Options previously granted to such Grantee
(other than pursuant to Section 4.2); and provided, further, that no amendment
shall be made without the approval of the stockholders of the Corporation if
such approval is required by applicable law, regulation or stock exchange rule.
3. STOCK OPTIONS
3.1. Common Stock Subject to the Plan. Subject to Section 4 hereof, the Common
Stock which is subject to outstanding but unexercised Stock Options or may be
issued or transferred pursuant to Stock Options shall not exceed 810,811 shares
in the aggregate. If a Stock Option expires and terminates for any reason, in
whole or in part, without being exercised, the number of shares of Common Stock
as to which such expired or terminated Stock Option shall not have been
exercised may again become available for the grant of Stock Options.
3.2. Granting of Stock Options. Each Stock Option shall be subject to such
terms and conditions consistent with the Plan as the Committee may impose from
time to time, subject to the limitations below.
(a) Eligibility. Only key Employees of the Corporation shall be eligible
to receive Stock Options under the Plan. The Committee shall have
the authority to grant to any such Employee one or more Incentive
Stock Options, Nonqualified Stock Options, or both types of Stock
Options; provided, however, that Incentive Stock Options may only be
granted to employees described in Treasury Regulation Section
1.421-7(h) of the Corporation or any Subsidiary within the meaning
of Section 424(f) on the grant date.
(b) Exercise Price. The exercise price of each share of Common Stock
subject to a Stock Option shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Stock Option
is granted, except as determined by the Committee in the case of any
Nonqualified Stock Option. In the case of an Incentive Stock Option,
the exercise price of each share of Common Stock subject to such
Stock Option granted to a Ten Percent Shareholder shall not be less
than 110% of the Fair Market Value of a share of Common Stock on the
date the Incentive Stock Option is granted.
-6-
(c) Period of Exercisability. The Committee, in its sole discretion,
shall determine whether any particular Stock Option shall become
exercisable in one or more installments, specify the installment
dates, and, within the limitations herein provided, determine the
duration of the period during which the Stock Option is exercisable.
No Stock Option shall be exercisable more than ten years from the
date the Stock Option was granted; provided, however, that an
Incentive Stock Option granted to a Ten Percent Shareholder shall
not be exercisable more than five years from the date the Incentive
Stock Option was granted.
(d) Grant of Options. The Committee shall determine and designate from
time to time those Employees who are to be granted Stock Options,
specify the number of shares of Common Stock subject to each Stock
Option and the exercise price of such Stock Option, and designate
the type of Stock Option (i.e., Incentive Stock Option or
Nonqualified Stock Option) being granted.
(e) Limitations on Incentive Stock Options. Notwithstanding other
provisions hereof, in the case of Incentive Stock Options, to the
extent that the aggregate Fair Market Value (determined as of the
time an Incentive Stock Option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by any Grantee during any calendar year (under all
incentive stock option plans of the Grantee's employer corporation
and its parent and subsidiary corporations) exceeds $100,000, the
later-granted of such Stock Options shall be treated as Nonqualified
Stock Options. Further, the Committee may make such other provisions
as may appear generally acceptable or desirable to the Committee or
necessary to qualify its grants of Incentive Stock Options under the
provisions of Section 422 of the Code.
(f) Additional Grants. The Committee may grant at any time new Stock
Options to an Employee who has previously received Stock Options or
other options, whether such prior Stock Options or other options are
still outstanding, have previously been exercised in whole or in
part, or are cancelled in
-7-
connection with the issuance of new Stock Options. The exercise
price of the new Stock Options may be established by the Committee
without regard to the existing Stock Options or other options.
(g) Committee Discretion. The Committee may prescribe, in the applicable
Stock Option Agreement, such other terms and conditions with respect
to the Stock Option granted thereby or Common Stock acquired
thereunder as it deems appropriate.
3.3. Exercise of Stock Options. The exercise price of a Stock Option shall be
payable on exercise, at the Grantee's option, (i) in cash or by certified or
cashier's check, bank draft or postal or express money order, (ii) by the
surrender of Common Stock then owned by the Grantee (to the extent permitted by
the Committee), and (iii) partially in accordance with clause (i) and partially
in accordance with clause (ii) of this Section 3.3. Shares of Common Stock so
surrendered in accordance with clause (ii) or (iii) shall be valued at the Fair
Market Value thereof on the date of exercise, surrender of such Common Stock to
be evidenced by delivery of the certificate(s) representing such shares in such
manner, and endorsed in such form, or accompanied by stock powers endorsed in
such form, as the Committee may determine. No fractional shares of Common Stock
shall be permitted to be surrendered.
3.4. Termination of Employment.
(a) Disability or Retirement. If a Grantee's employment with the
Corporation or with a Subsidiary is terminated by reason of
Disability or pursuant to a then existing Corporation or Subsidiary
retirement policy ("Retirement"), any Stock Option held by the
Grantee on the date of such termination of employment shall (i) to
the extent exercisable on such date, remain exercisable until the
earlier of the date on which such Stock Option would otherwise
expire or the first anniversary of the Grantee's last date of
employment, and (ii) to the extent not exercisable on such date, be
immediately forfeited on the Grantee's last date of employment.
(b) Death. If a Grantee's employment with the Corporation or with a
Subsidiary is terminated by reason of death, the representative of
the estate or beneficiaries thereof to whom the Stock Option has
been transferred shall have the right to exercise any then
outstanding and exercisable Stock Options
-8-
in whole or in part until the first anniversary of the Grantee's
death. If a Grantee dies after termination of employment and prior
to the expiration of the Stock Options held by such Grantee, without
having fully exercised any then exercisable Stock Options, the
representative of the estate or beneficiaries thereof to whom the
Stock Option has been transferred shall have the right to exercise
such options in whole or in part until the first anniversary of the
Grantee's death. The number of shares of Common Stock in respect of
which a Stock Option may be exercised after a Grantee's death shall
be the number of shares in respect of which such Stock Option could
be exercised as of the date of the Grantee's death or termination,
whichever occurs first. Notwithstanding the foregoing, in no event
may the period for exercising a Stock Option extend beyond the date
on which such Stock Option would otherwise have expired.
(c) Cause. If a Grantee's employment with the Corporation or a
Subsidiary is terminated and such termination is for Cause or,
within 90 days following such termination, the Board determines
(after written notice to the Grantee describing the reasons for the
Board's determination) that the Grantee could have been terminated
for Cause under paragraph (1) or (2) of Section 1.2(b), all Stock
Options held by the Grantee on the date of termination of employment
shall be immediately forfeited as of such date.
(d) Other Reasons. If a Grantee's employment with the Corporation and
its Subsidiaries is terminated for any reason other than as
described in Paragraphs (a) through (c) above, except as specified
by the Committee in an applicable Stock Option Agreement, any Stock
Option held by the Grantee shall (i) to the extent exercisable on
such date, remain exercisable until the earlier of the date on which
such Stock Option would otherwise expire or the 120th day following
the Grantee's last date of employment, and (ii) to the extent not
exercisable on such date, be immediately forfeited on the Grantee's
last date of employment.
(e) Committee Discretion to Accelerate. The Committee
may, in its sole discretion, provide that any or all
-9-
unexercisable Stock Options held by a Grantee on the date of
termination of employment shall become immediately exercisable and
remain exercisable until a date that occurs on or prior to the date
the Stock Option would otherwise expire.
3.5. Change in Control. If there is a Change in Control of the Corporation, all
outstanding Stock Options shall become immediately vested and exercisable.
3.6. Exercise Prior to Public Offering. In the event a Stock Option is exercised
prior to a Public Offering and (a) such exercise occurs subsequent to the
Grantee's termination of employment from the Corporation and its Subsidiaries
for Cause or pursuant to a voluntary termination or (b) such exercise occurs
prior to the Grantee's termination of employment for Cause or pursuant to a
voluntary termination, but the Grantee does not dispose of the shares of Common
Stock received upon such exercise prior to his termination of employment, the
Corporation shall have the right during the thirty-day period following the
later to occur of such Grantee's exercise of the Option or termination of
employment to purchase for cash the Common Stock received upon such exercise at
a price equal to Fair Market Value. Notwithstanding anything else contained in
this Section 3.6, upon the occurrence of a Public Offering any right pursuant to
this Section 3.6 to purchase Common Stock received upon the exercise of a Stock
Option shall terminate, and no such right may be exercised during the 90-day
period prior to the scheduled date of a Public Offering.
3.7. Cancellation of Stock Options; Return of Value. The Board may, in its
reasonable discretion, in the event a Grantee Option Agreement or in any other
agreement with the Corporation, cancel any Stock Option in whole or in part,
whether or not vested, and may require the Grantee to return to the Corporation
the gain with respect to any Stock Option exercise within the six-month period
prior to the Board's action. The determination of whether a Grantee has violated
a non-competition provision shall be determined by the Board in good faith and
in its reasonable discretion. This Section 3.7 shall not apply during the
two-year period immediately following a Change in Control.
4. GENERAL PROVISIONS
4.1. Maximum Number of Underlying Shares. The maximum aggregate number of shares
of Common Stock underlying Stock Options that may be granted to any Participant
during the term of the Plan shall be 350,000, subject to adjustment as provided
in
-10-
this Section 4. For purposes of the preceding sentence, stock options that are
cancelled or repriced shall continue to be counted in determining the number of
shares of Common Stock underlying Stock Options granted to a Grantee.
4.2. Adjustment Provisions.
(a) If the shares of Common Stock outstanding are changed in number or
class by reason of a split-up, merger, consolidation,
reorganization, reclassification, recapitalization, or any capital
adjustment, including a stock dividend, or if any distribution is
made to the holders of common stock other than a regular cash
dividend, then
(i) the aggregate number and class of shares or other securities that may
be issued or transferred pursuant to Sections 2.1 and 4.1 hereof,
(ii) the number and class of shares or other securities which are subject
to outstanding Stock Options, and
(iii) the exercise price to be paid per share under outstanding Stock
Options,
shall be adjusted as provided hereinafter.
(b) Adjustments under this Section 4.2 shall be made in
an equitable manner by the Committee to preserve the
value of Stock Options, whose determination as to
what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive,
provided that adjustments affecting Incentive Stock
Options shall be made in a manner consistent with
the requirements of Sections 422 and 424 of the
Code. Notwithstanding the foregoing, the operation
of this Section 4.2 should be consistent with the
operation of Section 6 of the Warrant Agreement.
(c) Notwithstanding anything to the contrary in this Section 4.2, if the
Corporation shall pay or distribute an Extraordinary Distribution in
cash or other property, the exercise price of outstanding Stock
Options shall be adjusted downward in an amount equal to the per
share (computed on the basis of the number of shares then
outstanding) dollar
-11-
amount of the Extraordinary Distribution (or shall be adjusted by
the Committee in conjunction with an adjustment to the number of
shares subject to such Stock Options in order to preserve the value
of such Stock Options).
4.3. General.
(a) Each Stock Option shall be evidenced by a written instrument
containing such terms and conditions, not inconsistent with this
Plan, as the Committee shall approve.
(b) The granting of a Stock Option in any year shall not give the
Grantee any right to similar grants in future years or any right to
be retained in the employ of the Corporation, and all Employees
shall remain subject to discharge to the same extent as if the Plan
were not in effect.
(c) No Employee, and no beneficiary or other person - claiming under or
through the Employee, shall have any right, title or interest by
reason of any Stock Option to any particular assets of the
Corporation, or any shares of Common Stock allocated or reserved for
the purposes of the Plan or subject to any Stock Option except as
set forth herein. The Corporation shall not be required to establish
any fund or make any other segregation of assets to satisfy its
obligations under this Plan.
(d) No right under the plan shall be subject to transfer, anticipation,
sale, assignment, pledge, encumbrance, or charge, except by will or
by the laws of descent and distribution, and a Stock Option shall be
exercisable during the Grantee's lifetime only by the Grantee or, in
the case of the Grantee's Disability or incapacity, his guardian or
legal representative.
(e) Notwithstanding any other provision of this Plan or agreements made
pursuant thereto, the Corporation's obligation to issue or deliver
any certificate or certificates for shares of Common Stock under a
Stock Option, and the transferability of Common Stock acquired by
exercise of a Stock Option, shall be subject to all of the following
conditions:
-12-
(i) Any registration or other qualification of such shares under
any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which
the Board shall, in its absolute discretion upon the advice of
counsel, deem necessary or advisable;
(ii) The obtaining of any other consent, approval, or permit from
any state or federal governmental agency which the Board
shall, in good faith upon the advice of counsel, determine to
be necessary or advisable;
(iii) Compliance with the terms and provisions of the Stockholders
Agreement, if and to the extent such agreement is still in
full force and effect; and
(iv) Each stock certificate issued pursuant to the exercise of a
Stock Option shall bear a legend substantially in the
following form, in addition to any legends required by the
Stockholders Agreement:
"The transferability of this certificate and the shares of Common
Stock represented hereby are subject to restrictions, terms and
conditions contained in the CHI Energy, Inc. 1997 Stock Option Plan
and that certain Stockholders' Agreement, dated , 1997, which may be
amended from time to time. Copies of the Plan and the Stockholders'
Agreement are on file in the office of the Secretary of CHI Energy,
Inc."
(f) All payments to Grantees or to their legal represen- tatives shall
be subject to any applicable tax, community property, or other
statutes or regulations of the United States or of any state having
jurisdiction thereof. The Grantee may be required to pay to the
Corporation the amount of any withholding taxes which the
Corporation is required to withhold with respect to a Stock Option
or its exercise. In the event that such payment is not made when
due, the Corporation shall have the right
-13-
to deduct, to the extent permitted by law, from any payment of any
kind otherwise due to such person all or part of the amount required
to be withheld.
(g) In the case of a grant of a Stock Option to any Em- ployee of a
Subsidiary of the Corporation, the Corporation may, if the Committee
so directs, issue or transfer the shares, if any, covered by the
Stock Option to the Subsidiary, for such lawful consideration as the
Committee may specify, upon the condition or understanding that the
Subsidiary will transfer the shares to the Employee in accordance
with the terms of the Stock Option specified by the Committee
pursuant to the provisions of the Plan.
(h) A Grantee entitled to Common Stock as a result of the exercise of a
Stock Option shall not be deemed for any purpose to be, or have
rights as, a share- holder of the Corporation by virtue of such
exercise, except to the extent a stock certificate is issued
therefor and then only from the date such certificate is issued.
Except as specifically provided for herein, no adjustments shall be
made for dividends or distributions or other rights for which the
record date is prior to the date such stock certificate is issued.
(i) This Plan will be governed by and construed in accordance with the
laws of the State of Delaware, without regard to its conflicts of
laws principles.
-14-
EXHIBIT A
---------
NONQUALIFIED STOCK OPTION AGREEMENT
-----------------------------------
AGREEMENT made on __________ ____, 1997, by and between CHI Energy,
Inc., a ________ corporation (the "Corporation") and _______________ (the
"Optionee").
WHEREAS, the Corporation has adopted the CHI Energy,
Inc. 1997 Stock Option Plan (the "Plan"); and
WHEREAS, the Corporation desires to grant to the Optionee an option
under the Plan to acquire an aggregate of __________ shares of the Corporation's
Class A common stock (the "Common Stock"), on the terms set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Plan.
2. Grant of Option. The Optionee is hereby granted, effective upon
the consummation of the Plan of Reorganization (the "Grant Date"), a
nonqualified stock option (the "Option") to purchase an aggregate of ________
shares of Common Stock, pursuant to the terms of this Agreement and the
provisions of the Plan.
3. Option Price. The exercise price of the Option shall be $10.00
per share of Common Stock issuable thereunder.
4. Conditions to Exercisability. (a) The Option shall be exercisable
on the Grant Date as to 33.33% of the shares initially covered thereby and as to
as to an additional 22.22% of such shares on December 31 of each of 1998, 1999
and 2000.
(b) The Option shall become exercisable in full upon a Change
in Control of the Corporation.
(c) Upon the Optionee's termination of employment, the Option
shall be exercisable solely to the extent of its exercisability as of the date
of termination.
5. Option Period. The Option shall have a 7-year term, and shall
expire upon the first to occur of: (a) the seventh anniversary of the Grant
Date; (b) the Optionee's termination of employment with the Corporation or any
Subsidiary
for Cause (or subsequent determination of Cause as set forth in Section 3.4(c)
of the Plan); (c) 120 days following termination of employment with the
Corporation and its Subsidiaries for any reason other than death, Disability,
Retirement or Cause; and (d) 1 year after termination of employment due to
death, Disability, or Retirement. Notwithstanding the foregoing, if the
Optionee's death occurs following the Optionee's termination of employment, the
Option shall remain exercisable to the extent exercisable as of the date of
death until the first anniversary of such death, unless the term of the Option
otherwise expires.
6. Exercise of Option. (a) The Option shall be exercised in the
following manner: the Optionee, or the person or persons having the right to
exercise the Option upon the death or Disability of the Optionee, shall deliver
to the Corporation written notice, in the form attached as Exhibit A hereto,
specifying the number of shares of Common Stock elected to be purchased. The
Optionee (or such other person) must include with such notice full payment of
the exercise price for the Common Stock being purchased pursuant to such notice.
Payment of the exercise price must be made in cash, by certified or cashier's
check, bank draft, or postal or express money order or, if permitted by the
Committee, in shares of Common Stock then owned by the Optionee having a Fair
Market Value on the date of exercise equal to such exercise price, or in a
combination thereof.
(b) As a condition of exercise of the Option, the Optionee will, no
later than the date of exercise, pay to the Corporation or make arrangements
satisfactory to the Committee regarding payment of any federal, state or local
taxes of any kind required by law to be withheld upon the exercise of the
Option. Such payment may be made by the Optionee, if permitted by the Committee,
with shares of Common Stock (whether previously owned by the Optionee or
issuable upon the exercise of the Option) having a Fair Market Value equal to
the amount of such taxes. In the event the Optionee does not pay to the
Corporation any such taxes, or make arrangements satisfactory to the Committee
regarding the payment of such taxes, the Committee shall be permitted to deduct,
to the extent permitted by law, any such taxes required to be withheld upon the
exercise of the Option award from any payment of any kind due to the Optionee.
(c) If the Plan or any law, regulation or interpretation requires
the Corporation to take any action regarding the Common Stock, before the
Corporation issues certificates for the Common Stock being purchased, the
Corporation may
-2-
delay delivering the certificates for the Common Stock for the period necessary
to take such action, as described in the Plan. The certificate or certificates
representing the Common Stock acquired pursuant to the Option may bear a legend
restricting the transfer of such Common Stock, as described in the Plan, and the
Corporation may impose stop transfer instructions to implement such
restrictions, if applicable.
(d) The Optionee will not be deemed to be a holder of any shares
pursuant to exercise of the Option until the date of the issuance of a stock
certificate to the Optionee for such shares of Common Stock and until the shares
of Common Stock are paid for in full.
(e) The Optionee acknowledges receipt of a copy of the Stockholders'
Agreement and hereby agrees that as a condition to receiving Common Stock
pursuant to the exercise of the Option, the Optionee shall upon exercise of the
Option execute, and become a party to, the Stockholders' Agreement, as amended
from time to time, and be bound by the obligations of and entitled to the rights
afforded stockholders thereunder.
(f) The Corporation hereby agrees that in the event of a proposed
"Tag-Along Sale" (as defined in the Stockholders' Agreement), it will comply
with the terms of Section 3.3(c) of the Stockholders' Agreement with respect to
the Optionee to the extent such Section 3.3(c) is applicable to the Optionee.
7. Transferability. Except as provided below, the option rights
herein are personal to the Optionee and shall not be subject to transfer,
anticipation, sale, assignment, pledge, encumbrance or charge, except by will or
by the laws of descent and distribution, and may be exercised during the
Optionee's lifetime only by the Optionee or in the case of the Optionee's
Disability or incapacity, his guardian or legal representative. Upon notifying
the Committee, the Optionee may transfer all or part of the Option to the
Optionee's spouse, children or grandchildren ("Immediate Family), any trust
solely for the benefit of the Optionee's Immediate Family, or any partnership
whose only partners are members of the Optionee's Immediate Family. Any such
transferee shall remain subject to all of the terms and conditions applicable to
such Option prior to such transfer, and may not transfer such Option or any
interests in any such trust or partnership other than by will or by the laws of
descent and distribution or to the Optionee's Immediate Family.
-3-
8. Exercise Prior to Public Offering. In the event the Option is
exercised prior to a Public Offering and (a) such exercise occurs subsequent to
the Optionee's termination of employment for Cause or pursuant to a voluntary
termination or (b) such exercise occurs prior to the Optionee's termination of
employment for Cause or pursuant to a voluntary termination, but the Optionee
does not dispose of the shares of Common Stock received upon such exercise prior
to his termination of employment, the Corporation shall have the right during
the 30-day period following the later to occur of such Optionee's exercise of
the Option or termination of employment to purchase for cash the Common Stock
received upon such exercise at a price equal to Fair Market Value.
Notwithstanding anything else contained in this Section 8, upon the occurrence
of a Public Offering any right pursuant to this Section 8 to purchase Common
Stock received upon the exercise of a Stock Option shall terminate, and no such
right may be exercised during the 90-day period prior to the scheduled date of a
Public Offering.
9. Cancellation of Stock Options; Return of Value. The Board may, in
its reasonable discretion, in the event the Optionee breaches Section 10, cancel
the Option in whole or in part, whether or not vested, and may require the
Optionee to return to the Corporation the gain with respect to any exercise of
the Option within the 6-month period prior to the Board's action. The
determination of whether the Optionee has breached Section 10 shall be
determined by the Board in good faith and in its reasonable discretion. This
Section 9 shall not apply during the 2-year period immediately following a
Change in Control.
10. Non-Competiton. During the Optionee's employment with the
Corporation and for 1 year following the Option- ee's termination of employment
with the Corporation, the Optionee shall not engage, directly or indirectly,
alone, in association with or as a shareholder, principal, agent, partner,
member, officer, director, employee or consultant of any person, firm or entity,
in any business within the United States or Canada in competition with any part
of the business being conducted by the Corporation or its subsidiaries;
provided, however, that Executive's ownership of less than 2 percent of the
outstanding stock of a publicly traded corporation (other than a corporation
engaged primarily in the business of developing or operating hydro-electric
projects) shall not by itself be deemed to constitute such competition. In the
event the Optionee has entered into any other non-competition agreements with
the Corporation (including any provisions in an employment agreement), the
non-competition and non-
-4-
solicitation covenants of such agreement shall be substituted for the
requirements of this Section 10 and a breach of such covenants shall be treated
as a breach of this Section 10 for purposes of enforcing Section 9 of this
Agreement.
11. Subject to Plan Provisions. The option rights herein granted are
in all respects subject to the provisions set forth in the Plan (including, but
not limited to, the adjustment provisions of Section 4.2 of the Plan) to the
same extent and with the same effect as if set forth fully herein, and to such
actions relating to the Plan as may be taken from time to time by the Committee.
12. No Employment Rights. The granting of the option rights
hereunder shall not be construed as giving to the Optionee any right to be
retained in the employ of the Corporation or any Subsidiary or affiliate of the
Corporation.
13. Representations. (a) The Corporation represents and warrants
that this Agreement has been authorized by all necessary corporate action of the
Corporation and is a valid and binding agreement of the Corporation enforceable
against them in accordance with its terms.
(b) The Optionee represents and warrants that the Optionee is
not a party to any agreement or instrument which would prevent him from entering
into or performing his duties in any way under this Agreement.
14. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into by them with respect thereto. The Optionee represents
that, in executing this Agreement, he does not rely and has not relied upon any
representation or statement not set forth herein made by the Corporation with
regard to the subject matter, bases or effect of this Agreement or otherwise.
15. Amendment or Modification, Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing and, signed by the Optionee and by a duly authorized officer of the
Corporation. No waiver by any party hereto of any breach by another party hereto
of any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar condition or provision
at the same time, any prior time or any subsequent time.
-5-
16. Notices. Any notice to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or telecopy
or registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Optionee at:
To the Corporation at:
680 Washington Boulevard
Stamford, CT 06901
Attention: President
Any notice delivered personally or by courier under this Section 16
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail postage prepaid, return receipt requested, shall be
deemed given on the date telecopied or mailed.
17. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstance shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstance other than those to which it is
so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
18. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
19. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Delaware, without regard to its
conflicts of laws principles.
20. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be con-
-6-
strued by reference to the heading of any section or paragraph.
21. Construction. This Agreement is made under and subject to the
provisions of the Plan, and all of the provisions of the Plan are hereby
incorporated herein as provisions of this Agreement. If there is a conflict
between the provisions of this Agreement and the provisions of the Plan, the
provisions of the Plan will govern. By signing this Agreement, the Optionee
confirms that he has received a copy of the Plan and has had an opportunity to
review the contents thereof.
22. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
By: ______________________
Name:
Title:
- - - ---------------------------------
[Optionee]
-7-
EXHIBIT B
---------
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
AGREEMENT made on __________ ____, 1997, by and between CHI Energy,
Inc., a ________ corporation (the "Corporation") and _______________ (the
"Optionee").
WHEREAS, the Corporation has adopted the CHI Energy,
Inc. 1997 Stock Option Plan (the "Plan"); and
WHEREAS, the Corporation desires to grant to the Optionee an option
under the Plan to acquire an aggregate of __________ shares of the Corporation's
Class A common stock (the "Common Stock"), on the terms set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the meaning set forth in the Plan.
2. Grant of Option. The Optionee is hereby granted, effective upon
the consummation of the Plan of Reorganization (the "Grant Date"), an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Option"), to purchase an aggregate of 20,000 shares of Common Stock,
pursuant to the terms of this Agreement and the provisions of the Plan.
3. Option Price. The exercise price of the Option shall be $10.00
per share of Common Stock issuable thereunder.
4. Conditions to Exercisability. (a) The Option shall be exercisable
on the Grant Date as to 33.33% of the shares initially covered thereby and as to
as to an additional 22.22% of such shares on December 31 of each of 1998, 1999
and 2000.
(b) The Option shall become exercisable in full upon a Change
in Control of the Corporation.
(c) Upon the Optionee's termination of employment, the Option
shall be exercisable solely to the extent of its exercisability as of the date
of termination.
5. Option Period. The Option shall have a 7-year term, and shall
expire upon the first to occur of: (a) the seventh anniversary of the Grant
Date; (b) the Optionee's ter-
mination of employment with the Corporation or any Subsidiary for Cause (or
subsequent determination of Cause as set forth in Section 3.4(c) of the Plan);
(c) 120 days following termination of employment with the Corporation and its
Subsidiaries for any reason other than death, Disability, Retirement or Cause;
and (d) 1 year after termination of employment due to death, Disability, or
Retirement. Notwithstanding the foregoing, if the Optionee's death occurs
following the Optionee's termination of employment, the Option shall remain
exercisable to the extent exercisable as of the date of death until the first
anniversary of such death, unless the term of the Option otherwise expires. If
the Optionee exercises the Option following termination of employment at a time
when the Option is no longer eligible for treatment as an incentive stock
option, the Option shall be treated as a nonqualified stock option.
6. Exercise of Option. (a) The Option shall be exercised in the
following manner: the Optionee, or the person or persons having the right to
exercise the Option upon the death or Disability of the Optionee, shall deliver
to the Corporation written notice, in the form attached as Exhibit A hereto,
specifying the number of shares of Common Stock elected to be purchased. The
Optionee (or such other person) must include with such notice full payment of
the exercise price for the Common Stock being purchased pursuant to such notice.
Payment of the exercise price must be made in cash, by certified or cashier's
check, bank draft, or postal or express money order or, if permitted by the
Committee, in shares of Common Stock then owned by the Optionee having a Fair
Market Value on the date of exercise equal to such exercise price, or in a
combination thereof.
(b) If the Plan or any law, regulation or interpretation requires
the Corporation to take any action regarding the Common Stock, before the
Corporation issues certificates for the Common Stock being purchased, the
Corporation may delay delivering the certificates for the Common Stock for the
period necessary to take such action, as described in the Plan. The certificate
or certificates representing the Common Stock acquired pursuant to the Option
may bear a legend restricting the transfer of such Common Stock, as described in
the Plan, and the Corporation may impose stop transfer instructions to implement
such restrictions, if applicable.
(c) The Optionee will not be deemed to be a holder of any shares
pursuant to exercise of the Option until the date of the issuance of a stock
certificate to the Optionee
-2-
for such shares of Common Stock and until the shares of Common Stock are paid
for in full.
(d) The Optionee acknowledges receipt of a copy of the Stockholders'
Agreement and hereby agrees that as a condition to receiving Common Stock
pursuant to the exercise of the Option, the Optionee shall upon exercise of the
Option execute, and become a party to, the Stockholders' Agreement, as amended
from time to time, and be bound by the obligations of and entitled to the rights
afforded stockholders thereunder.
(e) The Corporation hereby agrees that in the event of a proposed
"Tag-Along Sale" (as defined in the Stockholders' Agreement), it will comply
with the terms of Section 3.3(c) of the Stockholders' Agreement with respect to
the Optionee to the extent such Section 3.3(c) is applicable to the Optionee.
7. Transferability. The option rights herein are personal to the
Optionee and shall not be subject to transfer, anticipation, sale, assignment,
pledge, encumbrance or charge, except by will or by the laws of descent and
distribution, and may be exercised during the Optionee's lifetime only by the
Optionee or in the case of the Optionee's Disability or inca- pacity, his
guardian or legal representative.
8. Exercise Prior to Public Offering. In the event the Option is
exercised prior to a Public Offering and (a) such exercise occurs subsequent to
the Optionee's termination of employment for Cause or pursuant to a voluntary
termination or (b) such exercise occurs prior to the Optionee's termination of
employment for Cause or pursuant to a voluntary termination, but the Optionee
does not dispose of the shares of Common Stock received upon such exercise prior
to his termination of employment, the Corporation shall have the right during
the 30-day period following the later to occur of such Optionee's exercise of
the Option or termination of employment to purchase for cash the Common Stock
received upon such exercise at a price equal to Fair Market Value.
Notwithstanding anything else contained in this Section 8, upon the occurrence
of a Public Offering any right pursuant to this Section 8 to purchase Common
Stock received upon the exercise of a Stock Option shall terminate, and no such
right may be exercised during the 90-day period prior to the scheduled date of a
Public Offering.
9. Cancellation of Stock Options; Return of Value. The Board may, in
its reasonable discretion, in the event the
-3-
Optionee breaches Section 10, cancel the Option in whole or in part, whether or
not vested, and may require the Optionee to return to the Corporation the gain
with respect to any exercise of the Option within the 6-month period prior to
the Board's action. The determination of whether the Optionee has breached
Section 10 shall be determined by the Board in good faith and in its reasonable
discretion. This Section 9 shall not apply during the 2-year period immediately
following a Change in Control.
10. Non-Competiton. During the Optionee's employment with the
Corporation and for 1 year following the Option- ee's termination of employment
with the Corporation, the Optionee shall not engage, directly or indirectly,
alone, in association with or as a shareholder, principal, agent, partner,
member, officer, director, employee or consultant of any person, firm or entity,
in any business within the United States or Canada in competition with any part
of the business being conducted by the Corporation or its subsidiaries;
provided, however, that Executive's ownership of less than 2 percent of the
outstanding stock of a publicly traded corporation (other than a corporation
engaged primarily in the business of developing or operating hydro-electric
projects) shall not by itself be deemed to constitute such competition. In the
event the Optionee has entered into any other non-competition agreements with
the Corporation (including any provisions in an employment agreement), the
non-competition and non- solicitation covenants of such agreement shall be
substituted for the requirements of this Section 10 and a breach of such
covenants shall be treated as a breach of this Section 10 for purposes of
enforcing Section 9 of this Agreement.
11. Subject to Plan Provisions. The option rights herein granted are
in all respects subject to the provisions set forth in the Plan (including, but
not limited to, the adjustment provisions of Section 4.2 of the Plan) to the
same extent and with the same effect as if set forth fully herein, and to such
actions relating to the Plan as may be taken from time to time by the Committee.
12. No Employment Rights. The granting of the option rights
hereunder shall not be construed as giving to the Optionee any right to be
retained in the employ of the Corporation or any Subsidiary or affiliate of the
Corporation.
13. Representations. (a) The Corporation represents and warrants
that this Agreement has been authorized by all necessary corporate action of the
Corporation and is a
-4-
valid and binding agreement of the Corporation enforceable against them in
accordance with its terms.
(b) The Optionee represents and warrants that the Optionee is
not a party to any agreement or instrument which would prevent him from entering
into or performing his duties in any way under this Agreement.
14. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into by them with respect thereto. The Optionee represents
that, in executing this Agreement, he does not rely and has not relied upon any
representation or statement not set forth herein made by the Corporation with
regard to the subject matter, bases or effect of this Agreement or otherwise.
15. Amendment or Modification, Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is agreed to
in writing and, signed by the Optionee and by a duly authorized officer of the
Corporation. No waiver by any party hereto of any breach by another party hereto
of any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar condition or provision
at the same time, any prior time or any subsequent time.
16. Notices. Any notice to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or telecopy
or registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice of hereunder in writing:
To Optionee at:
To the Corporation at:
680 Washington Boulevard
Stamford, CT 06901
Attention: President
-5-
Any notice delivered personally or by courier under this Section 16
shall be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail postage prepaid, return receipt requested, shall be
deemed given on the date telecopied or mailed.
17. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstance shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstance other than those to which it is
so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
18. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
19. Early Dispositions. The Optionee agrees, as partial
consideration for the designation of this Option as an incentive stock option
under Section 422 of the Code, to notify the Company in writing within thirty
(30) days of any disposition of any shares acquired by exercise of this Option
if such disposition occurs within two (2) years from the Grant Date or within
one (1) year from the date the Optionee purchased such shares by exercise of
this Option.
20. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Delaware, without regard to its
conflicts of laws principles.
21. Headings. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
22. Construction. This Agreement is made under and subject to the
provisions of the Plan, and all of the provisions of the Plan are hereby
incorporated herein as provisions of this Agreement. If there is a conflict
between the provisions of this Agreement and the provisions of the Plan, the
provisions of the Plan will govern. By signing this Agreement, the Optionee
confirms that he has received a copy
-6-
of the Plan and has had an opportunity to review the contents thereof.
23. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
By: ______________________
Name:
Title:
- - - ---------------------------------
[Optionee]
-8-