Exhibit 10.10
PENHALL INTERNATIONAL CORP.
1998 STOCK OPTION PLAN
Date Adopted: ____________, 1998
PENHALL INTERNATIONAL CORP.
1998 STOCK-OPTION PLAN
1. Purpose of the Plan
The purpose of the Plan is to assist the Company in attracting
and retaining valued employees, non-employee directors and independent
contractors by offering them a greater stake in the Company's success and a
closer identity with it, and to encourage ownership of the Company's stock by
such employees, non-employee directors and independent contractors.
2. Definitions
2.1 "Board" means the Board of Directors of the
Company.
2.2 "Cause" means that Employee (i) has engaged
in misconduct involving dishonesty, theft, embezzlement or fraud with respect to
the Company, (ii) has been convicted of a felony, or (iii) refuses to perform
adequately any of his or her usual and ordinary duties for or on behalf of the
Company or those reasonably requested by the Company or the Board, provided that
the Company shall have given notice to the Employee of the nature of such
refusal and such refusal has not been cured within 5 days thereafter.
2.3 "Change in Control" shall mean a change in
control of the Company of a nature that would be required to be reported in
response to Item 1 of
Form 8-K promulgated under the Exchange Act, provided, that, without limitation,
such a change in control shall be deemed to have occurred if (i) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than the Company or any "person" who on the date hereof is a director or officer
of the Company, is or becomes the "beneficial owner," (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the Company's then
outstanding securities; or (ii) during any period of two consecutive years
during the term of this Plan, individuals who at the beginning of such period
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, unless the election of each director who was
not a director at the beginning of such period has been approved in advance by
directors representing at least a majority of the directors then in office who
were members of the Incumbent Board or whose election was approved by the
Incumbent Board.
2.4 "Code" means the Internal Revenue Code of
1986, as amended.
2.5 "Common Stock" means the common stock of the
Company, par value $______ per share, or such other class or kind of shares or
other securities resulting from the application of Section 7.
- 3 -
2.6 "Company" means Penhall International Corp.,
a ______________ corporation, or any successor corporation.
2.7 "Committee" means a committee composed of
members of the Board, designated by the Board to administer the Plan in
accordance with Section 4. After the Company becomes Publicly Traded, the
Committee shall have at least two members and each member of the Committee shall
be a non-employee director within the meaning of Rule 16b-3 under the Exchange
Act.
2.8 "Director" means a member of the Board who
is not an Employee.
2.9 "Employee" means an officer or other key
employee of the Company including a director who is such an
employee.
2.10 "Exchange Act" means the Securities
Exchange Act of 1934, as amended.
2.11 "Fair Market Value" means, on any given
date,
2.11.1 If the Common Stock is listed on an
established stock exchange or exchanges, the last reported
sale price per share on such date on the principal exchange on
which it is traded, or if no sale was made on such date on
such principal exchange, at the closing reported bid price on
such date on such exchange;
- 4 -
2.11.2 If the Common Stock is not then listed on an
exchange, the last reported sale price per share on such date
reported by NASDAQ, or if sales are not reported by NASDAQ, or
no sale was made on such date, the average of the closing bid
and asked prices per share for the Common Stock in the
over-the-counter market as quoted on NASDAQ on such date;
2.11.3 If the Common Stock is not then listed on an
exchange or quoted on NASDAQ, the average of the reported
closing bid and asked prices on the most recent date the
Common Stock traded in the over-the-counter market; or
2.11.4 If the Common Stock is not then listed on an
exchange, quoted on NASDAQ or traded in the over-the-counter
market, the value ascribed to the shares of Common Stock by
the Committee based on a good faith attempt to value the
Common Stock.
2.12 "Holder" means an Employee, Director or
Independent Contractor to whom an Option is granted.
2.13 "Incentive Stock Option" means an Option
intended to meet the requirements of an incentive stock option as defined in
section 422 of the Code and designated as an Incentive Stock Option.
- 5 -
2.14 "Independent Contractor" means an
individual other than an Employee who performs services for the
Company.
2.15 "Non-Qualified Stock Option" means an
Option not intended to be an Incentive Stock Option, and designated as a
Non-Qualified Stock Option.
2.16 "Option" means any stock option granted
from time to time under Section 6 of the Plan.
2.17 "Option Agreement" means an agreement
evidencing the grant of Options under this Plan by the Company to the Holder and
containing such terms as the Committee shall determine.
2.18 "Option Share" means any share of Common
Stock purchased upon the exercise of an Option.
2.19 "Permitted Transferee" means the spouse,
parents, siblings, children or grandchildren (in each case, natural or adopted)
of a Holder, any trust for his or her benefit or the benefit of his or her
spouse, parents, siblings, children or grandchildren (in each case, natural or
adopted), or any corporation or partnership in which the direct and beneficial
owner of all of the equity interest in such corporation or partnership is such
individual Holder or Permitted Transferee (or any trust for the benefit of such
persons).
- 6 -
2.20 "Plan" means the Penhall International
Corp. 1998 Stock Option Plan herein set forth, as amended from
time to time.
2.21 "Publicly Traded" means the Company is
required to register shares of any class of common equity under Section 12 of
the Exchange Act.
2.22 "Retirement" means retirement from the
active employment of the Company pursuant to the relevant provisions of the
applicable pension plan to such Employee or as otherwise determined by the
Board.
2.23 "Ten Percent Shareholder" means a person
who on any given date owns, either directly or indirectly (taking into account
the attribution rules contained in section 424(d) of the Code), stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary of which the Company has a 50% or greater, direct or
indirect ownership.
3. Eligibility
Any Employee, Director or Independent Contractor is eligible
to receive an Option.
4. Administration and Implementation of Plan
4.1 The Plan shall be administered by the
Committee, which shall have full power to interpret and administer the Plan and
full authority to act in selecting the Employees, Directors and Independent
Contractors to whom Options will be
- 7 -
granted, in determining the type and amount of Options to be granted to each
such Employee, Director or Independent Contractor, the terms and conditions of
Options granted under the Plan and the terms of agreements which will be entered
into with Holders.
4.2 The Committee's powers shall include, but
not be limited to, the power to determine whether, to what extent and under what
circumstances an Option may be exchanged for cash; to determine the effect, if
any, of a change in control of the Company upon outstanding Options; and to
grant Options (other than Incentive Stock Options) that are transferable by the
Holder.
4.3 The Committee shall have the power to adopt
regulations for carrying out the Plan and to make changes in such regulations as
it shall, from time to time, deem advisable. The Committee shall have the power
unilaterally and without approval of a Holder to amend an existing Option
Agreement in order to carry out the purposes of the Plan so long as such an
amendment does not, other than pursuant to a specific term of the Plan, take
away any benefit granted to a Holder by the Option Agreement and as long as the
amended Option Agreement comports with the terms of the Plan. Any interpretation
by the Committee of the terms and provisions of the Plan and the administration
thereof, and all action taken by the Committee, shall be final and binding on
Holders.
- 8 -
5. Shares of Stock Subject to the Plan
5.1 Subject to adjustment as provided in Section
7, the total number of shares of Common Stock available for Options granted
under the Plan shall be ___________ shares. The maximum number of shares of
Common Stock for which any individual may be granted options in any calendar
year shall be __________.
5.2 Any shares issued by the Company through the
assumption or substitution of outstanding grants from an acquired company shall
not reduce the shares available for Options granted under the Plan. Any shares
issued hereunder may consist, in whole or in part, of authorized and unissued
shares or treasury shares. If any shares subject to any Option granted hereunder
are forfeited or such Option otherwise terminates without the issuance of such
shares or the payment of other consideration in lieu of such shares, the shares
subject to such Option, to the extent of any such forfeiture or termination,
shall again be available for Options under the Plan.
6. Options
Options give an Employee, a Director or an Independent
Contractor the right to purchase a specified number of shares of Common Stock
from the Company for a specified time period at a fixed price. The grant of
Options shall be subject to the following terms and conditions:
6.1 Option Grants: Options shall be granted to
an Employee, Director or Independent Contractor at the time and in the amount
determined by the
- 9 -
Committee. Options shall be evidenced by Option Agreements. Such Option
Agreements shall conform to the requirements of the Plan, and may contain such
other provisions as the Committee shall deem advisable.
6.2 Option Price: The price per share at which
Common Stock may be purchased upon exercise of an Option shall be determined by
the Committee, but shall be not less than the Fair Market Value of a share of
Common Stock on the date of grant. In the case of any Incentive Stock Option
granted to a Ten Percent Shareholder, the option price per share shall not be
less than 110% of the Fair Market Value of a share of Common Stock on the date
of grant.
6.3 Term of Options: The Option Agreements shall
specify when an Option may be exercisable and the terms and conditions
applicable thereto. The term of an Option shall in no event be greater than ten
years (five years in the case of an Incentive Stock Option granted to a Ten
Percent shareholder).
6.3.1 Vesting. Options granted under the
Plan may be subject to a vesting schedule set forth in the Option Agreement,
under which such Options cannot be exercised until they are vested, except as
provided in Section 6.3.2. However, Options shall vest at a rate of at least 25%
each year on the anniversary of the date the Options were granted, so that all
Options will be 100% vested no later than the fourth anniversary of their grant.
- 10 -
6.3.2 Early Exercise. An Option Agreement
may allow a Holder to exercise an Option before the date on which the Option is
vested. Any Option Shares purchased through such an early exercise will be
subject to the Repurchase Rights described in Section 6.12 until the underlying
Options otherwise would have become vested.
6.4 Incentive Stock Options: Each provision of
the Plan and each Option Agreement relating to an Incentive Stock Option shall
be construed so that each Incentive Stock Option shall be an incentive stock
option as defined in section 422 of the Code, and any provisions of the Option
Agreement thereof that cannot be so construed shall be disregarded. In no event
may a Holder be granted an Incentive Stock Option which does not comply with the
limitations ($100,000 at the date hereof) imposed by Section 422(d) of the Code
on the dollar amount of such Options that may first be exercisable in any one
calendar year.
6.5 Restrictions on Transferability: No
Incentive Stock Option shall be transferable otherwise than by will or the laws
of descent and distribution and, during the lifetime of the Holder, shall be
exercisable only by the Holder. Upon the death of a Holder, the person to whom
the rights have passed by will or by the laws of descent and distribution may
exercise an Incentive Stock Option only in accordance with this Section 6.
- 11 -
6.6 Payment of Option Price and Taxes:
6.6.1 Payment. The Option Price or, where
applicable, a portion thereof, shall be paid in full in cash or by certified or
bank cashiers check payable to the Company, or, subject to the approval of the
Committee and where provided in the applicable Option Agreement: (a) by
surrendering shares of the Company's Common Stock that have an aggregate Fair
Market Value equal to the aggregate Option Price and that have been held by
Holder for six months, (b) delivery of an irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the aggregate Option
Price or delivery of irrevocable instructions to a broker to deliver promptly to
the Company sufficient funds to pay the aggregate Option Price, (c) by having
the Company retain the number of Option Shares whose aggregate Fair Market Value
equals the aggregate Option Price or (d) any combination of the foregoing.
6.6.2 Taxes. Any taxes required to be
withheld by the Company upon exercise of an Option shall be paid in full in cash
or by certified or bank cashiers check payable to the Company, or, subject to
the approval of the Committee (and subject to such rules as the Committee may
adopt) and where provided in the applicable Option Agreement, by having the
Company retain the number of Option Shares whose aggregate Fair Market Value
equals the amount to be withheld in satisfaction of the applicable withholding
taxes.
- 12 -
6.7 Termination by Death: If a Holder dies, any
Option granted to such Holder may thereafter be exercised (to the extent such
Option was exercisable at the time of death or on such accelerated basis as the
Committee may determine at or after grant) by, where appropriate, the Holder's
transferee or by the Holder's legal representative, for a period of three months
from the date of death or until the expiration of the stated term of the Option,
whichever period is shorter.
6.8 Termination by Reason of Retirement or
Disability: If a Holder's employment by the Company or service on the Board
terminates by reason of disability (as determined by the Committee) or
Retirement, any unexercised Option granted to the Holder may thereafter be
exercised by the Holder (or, where appropriate, the Holder's transferee or legal
representative), to the extent it was exercisable at the time of termination or
on such accelerated basis as the Committee may determine at or after grant, for
a period of three months from the date of such termination or until the
expiration of the stated term of the Option, whichever period is shorter. This
Section 6.8 shall not apply to any Option held by an Independent Contractor.
6.9 Other Termination: If a Holder's employment
by the Company or service on the Board terminates for any reason other than
death, disability or Retirement, all unexercised Options, to the extent they
were exercisable at the time of termination, may be exercised within the shorter
of 60 days following the Holder's termination or the remaining term of the
Option. Any such unexercised Options shall then terminate at the end of such
60-day period. All unexercised Options that are
- 13 -
unexercisable at the time of the Holder's termination shall immediately
terminate on the date of the Holder's termination. This Section 6.9 shall not
apply to any Option held by an Independent Contractor.
6.10 Rights of First Refusal of Company. In the
event that any Holder of Option Shares receives a bona fide offer from a third
party to purchase a complete or partial interest in such Option Shares, and at
the time of that offer, the Option Shares are not Publicly Traded, the Holder
may not transfer the Option Shares unless otherwise permitted by the provisions
of the Plan and the Agreement, and without first offering to sell such Option
Shares to the Company or its designee pursuant to this Section 6.10.
6.10.1 The Holder shall deliver a written
notice (a "Sale Notice") to the Company describing in reasonable detail the
Option Shares, the name of the offeror, the purchase price offered and all other
material terms of the proposed transfer. The Sale Notice shall be delivered to
and received by the Company at least sixty (60) days prior to any such proposed
sale.
6.10.2 The Sale Notice shall constitute an
irrevocable offer by such Holder to sell the Option Shares described therein to
the Company or its designee in accordance with this Section 6.10.
6.10.3 Upon receipt of the Sale Notice, the
Company or its designee shall have the right and option to purchase the Option
Shares on the terms of
- 14 -
the proposed transfer set forth in the Sale Notice, except for such terms as are
otherwise specified or permitted by this Section 6.10. Within 30 days after
receipt of the Sale Notice, the Company shall notify such Holder whether or not
it or its designee wishes to purchase the Option Shares. If the Company or its
designee elects to purchase the Option Shares, the closing of the purchase and
sale of the Option Shares shall be held at the place and on the date established
by the Company in its notice to the Holder in response to the Sale Notice, which
date shall be not more than 30 days from the date of the Company's notice,
unless the terms of the proposed transfer provide for a later closing date.
6.10.4 If neither the Company nor its
designee elects to purchase the Option Shares, the Holder may, subject to the
other provisions of the Plan and the Agreement, transfer the Option Shares to
the offeror specified in the Sale Notice at a price no less than the price
specified in the Sale Notice and on other terms no more favorable to the offeror
than specified in the Sale Notice during the 90-day period immediately following
the last date on which the Company could have elected to purchase the Option
Shares. Any such Option Shares not so transferred within such 90-day period will
be subject again to all of the provisions of this Section 6.10 upon subsequent
transfer.
6.11 Approved Sale of the Company. If the Board
and holders of a majority of the Common Stock (voting as a single class) then
outstanding approve the sale of the Company (whether by merger, consolidation,
sale of all or substantially all of
- 15 -
the assets or outstanding shares of capital stock (an "Approved Sale"), and if
at that time the Common Stock is not Publicly Traded, the following restrictions
shall apply with respect to any Option Share:
6.11.1 each Holder shall consent to, vote for
and raise no objections with respect to the Approved Sale, and if the Approved
Sale is structured as a sale of stock, shall agree to sell all Option Shares
held by such Holder on the terms and conditions approved by the Board and the
holders of a majority of the Common Stock then outstanding.
6.11.2 Each Holder shall take all action
which is necessary or in the judgment of the Company advisable to facilitate or
consummate an Approved Sale. The obligations of a Holder with respect to an
Approved Sale of the Company are subject to the satisfaction of the following:
upon the consummation of the Approved Sale, either all of the holders of Common
Stock will receive the same form and amount of consideration per share of Common
Stock, or if any such holder of Common Stock is given an option as to the form
and amount of consideration to be received, such Holder will be given the same
option. Each Holder hereby appoints the Company as its or his true and lawful
proxy and attorney-in-fact, with full power of substitution and resubstitution,
to vote its or his Option Shares that are entitled to vote to effectuate the
provisions and intentions of this Section 6.11. The proxies and powers of
attorney granted under this Section 6.11 are hereby declared to be coupled with
an interest and shall be irrevocable.
- 16 -
6.12 Repurchase Rights of Company. So long as
the Common Stock is not Publicly Traded:
6.12.1 If a Holder's employment or service
with the Company is terminated by the Company for Cause or by the Holder for any
reason whatsoever, and if such Holder has been previously granted an Option or
Options under the Plan, then any Option Shares that are held by such Holder
shall be subject to the right and option of the Company or its designee to
purchase in one or more transactions all or a portion of such Option Shares at
an aggregate price equal to the product of the number of such Option Shares and
the lower of the Fair Market Value (determined as of a date not more than 30
days prior to the date of the Company's notice called for by Section 6.12.3) and
the Option Price paid for such Option Shares, subject to the terms set forth in
Section 6.12.3.
6.12.2 If a Holder's employment or service
with the Company is terminated by the Company for other than Cause and if such
Holder has been previously granted Options under the Plan, then any Option
Shares that are held by such Holder shall be subject to the right and option of
the Company or its designee to purchase in one or more transactions all or a
portion of such Option Shares at an aggregate price equal to the product of the
number of such Option Shares and the Option Price paid for such Option Shares,
subject to the terms set forth in Section 6.12.3.
- 17 -
6.12.3 In the event that the Company or its
designee should decide to exercise the right to purchase Option Shares, the
Company shall notify the Holder of the Company's or its designee's exercise of
such right, setting forth the purchase price determined by the Company as well
as the date and place of closing; provided, that the Company or its designee
shall provide such notification to Holder in writing within 60 days of
termination of Holder's employment or service with the Company. At the closing,
the Company or its designee, as the case may be, shall make available to the
Holder such purchase price, payable in cash or by check, and the Holder shall
deliver any such Option Shares immediately prior to such closing, whereupon the
purchase and sale pursuant to such right shall be deemed completed and the
Company or its designee, as the case may be, shall be deemed the sole registered
and beneficial owner of such Option Shares for all purposes.
7. Adjustments upon Changes in Capitalization
In the event of a reorganization, recapitalization, stock
split, spin-off, split-off, split-up, stock dividend, issuance of stock rights,
combination of shares, merger, consolidation or any other change in the
corporate structure of the Company affecting Common Stock, or any distribution
to stockholders other than a cash dividend, the Board shall make appropriate
adjustment in the number and kind of shares authorized by the Plan and any
adjustments to outstanding Options as it determines appropriate. No fractional
shares of Common Stock shall be issued pursuant to such an adjustment. The Fair
Market Value of any fractional shares resulting from adjustments pursuant to
- 18 -
this Section shall, where appropriate, be paid in cash to the Holder.
8. Adjustments Upon Change in Control
In the event of a Change in Control pursuant to which another
person or entity acquires control of the Company (such other person or entity
being the "Successor"), at the discretion of the Company and by virtue of the
Change in Control:
(a) the Common Stock subject to the Plan shall
be converted into and replaced by shares of common voting stock of the
Successor, or such other class of securities having rights and preferences no
less favorable than the common voting stock of the Successor, and the number of
shares subject to an Option granted under the Plan and the purchase price per
share upon exercise of such Option shall be correspondingly adjusted so that, by
virtue of such Change in Control, the Holder of such Option shall have the right
to purchase that number of common voting stock of the Successor which has a Fair
Market Value equal to the Fair Market Value of the shares of Common Stock
subject to the Holder's Option, as of the date of such Change in Control, for a
purchase price per share which, when multiplied by the number of shares of
common voting stock of the Successor subject to the adjusted Option, shall equal
the aggregate exercise price at which the Holder would have received all of the
shares of Common Stock optioned to the Holder under the original Option; or
- 19 -
(b) the Company may convert the Option into a
right in the Holder to realize the value of an Option (which value the Company
may in its discretion determine equals the excess of the Fair Market Value of
the consideration to be received as a result of the Change in Control had such
Option been exercised immediately prior thereto, over the option price of such
Option) in cash.
9. Effective Date, Termination and Amendment
The Plan shall become effective on _________, 1998, subject to
shareholder approval. The Plan shall remain in full force and effect until the
earlier of 10 years from the date of its adoption by the Board, or the date it
is terminated by the Board. The Board shall have the power to amend, suspend or
terminate the Plan at any time, provided that no such amendment shall be made
without shareholder approval to the extent such approval is required under
section 162(m) or section 422 of the Code.
Termination of the Plan pursuant to this Section 9 shall not
affect Options outstanding under the Plan at the time of termination.
10. Transferability
Except as provided below, Options may not be pledged, assigned
or transferred for any reason during the Holder's lifetime, and any attempt to
do so shall be void and the relevant Option shall be forfeited; provided,
however that Options
- 20 -
(except incentive stock options) may be pledged, assigned or transferred (i) at
the discretion of the Committee, during the Holder's lifetime by the Holder to a
Permitted Transferee, (ii) at the discretion of the Committee, by a Permitted
Transferee to another Permitted Transferee or (iii) as otherwise permitted by
the Committee; provided, further, that any such transfer shall (i) not occur for
a period of at least six months after the Option is granted, and (ii) comply
with all terms and conditions established by the Committee and any term,
condition or restriction contained in the relevant Option Agreement.
11. General Provisions
11.1 Nothing contained in the Plan, or any Option
granted pursuant to the Plan, shall confer upon any Employee any right with
respect to continuance of employment by the Company, nor interfere in any way
with the right of the Company to terminate the employment of any Employee at any
time.
11.2 To the extent that federal laws do not
otherwise control, the Plan and all determinations made and actions taken
pursuant hereto shall be governed by the law of ____________ and construed
accordingly.
11.3 The Committee may amend any outstanding
Option to the extent it deems appropriate. Such amendment may be made by the
Committee without the consent of the Holder, except in the case of amendments
adverse to the Holder, in
- 21 -
which case the Holder's consent is required to any such amendment, unless the
amendment is designed to conform the Option to the terms of the Plan.
- 22 -