Exhibit 10.12
TREESOURCE INDUSTRIES, INC.
STOCK OPTION LETTER AGREEMENT
To: Jess R. Drake
On November 3, 1998, in connection with that certain Employment
Contract between you and TreeSource Industries, Inc. (the "Company"), dated
effective November 4, 1998 (the "Employment Contract"), the Board of Directors
of the Company has awarded you stock options for the purchase of 543,295 shares
of the Company's common stock at an exercise price of $.7969 per share, subject
to your agreement with the terms and conditions set forth below.
1. Term
The term of your option is ten (10) years from date of grant, unless
sooner terminated.
2. Exercise
During your lifetime only you can exercise the option. The personal
representative of your estate or the beneficiary thereof may exercise the option
following your death.
To exercise your option, you must deliver to the Company written notice
of your intention to exercise in the form attached hereto, specifying the number
of shares as to which you desire to exercise the option and the date on which
you desire to complete the transaction.
Unless the Board of Directors or any committee authorized by the Board
of Directors to administer stock options granted by the Company (the Board of
Directors or any such committee is referred to herein as the "Board of
Directors") determines otherwise, on or before the date specified for completion
of the purchase of shares pursuant to your option, you must have paid the
Company the full purchase price of such shares. No shares shall be issued until
full payment for the shares has been made.
After exercise of your option, immediately upon notification of the
amount due, if any, you shall pay to the Company in cash amounts necessary to
satisfy any applicable federal, state and local tax withholding requirements. If
additional withholding is or becomes required beyond any amount deposited before
delivery of the certificates, you shall pay such amount to the Company on
demand. If you fail to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to you, including salary,
subject to applicable law. With the consent of the Board of Directors, you may
satisfy this obligation, in whole or in part, by having the Company withhold
amounts due or by delivering to the Company common stock shares that would
satisfy the withholding amount.
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3. Payment for Shares
The option may be exercised by the delivery of cash (including, with
the consent of the Board of Directors, cash that may be the proceeds of a loan
from the Company), and, unless the Board of Directors at any time determines
otherwise, personal check, bank certified or cashier's check or, with the
consent of Board of Directors, in whole or in part, in common stock of the
Company valued at fair market value, promissory notes and other forms of
consideration.
With the consent of the Board of Directors, you may request the Company
to apply automatically the shares to be received upon the exercise of a portion
of the option (even though stock certificates have not yet been issued) to
satisfy the purchase price for additional portions of the option. If and so long
as the common stock is registered under Section 12(b) or 12(g) of the Exchange
Act, such cashless exercise may be accomplished by delivery of a properly
executed exercise notice, together with irrevocable instructions, to (i) a
brokerage firm designated by the Company to deliver promptly to the Company the
aggregate amount of sale proceeds to pay the option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board.
4. Termination
In the event your employment or service with the Company or a
subsidiary terminates for any reason other than for cause (as defined below),
physical disability or death, or any reason that results in the Company's being
obligated to provide the payments and benefits specified in Section 6.2.2 of the
Employment Contract, your option may only be exercised within one month after
the date of such termination of your employment or services, but in no event
later than the remaining term of the option. In the event that your employment
is terminated under any provision of the Employment Contract that results in the
Company's being obligated to provide the payments and benefits specified in
Section 6.2.2 of the Employment Contract, your option may be exercised at any
time within two (2) years after the date of such termination of your employment,
but in no event later than the remaining term of the option. For the purposes of
this letter agreement "cause" shall consist of the following: (i) your willful
and continual failure and refusal to comply with the reasonable express
directives of the Company's Board of Directors; (ii) your conviction for a
felony or any crime involving fraud or dishonesty in the performance of, or that
reflects upon your ability to perform, your duties on behalf of the Company; or
(iii) circumstances where you have been grossly negligent or have exhibited
willful misconduct in the performance of your duties.
In the event of the termination of your employment or service for
cause, your option shall automatically terminate on the date you are first
notified by the Company of such termination, unless the Board of Directors
determines otherwise.
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In the event of the termination of your employment or service because
of permanent disability, your option may be exercised only within one year after
such termination, but in no event later than the remaining term of the option.
The term "permanent disability" means a mental or physical impairment that is
expected to result in death or that has lasted or is expected to last for a
continuous period of six (6) months or more and that causes you to be unable, in
the opinion of the Company and two independent physicians, to perform the
majority of your usual duties as an employee, director, officer or consultant of
the Company. Permanent disability shall be deemed to have occurred on the first
day after the Company and the two independent physicians have furnished their
opinion of permanent disability to the Company.
In the event of your death while employed by or providing service to
the Company or a subsidiary, your option may be exercised at any time within one
year after the date of death, but in no event later than the remaining term of
your option, and only if and to the extent you were entitled to exercise the
option at the date of death, and only by the person or persons to whom your
rights under the option shall pass by your will or by the laws of descent and
distribution of estate or country of domicile at the time of death.
Your option may be exercised only if and to the extent you were
entitled to exercise such option at the date of such termination. To the extent
that your option is not exercised within the applicable period, all further
rights to purchase shares pursuant to such option shall cease and terminate. In
no event may this option be exercised later than its remaining term.
5. Transfer of Option
Your option is not transferable except by will or by the applicable
laws of descent and distribution of the state or county of your domicile at the
time of death or pursuant to a qualified domestic relations order as defined
under the Internal Revenue Code or Title I of the Employee Income Security Act
of 1974, as amended.
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6. Vesting
Your option shall vest and become exercisable according to the
following schedule:
Number of shares
Date on and after which for which option
option is exercisable is exercisable
Upon execution of this letter agreement ........................ 25%
On November 3, 1999--the first anniversary of your
Employment Contract ........................................... 50%
On November 3, 2000--the second anniversary of your
Employment Contract ........................................... 75%
On November 3, 2001--the third anniversary of your
Employment Contract ........................................... 100%
7. Holding Periods:
7.1 Securities and Exchange Act Section 16
Shares of common stock obtained upon the exercise of your option may
not be sold by a person subject to Section 16 of the Exchange Act until six
months after the date such option was granted.
7.2 Taxation of Stock Options
Tax advice should be obtained when exercising any option and prior to
the disposition of the shares issued upon the exercise of any option.
8. Date of Grant
The date of grant of the option is November 3, 1998.
9. Acceleration in Certain Events
Notwithstanding any other provisions of this letter agreement, all
options outstanding under this letter agreement shall immediately become
exercisable in full at any time when any one of the following events has taken
place:
(a) The Company undergoes a change of control, which for the purposes
of this option is defined as any sale, transfer or disposition of all or
substantially all of the assets of the Company, or the merger of the Company
with another entity that results in the shareholders of the Company obtaining
less than 50% of the voting equity of the resulting company, or an individual or
company in any manner acquires or controls more than 50% of the voting equity of
the Company;
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(b) The Company receives notice from a senior lender under the
Company's Credit and Security Agreement that such senior lender has declared
that the Company is in default on its loan obligations and that the loan
obligations are being accelerated; or
(c) The Company terminates your employment with the Company other than
for cause.
10. Adjustments
10.1 Adjustment of Shares
The aggregate number and class of shares for which this option has been
granted and the exercise price per share thereof (but not the total price) shall
be proportionately adjusted for any increase or decrease in the number of issued
shares of common stock resulting from a split-up or consolidation of shares or
any like capital adjustment, or the payment of any stock dividend.
10.2 Conversion of Options on Stock for Stock Exchange
Except as provided in Section 9(a), if the shareholders of the Company
receive capital stock of another corporation ("Exchange Stock") in exchange for
their shares of common stock in any transaction involving a merger,
consolidation, acquisition of property or stock, separation or reorganization,
the option granted hereunder shall be converted into an option to purchase
shares of Exchange Stock. The amount and price of a converted option shall be
determined by adjusting the amount and price of the option granted hereunder in
the same proportion as used for determining the number of shares of Exchange
Stock the holders of the shares of common stock receive in such merger,
consolidation, acquisition of property or stock, separation or reorganization.
10.3 Fractional Shares
In the event of any adjustment in the number of shares covered by this
option, any fractional shares resulting from such adjustment shall be
disregarded and the option shall cover only the number of full shares resulting
from such adjustment.
10.4 Determination of Board to Be Final
All Section 10 adjustments shall be made by the Board of Directors of
the Company, and its determination as to what adjustments shall be made, and the
extent thereof, shall be presumed to be correct unless such determination is
inconsistent with the other terms and requirements of this Section 10 or the
terms and requirements of the Employment Contract. Should any conflict exist
between the terms of this letter agreement and the terms of the Employment
Contract, the terms of the Employment Contract shall govern.
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10.5 Further Adjustment of Awards
Subject to Sections 9(a) and 10.2, the Board of Directors shall have
the discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Board of Directors, to take such further action as it determines to be
necessary or advisable, and fair and equitable to you, (but shall not be limited
to) establishing, amending or waiving the type, terms, conditions or duration
of, or restrictions on, the option so as to provide for earlier, later, extended
or additional time for exercise and other modifications. The Board of Directors
may take such actions before or after any public announcement with respect to
such sale, merger, consolidation, reorganization, liquidation or change in
control that is the reason for such action.
10.6 Limitations
The grant of this option will in no way affect the Company's right to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
11. Approvals
The Company agrees to register for offering or resale, or to qualify
for exemption, under the Securities Act, and to register or qualify under state
securities laws, any shares of common stock issued to you upon exercise of this
option, and to continue in effect any such registrations or qualifications.
12. Rights as a Stockholder
As a holder of an option issued pursuant to this option agreement, you
have no rights as a stockholder with respect to any common stock until the date
of issue to you of a stock certificate for such shares. Except as otherwise
expressly provided herein, no adjustment shall be made for dividend or other
rights for which the record date occurs prior to the date such stock certificate
is issued.
Please execute the Acceptance and Acknowledgment set forth below on the
enclosed copy of this letter agreement and return it to the undersigned.
Very truly yours,
TREESOURCE INDUSTRIES, INC.
/s/ Robert J. Riecke
----------------------------------------
By: Robert J. Riecke
Its: Vice President-Administration
and Secretary
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STOCK OPTION LETTER AGREEMENT
ACCEPTANCE AND ACKNOWLEDGMENT
I, a resident of the State of Washington, accept the stock option described
above, and acknowledge receipt of a copy of this Stock Option Letter Agreement
("Agreement"). I have read and understand this Agreement. I acknowledge that,
except as set forth in this Agreement and that certain Employment Contract with
the undersigned, the Company has no obligation to sell or otherwise issue to me
any stock or other equity or ownership interest in the Company.
Dated: November 6, 1998
###-##-#### /s/ Jess R. Drake
- ------------------------------------- -----------------------------
Taxpayer I.D. Number Jess R. Drake
Address:
By his or her signature below, the spouse of the Optionee, if such Optionee
is legally married as of the date of his or her execution of this Agreement,
acknowledges that he or she has read this Agreement and is familiar with the
terms and provisions thereof, and agrees to be bound by all the terms and
conditions of this Agreement.
Dated: November 6, 1998
/s/ Sandra Kay Drake
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Spouse's Signature
Sandra Kay Drake
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Printed Name
By his or her signature below, the Optionee represents that he or she is
not legally married as of the date of execution of this Agreement.
Dated:
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Optionee's Signature
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NOTICE OF EXERCISE OF STOCK OPTION
To: TreeSource Industries, Inc. Board of Directors
I, a resident of the State of , hereby exercise my stock
option granted by TreeSource Industries, Inc. (the "Company") on ,
, subject to all the terms and provisions thereof, and notify the Company of
my desire to purchase shares of common stock of the Company (the
"Securities") at the exercise price of $ per share that were offered to me
pursuant to said option.
I hereby represent and warrant that (1) I have been furnished with a
copy of all information that I deem necessary to evaluate the merits and risks
of the purchase of the Securities; (2) I have had the opportunity to ask
questions and receive answers concerning the information received about the
Securities and the Company; and (3) I have been given the opportunity to obtain
any additional information I deem necessary to verify the accuracy of any
information obtained concerning the Securities and the Company.
Dated:
--------------------
- ------------------------- ------------------------
Taxpayer I.D. Number Jess R. Drake
Address
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RECEIPT
TreeSource Industries, Inc. hereby acknowledges receipt from Jess R. Drake
in payment for shares of common stock of TreeSource Industries, Inc.,
an Oregon corporation, of $ in the form of:
[ ] Cash
[ ] Check (personal, cashier's or bank certified)
[ ] Other (specify)
TREESOURCE INDUSTRIES, INC.
Date: For:
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