EXHIBIT 10.5
AVERY COMMUNICATIONS, INC.
STOCK OPTION
FOR
925,000 SHARES
OF
COMMON STOCK, PAR VALUE $0.01 PER SHARE
____________________________________________________________
MARK NIELSEN
____________________________________________________________
DECEMBER 1, 1998
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement (this "Agreement") is entered
into between Avery Communications, Inc., a Delaware corporation (the "Company"),
and Mark Nielsen (the "Optionee") as of the December 1, 1998. This Agreement is
the Stock Option to which reference is made in that certain Employment Agreement
(the "Employment Agreement") dated as of December 1, 1998, by and between the
Company and the Optionee. All terms defined in the Employment Agreement are used
in this Agreement with the same meanings as assigned to such terms in the
Employment Agreement unless otherwise defined herein or the context clearly
otherwise requires.
In consideration of the mutual promises and covenants made herein, the
parties hereby agree as follows:
1. GRANT OF OPTION. The Company grants to the Optionee an option (this
"Option") to purchase from the Company all or any part of a total of 925,000
shares (collectively, the "Option Shares") of the Company's Common Stock (as
hereinafter defined), par value $0.01 per share (the "Common Stock"), at an
initial purchase price of $2.00 per share (the "Initial Purchase Price"). The
Initial Purchase Price is subject to adjustment as hereinafter provided. The
Initial Purchase Price at any time in effect or, in the case of any such
adjustment, such Initial Purchase Price as most recently so adjusted, is herein
called the "Current Purchase Price." The Option is granted as of December 1,
1998.
2. CHARACTER OF OPTION. This Option is not an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
3. TERM. This Option will expire at 5:00 p.m., Chicago time, on
November 30, 2008 (the "Option Termination Date").
4. CONDITIONS PRECEDENT. The Company will not issue or deliver any
certificate for Option Shares pursuant to the exercise of this Option prior to
fulfillment of all of the following conditions:
(a) The admission of the Option Shares to listing on all stock
exchanges on which the Common Stock is then listed, unless the Committee (as
hereinafter defined) determines in its sole discretion that such listing is
neither necessary nor advisable;
(b) The completion of any registration or other qualification
of the sale of the Option Shares under any federal or state law or under the
rulings or regulations of the Securities and Exchange Commission or any other
governmental regulatory body that the Committee in its sole discretion deems
necessary or advisable; and
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency that the Committee in its sole discretion
determines to be necessary or advisable.
Anything in this Agreement to the contrary notwithstanding, if the Company is
unable to issue or deliver certificates for Option Shares for any reason set
forth in (a), (b) or (c) above, then the period of time within which this Option
may be exercised under the applicable provisions of Sections 3 and 10 hereof
shall, with respect to all Option Shares for which certificates cannot be so
issued or delivered ("Applicable Option Shares"), be extended by an interval of
time equal to the interval of time elapsing between the date of the Optionee's
exercise made in respect of those Applicable Option Shares and the date that
certificates evidencing those Applicable Option Shares are issued and delivered
to the Optionee.
5. VESTING. Subject to the provisions of this Agreement, the Option may
be exercised according to the following schedule:
NUMBER OF OPTION SHARES DATE OF VESTING
----------------------- ---------------
462,500 December 1, 1998
231,250 March 1, 1999
231,250 June 1, 1999
From and after the dates set forth above on which this Option becomes
exercisable, the number of Option Shares set forth to the left of such dates
shall be deemed to be fully vested in the Optionee (all of such fully vested
Option Shares being hereinafter referred to collectively as the "Vested
Shares"). Except as provided in Section 10 hereof, the Optionee shall have the
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right to exercise this Option with respect to all or any part of the Vested
Shares at any time and from time to time until the Option Termination Date. The
unexercised portion of this Option from one period may be carried over to a
subsequent period or periods, and the right of the Optionee to exercise the
Option as to such unexercised portion shall continue through and until the
earlier of the dates hereinafter set forth or the Option Termination Date.
6. PROCEDURE FOR EXERCISE. Exercise of this Option or a portion hereof
shall be effected by the Optionee's giving of written notice to the Company at
the offices of the Company located at 190 South LaSalle Street, Suite 1710,
Chicago, Illinois 60603, and paying the Current Purchase Price for the Option
Shares to be acquired pursuant to the exercise.
7. PAYMENT OF PURCHASE PRICE. The Current Purchase Price for any Option
Shares purchased will be paid at the time of exercise of this Option either (i)
in cash; (ii) by certified or cashier's check; (iii) by delivery to the Company
of shares of Common Stock already owned by the Optionee having a Fair Market
Value (as hereinafter defined) equal to the exercise price, if permitted by the
Committee in its sole discretion at the time of exercise; or (iv) in any other
form of valid consideration, as permitted by the Committee in its sole
discretion at the time of exercise.
8. ACCELERATION IN CERTAIN EVENTS. Notwithstanding any provision of
this Agreement to the contrary, the following provisions will apply:
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(a) Mergers and Reorganizations. If the Company or its
shareholders enter into an agreement to dispose of all or substantially all of
the assets of the Company, on a consolidated basis, by means of a sale, merger
or other reorganization, liquidation or otherwise in a transaction in which the
Company is not the surviving corporation, all Option Shares shall thereupon
become Vested Shares and this Option will become immediately exercisable with
respect to the full number of shares subject to this Option during the period
commencing as of the date of the agreement to dispose of all or substantially
all of the assets of the Company and ending when the disposition of assets
contemplated by that agreement is consummated; provided, however, that no Option
Shares will become Vested Shares under this Section on account of any agreement
of merger or other reorganization when the shareholders of the Company
immediately before the consummation of the transaction will own at least fifty
percent of the total combined voting power of all classes of stock entitled to
vote of the surviving entity immediately after the consummation of the
transaction. This Option will not become immediately exercisable if the
transaction contemplated in the agreement is a merger or reorganization in which
the Company will survive.
(b) Change in Control. In the event of a Change in Control of
the Company, this Option will become immediately exercisable and all Option
Shares shall become Vested Shares. This Option may be fully exercised, to the
extent that it remains unexercised on the date of a Change in Control, by the
Optionee, by the Optionee's personal representative or by the distributees to
whom the Optionee's rights under this Option shall pass by will or by the laws
of descent and distribution through and including the Option Termination Date.
9. TAX WITHHOLDING.
(a) Condition Precedent. The issuances of Option Shares
pursuant to the exercise of this Option are subject to the condition that if at
any time the Committee determines, in its discretion, that the satisfaction of
withholding tax or other withholding liabilities under any federal, state or
local law is necessary or desirable as a condition of, or in connection with
such issuances, then the issuances will not be effective unless the withholding
has been effected or obtained in a manner acceptable to the Committee.
(b) Manner of Satisfying Withholding Obligation. When the
Optionee is required to pay to the Company an amount required to be withheld
under applicable income tax laws in connection with the purchase of Option
Shares upon exercise of this Option, such payment may be made at the Optionee's
election (i) in cash; (ii) by check; (iii) by delivery to the Company of shares
of Common Stock already owned by the Optionee having a Fair Market Value (as
hereinafter defined) on the date the amount of tax to be withheld is to be
determined (the "Tax Date") equal to the amount required to be withheld; (iv)
through the withholding by the Company of a portion of the Option Shares
acquired upon the exercise of the Options having a Fair Market Value on the Tax
Date equal to the amount required to be withheld; or (v) in any other form of
valid consideration permitted by the Committee in its sole discretion.
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10. RIGHTS OF OPTIONEE UPON TERMINATION OF EMPLOYMENT. If the
Optionee's employment with the Company under the Employment Agreement is
terminated, this Option may be exercised as follows:
(a) Death. If the Optionee dies during the Term of the
Employment Agreement, this Option shall become fully exercisable with respect to
all Option Shares on the date of Optionee's death and all Option Shares shall
thereafter be Vested Shares. This Option may be fully exercised, to the extent
that it remains unexercised on the date of death, by the Optionee's personal
representative or by the distributees to whom the Optionee's rights under this
Option shall pass by will or by the laws of descent and distribution through and
including the Option Termination Date.
(b) Disability. If the Optionee's employment with Company
pursuant to the Employment Agreement is terminated as a result of Optionee's
Disability, this Option shall become fully exercisable with respect to all
Option Shares and all Option Shares shall thereafter be Vested Shares. This
Option may be fully exercised, to the extent that it remains unexercised on the
Date of Termination for Disability, by the Optionee, the Optionee's personal
representative or by the distributees to whom the Optionee's rights under this
Option shall pass by will or by the laws of descent and distribution through and
including the Option Termination Date.
(c) Termination Without Good Reason or for Cause. If the
Optionee voluntarily terminates employment with the Company under the Employment
Agreement without Good Reason during the Initial Term of the Employment
Agreement, or if the Optionee's employment with the Company under the Employment
Agreement is terminated for Cause during the Initial Term of the Employment
Agreement, this Option shall automatically expire on and as of the Date of
Termination and shall not be exercisable thereafter with respect to any of the
Option Shares, regardless of whether such Option Shares are Vested Shares.
(d) Termination for Good Reason, Without Cause, Non-Renewal
Following Initial Term or Without Good Reason During a Renewal Term. If (i) the
Optionee terminates employment with the Company under the Employment Agreement
for Good Reason, (ii) employment of the Optionee with the Company under the
Employment Agreement is terminated without Cause by the Company, (iii) the term
of Optionee's employment under the Employment Agreement is not automatically
extended following the expiration of the Initial Term of the Employment
Agreement pursuant to the provisions of Paragraph 2 thereof, or (iv) the
Optionee terminates Optionee's employment with the Company under the Employment
Agreement without Good Reason during any Renewal Term, this Option shall become
fully exercisable with respect to all Option Shares and all Option Shares shall
thereafter be Vested Shares. This Option may be fully exercised, to the extent
that it remains unexercised on the Date of Termination, by the Optionee, the
Optionee's personal representative or by the distributees to whom the Optionee's
rights under this Option shall pass by will or by the laws of descent and
distribution through and including 5:00 p.m., Chicago time, on the second
anniversary of the Date of Termination of the Employment Agreement.
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11. TRANSFERABILITY. This Option shall not be transferable other than
pursuant to a qualified domestic relations order, by will or by the laws of
descent and distribution.
12. ADJUSTMENT. If the outstanding Common Stock is increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities through merger, consolidation, combination, exchange of shares, other
reorganization, recapitalization, reclassification, stock dividend, stock split
or reverse stock split, an appropriate and proportionate adjustment will be made
in the number or kind of shares purchasable under any unexercised portion of
this Option. Any such adjustment will be made without change in the aggregate
Current Purchase Price applicable to the unexercised portion of this Option, but
with a corresponding adjustment in the Current Purchase Price as then in effect
for each Option Share purchasable under this Option. The foregoing adjustments
and the manner of application of the foregoing provisions will be determined
solely by the Committee, and any such adjustment may provide for the elimination
of fractional share interests.
13. AMENDMENT. This Agreement may be amended by an instrument in
writing signed by both the Company and the Optionee.
14. EMPLOYMENT OF PARTICIPANT. Nothing in this Agreement confers upon
the Optionee any right to continued employment by the Company or any of its
Subsidiaries or limit in any way the right of the Company or any Subsidiary at
any time to terminate or alter the terms of the Optionee's employment.
15. COMPLIANCE WITH SECURITIES LAWS. Option Shares will not be issued
unless the issuance and delivery of the Option Shares (and the exercise of this
Option, if applicable) complies with all relevant provisions of federal and
state law, including, without limitation, the Securities Act, the rules and
regulations promulgated thereunder and the requirements of any stock exchange
upon which the Option Shares may then be listed, and will be further subject to
the approval of counsel for the Company with respect to such compliance. The
Optionee agrees to furnish evidence satisfactory to the Company, including,
without limitation, a written and signed representation letter and consent to be
bound by any transfer restrictions imposed by law, legend, condition or
otherwise, and a representation that the Option Shares are being acquired only
for investment and without any present intention to sell or distribute the
Option Shares in violation of any federal or state law, rule or regulation.
Further, the Optionee consents to the imposition of a legend on the certificate
representing the Option Shares issued pursuant to the exercise of this Option
restricting their transferability as required by law or by this Section.
16. DEFINITIONS. As used herein with initial capital letters, the
following terms have the meanings set forth unless the context clearly indicates
to the contrary:
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"Business Day" means any day except a Saturday, Sunday or
other day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Board, or, if established by the
Board, any committee of the Board delegated with the responsibility of
administering this Agreement or the Company's employee benefit plans, or both.
"Common Stock" means the Common Stock, par value $.01 per
share, of the Company or, in the event that the outstanding shares of such
Common Stock are hereafter changed into or exchanged for shares of a different
stock or security of the Company or some other corporation, such other stock or
security.
"Fair Market Value" means, with respect to a share of the
Common Stock (a "Share") as of any date, the average of the "closing price" per
Share for the ten (10) consecutive Trading Days immediately preceding such date.
The "closing price" for each such Trading Day means the last sale price for a
Share, or, if there is no reported last sale price on that day, the average of
the closing bid and asked prices, on the principal registered national
securities exchange on which the Shares are listed or admitted to unlisted
trading privileges, in either case as reported in the consolidated transaction
reporting system with respect to securities listed or admitted to unlisted
trading privileges on such exchange, or, if the Shares are not so listed or
admitted to trading, the last sale price, or, if there is no reported last sale
price on that day, the average of the closing bid and asked prices, on The
Nasdaq Stock Market, in either case as reported in the consolidated transaction
reporting system with respect to securities listed on The Nasdaq Stock Market,
or, if the Shares are not so listed, the last sale price, or if is no reported
last sale price on that day, the average of the high bid and low asked prices on
that day, in the over-the-counter market, as reported by the electronic
inter-dealer quotation system owned and operated by NASDAQ, Inc., a subsidiary
of the National Association of Securities Dealers, Inc., or, if such system is
no longer in use, the principal automated quotation system then in use, or, if
the Shares are not so quoted by any such system, the average of the high bid and
low asked prices on that day, as furnished by a registered market maker for the
Shares selected by the Board, or, if there is no such market maker or such
prices otherwise are not available, the fair market value of the Shares on that
day, as determined by the Board in its sole discretion. In the event the Company
issues to all holders of Shares rights, options, warrants or convertible or
exchangeable securities entitling the shareholders to subscribe for or purchase
Shares or any other property, then the Fair Market Value of a Share shall
include the value of such rights, as determined by the Board acting in good
faith on the basis of such quotations and other information as it considers, in
its reasonable judgment, appropriate.
"Securities Act" means the Securities Act of 1933, as amended.
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"Subsidiary" means a subsidiary of the Company, as defined in
Section 424(f) of the Code.
"Trading Day" means a day on which the principal registered
national securities exchange or The Nasdaq Stock Market, as the case may be, on
which the Shares are listed or admitted to unlisted trading privileges is open
for the transaction of business, or, if the Shares are not so listed or admitted
to trading, means a Business Day.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. MISCELLANEOUS. This Agreement will be construed and enforced in
accordance with the laws of the State of Illinois and will be binding upon and
inure to the benefit of any successor or assign of the Company and any executor,
administrator, trustee, guarantor or other legal representative of the Optionee.
Executed as of the December 1, 1998.
THE COMPANY:
AVERY COMMUNICATIONS, INC.
By:/s/ PATRICK J. HAYNES, III
-----------------------------------------------
Patrick J. Haynes, III
Chairman of the Board, President and Chief
Executive Officer
THE OPTIONEE:
/s/ MARK NIELSEN
--------------------------------------------------
Mark Nielsen
###-##-####
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Social Security Number of Optionee
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EXERCISE FORM
Date:___________________________
TO: Chief Financial Officer
The undersigned hereby irrevocably elects to exercise the attached Stock Option
to the extent of options to purchase _______ shares and hereby makes payment of
$_________ in payment of the purchase price thereof.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name:___________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Social Security or Taxpayer Identification Number:______________________________