Sample Business Contracts

Stock Option Agreement - Ladenburg Thalmann Financial Services Inc. and Charles I. Johnston

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                         590 MADISON AVENUE, 34TH FLOOR
                               NEW YORK, NY 10022

                                                             As of March 9, 2004

Mr. Charles I. Johnston

Dear Mr. Johnston:

         We are pleased to inform you that Ladenburg Thalmann Financial Services
Inc. (the "Company") has granted you a nonqualified option (the "Option") to
purchase 1,000,000 shares of the Company's common stock, par value $.0001 per
share (the "Common Stock"), at a purchase price of $0.75 per share (any of the
underlying shares of Common Stock to be issued upon exercise of the Option are
referred to hereinafter as the "Shares"), pursuant to the Company's 1999
Performance Equity Plan, as may be and is in effect and as amended from time to
time (the "Plan"). Except as otherwise provided herein, this agreement is
subject in all respects to the terms and provisions of the Plan, all of which
terms and provisions are made a part of and incorporated in this agreement as if
they were each expressly set forth herein. Except as otherwise provided herein,
in the event of any conflict between the terms of this agreement and the terms
of the Plan, the terms of the Plan shall control.

         1. Subject to the terms hereof, the Option may be exercised on or prior
to March 8, 2014 (after which date the Option will, to the extent not previously
exercised, expire). The Option shall vest and become exercisable as to 200,000
of the Shares on and after each of March 9, 2005, 2006, 2007, 2008 and 2009,
provided you are then employed by the Company and/or one of its Subsidiaries (as
defined in the Plan); provided, however, that the entire Option shall vest
earlier and become immediately exercisable upon (i) the occurrence of a "Change
in Control" as defined in Section 3(D) of the Employment Agreement dated as of
March 9, 2004, by and between you and the Company, regardless of whether the
Employment Agreement is then in effect (the "Employment Agreement"), or (ii) the
termination of your employment with the Company due to death or Disability (as
defined in Section 7(B) of the Employment Agreement).

         2. The Option, from and after the date it vests and becomes exercisable
pursuant to Section 1 hereof, may be exercised in whole or in part by delivering
to the Company a written notice of exercise in the form attached hereto as
Exhibit A, specifying the number of the Shares to be purchased and the purchase
price therefor, together with payment of the purchase price of

Mr. Charles I. Johnson
March 9, 2004
Page 2

the Shares to be purchased. The purchase price is to be paid in cash or by
delivering shares of Common Stock already owned by you for at least six months
and having a Fair Market Value (as defined in the Plan) on the date of exercise
equal to the purchase price of the Option being exercised, or a combination of
such shares and cash.

                  In addition, payment of the purchase price of the Shares to be
purchased may also be made by delivering a properly executed notice to the
Company, together with a copy of the irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds necessary to
pay the purchase price, and, if required, the amount of any federal, state or
local withholding taxes.

                  No Shares shall be issued until full payment therefor has been
made. You shall have all of the rights of a stockholder of the Company holding
the Common Stock that is subject to the Option (including, if applicable, the
right to vote the Shares and the right to receive dividends thereon), when you
have given written notice of exercise, have paid in full for such Shares and, if
requested, have given the certificate described in Section 9 hereof.

         3. In the event your employment with the Company is terminated for any
reason, the Option shall forthwith terminate, provided that you may exercise any
then unexercised portion of the Option then vested and exercisable pursuant to
Section 1 hereof at any time prior to the earlier of nine months after the
termination of your employment (one year in the event of death or Disability),
or the expiration of the Option.

         4. The Option is not transferable except (i) by will or the applicable
laws of descent and distribution or (ii) for transfers to your family members or
trusts or other entities whose beneficiaries are your family members, provided
that such transfer is being made for estate, tax and/or personal planning
purposes and will not have adverse tax consequences to the Company. In such
event, the transferee shall remain subject to all the terms and conditions
applicable to the Option prior to such transfer.

         5. In the event of your death or Disability, the Option may be
exercised by your personal representative or representatives, or by the person
or persons to whom your rights under the Option shall pass by will or by the
applicable laws of descent and distribution, within the one year period
following termination due to death or Disability.

         6. In the event of any change in the shares of Common Stock of the
Company as a whole occurring as the result of a stock split, reverse stock
split, stock dividend payable on shares of Common Stock, combination or exchange
of shares, or other extraordinary or unusual event occurring after the date
hereof, the Committee (as defined in the Plan) shall determine, in its sole
discretion, whether such change equitably requires an adjustment in the terms of

Mr. Charles I. Johnson
March 9, 2004
Page 3

Option. Any such adjustments will be made by the Committee, whose determination
will be final, binding and conclusive.

         7. The grant of the Option does not confer on you any right to continue
in the employ of the Company or any of its subsidiaries or affiliates or
interfere in any way with the right of the Company or its subsidiaries or
affiliates to terminate the term of your employment.

         8. The Company shall require as a condition to the exercise of any
portion of the Option that you pay to the Company, or make other arrangements
regarding the payment of, any federal state or local taxes required by law to be
withheld as a result of such exercise.

         9. Unless at the time of the exercise of any portion of the Option a
registration statement under the Securities Act of 1933, as amended (the "Act"),
is in effect as to the Shares, the Shares shall be acquired for investment and
not for sale or distribution, and if the Company so requests, upon any exercise
of the Option, in whole or in part, you agree to execute and deliver to the
Company a reasonable certificate to such effect.

         10. You understand and acknowledge that: (i) any Shares purchased by
you upon exercise of the Option may be required to be held indefinitely unless
such Shares are subsequently registered under the Act or an exemption from such
registration is available; (ii) any sales of such Shares made in reliance upon
Rule 144 promulgated under the Act may be made only in accordance with the terms
and conditions of that Rule (which, under certain circumstances, restrict the
number of shares which may be sold and the manner in which shares may be sold);
(iii) certificates for Shares to be issued to you hereunder shall bear a legend
to the effect that the Shares have not been registered under the Act and that
the Shares may not be sold, hypothecated or otherwise transferred in the absence
of an effective registration statement under the Act relating thereto or an
opinion of counsel satisfactory to the Company that such registration is not
required; (iv) the Company shall place an appropriate "stop transfer" order with
its transfer agent with respect to such Shares; and (v) you shall abide by all
of the Company's policies in effect at the time you acquire any Shares and
thereafter, including the Company's Insider Trading Policy, with respect to the
ownership and trading of the Company's securities.

         11. Article XI and Sections 14.3(a) and (b) of the Plan shall not be
applicable to the Option.

         12. The Company shall use its best efforts to keep in effect a
Registration Statement on Form S-8 registering under the Act the Shares issuable
to you upon exercise of the Option.

         13. The Company represents and warrants to you as follows: (i) this
agreement and the grant of the Option hereunder have been authorized by all
necessary corporate action by the

Mr. Charles I. Johnson
March 9, 2004
Page 4

Company and this letter agreement is a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms; (ii) the
grant of the Option to you on the terms set forth herein will be exempt from the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended,
pursuant to Rule 16b-3(d) thereunder; (iii) the Company will obtain, at its
expense, any regulatory approvals necessary or advisable in connection with the
grant of the Option or the issuance of the Shares; and (iv) the Company
currently has reserved and available, and will continue to have reserved and
available during the term of the Option, sufficient authorized and issued shares
of its Common Stock for issuance upon exercise of the Option.

         14. This letter agreement contains all the understandings between the
Company and you pertaining to the matters referred to herein, and supercedes all
undertakings and agreements, whether oral or in writing, previously entered into
by the Company and you with respect hereto. No provision of this letter
agreement may be amended or waived unless such amendment or waiver is agreed to
in writing signed by you and a duly authorized officer of the Company. No waiver
by the Company or you of any breach by the other party hereto of any condition
or provision of this letter agreement to be performed by such other party shall
be deemed a waiver of a similar or dissimilar condition or provision at the same
time, any prior time or any subsequent time. If any provision of this letter
agreement or the application of any such provision to any party or circumstances
shall be determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this letter agreement or the
application of such provision to such person or circumstances 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. This letter agreement will be
governed by and construed in accordance with the laws of the State of New York,
without regard to its conflicts of laws principles. This letter 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.


Mr. Charles I. Johnson
March 9, 2004
Page 5

         Would you kindly evidence your acceptance of the Option and your
agreement to comply with the provisions hereof by executing this letter
agreement in the space provided below.

                                     Very truly yours,

                                     LADENBURG THALMANN FINANCIAL SERVICES INC.

                                     By: /s/ Salvatore Giardina
                                         Salvatore Giardina
                                         Vice President and Chief Financial


/s/ Charles I. Johnston
Charles I. Johnston


                                                                       EXHIBIT A

Ladenburg Thalmann Financial Services Inc.
590 Madison Avenue, 34th Floor
New York, NY  10022


         Notice is hereby given of my election to purchase _________ shares of
Common Stock, $.0001 par value (the "Shares"), of Ladenburg Thalmann Financial
Services Inc., at a price of $______ per Share, pursuant to the provisions of
the stock option granted to me as of March 9, 2004. Enclosed in payment for the
Shares is:

                     [ ]   my check in the amount of $_________________.

                     [ ]   ______________ Shares having a total value of
                           $______________, such value being based on the
                           closing price(s) of the Shares on the date hereof.

         The following information is supplied for use in issuing and
registering the Shares purchased hereby:

                  Number of Certificates
                     and Denominations              ----------------------------

                  Name                              ----------------------------

                  Address                           ----------------------------



                  Social Security No.               ----------------------------

                                                    Very truly yours,

                                                    Charles I. Johnston