Document:

Exhibit 10.5

 

STOCK OPTION AGREEMENT

 

THIS STOCK OPTION AGREEMENT (“Agreement”) is made as of this 30th
day of  January, 2004, by and
between EPIQ Systems, Inc.  a
Missouri corporation (the “Company”) and Jeffrey B. Baker (the “Employee”).

 

WITNESSETH:

 

WHEREAS,
Poorman-Douglas Corporation (the “Employer”) is a corporation which is
wholly-owned by P-D Holding Corp. which is a wholly-owned subsidiary of the
Company;

 

WHEREAS, as of January 30, 2004, the Employee has executed an
employment and non-competition agreement by and between the Employee and the
Employer (the “Employment Agreement”) pursuant to which the Employee will be
employed by the Employer;

 

WHEREAS, as an inducement for the Employee to enter into the Employment
Agreement, the Company has agreed to grant to the Employee the right and option
to purchase up to Two Hundred Thousand (200,000) shares of common stock, one
cent ($.01) par value of the Company (the “Stock”); and

 

WHEREAS, the Employee desires to accept the aforementioned option to
purchase the Stock in accordance with the provisions of the terms and
conditions of this Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties agree as
follows:

 

SECTION 1. 
GRANT OF OPTION

 

The Company hereby
grants as of the date hereof (the “Grant Date”) to the Employee the right and
option (the “Option”) to purchase all or any part of an aggregate of Two
Hundred Thousand (200,000) shares of the Stock (the “Option Shares”) (such
number being subject to adjustment as provided in Section 11 hereof) on the
terms and conditions set forth herein. 
The parties acknowledge and agree that this Option is intended to qualify
as a nonstatutory or nonqualified stock option (“NSO”) and not as an incentive
stock option under Section 422 of Internal Revenue Code of 1986, as amended
(the “Code”).

 

SECTION 2. 
PURCHASE PRICE

 

The per share purchase or exercise price of the Option Shares shall be
$18.20, which is the closing bid price of one (1) share of Stock as reported on
the NASDAQ National Market as of the close of trading on the Grant Date.  The purchase price is subject to adjustment
as provided in Section 11 hereof.

 

SECTION 3. 
MEDIUM OF PAYMENT

 

The parties agree that full payment of the purchase price for the
Option Shares shall be payable in either (a) United States Dollars by cash,
certified or cashier’s check, personal check, money order or wire transfer; or
(b) in any combination of cash or check as described in subsection (a).

 

SECTION 4. 
OPTION TERM AND TERMINATION

 

(a)                                  No part of the Option
shall be exercised after ten (10) years after the date hereof.

 

1

 

(b)                                 All rights to exercise
the Option hereunder shall be terminated in accordance with the following
provisions:

 

(i)                                     If the Employee is
no longer employed by the Employer or an Affiliate of the Employer for any
reason other than death, Disability (as defined in the Employment Agreement),
or for Cause (as defined in the Employment Agreement), the Employee shall be
entitled to exercise the Option, to the extent it is exercisable, in whole or
in part, within three (3) months after the date Employee’s employment
terminates, but in no event later than the date on which the Option would have
expired if Employee’s employment had not terminated.

 

(ii)                                  If the Employee is no
longer employed by the Employer or an Affiliate of the Employer on account of
Disability, the Employee may exercise the Option, to the extent it is
exercisable, in whole or in part, within one (1) year after the date on which
the Employee’s employment terminates on account of Disability, but in no event
later than the date on which the Option would have expired if the Employee had
not become Disabled.

 

(iii)                               If the Employee is no
longer employed by the Employer or an Affiliate of the Employer on account of
Employee’s death, the estate of the Employee or any person who acquires the
right to exercise the Option by will or the laws of descent or distribution or
by reason of the Employee’s death may exercise the Option, to the extent it is
exercisable, in whole or in part, within one (1) year after the Employee’s date
of death, but in no event later than the date on which the Option would have
expired if the Employee had not died.

 

(iv)                              If the Employee is no
longer employed by the Employer or an Affiliate of the Employer on account of
Employee’s termination for Cause, he shall forfeit any and all outstanding
rights under the Option and such rights shall be deemed to have lapsed for
purposes hereof as of the date of such termination of employment for Cause.

 

(c)                                      For purposes of this Agreement, an
“Affiliate of the Employer” shall mean any business entity directly or
indirectly controlling, controlled by or under common control with the
Employer.  For purposes of this
definition, “controlling”, “controlled by” or “under common control with” means
a more than fifty percent (50%) voting, equity and profits interest.

 

(d)                                 For purposes of this Agreement, Employee’s
employment with the Employer will not be deemed terminated if Employee goes on
a military leave, a sick leave, or any other bona fide leave of absence that is
approved by the Employer (or an Affiliate of Employer) in accordance with the
usual procedures of the Employer (or its Affiliate) and if continued crediting
of employment service is required by the terms of the leave or applicable law.

 

SECTION 5. 
TIME OF EXERCISE

 

(a)                                  The Option shall become vested in
accordance with the following schedule, if as of each such date Employee is
employed by Employer or an Affiliate of the Company:

 

	
  Date

  	
   

  	
  Cumulative Percentage of Option Vested

  
	
   

  	
   

  	
   

  
	
  First anniversary of
  the Grant Date

  	
   

  	
  20%

  
	
   

  	
   

  	
   

  
	
  Second anniversary of
  the Grant Date

  	
   

  	
  40%

  
	
   

  	
   

  	
   

  
	
  Third anniversary of
  the Grant Date

  	
   

  	
  60%

  
	
   

  	
   

  	
   

  
	
  Fourth anniversary of
  the Grant Date

  	
   

  	
  80%

  
	
   

  	
   

  	
   

  
	
  Fifth anniversary of
  the Grant Date

  	
   

  	
  100%

  

 

2

 

(b)                                 The Option or any
installment of the Option that has become exercisable in accordance with
Section 5(a) above, may be exercised at any time and from time to time (so long
as the term of the Option or such installment thereof has not expired), as to
all or any part of any installment thereof; provided, that the Option may not
be exercised for a fractional share of Stock.

 

(c)                                  If, at any time after
the date hereof, the Company (through action of the board of directors of the
Company or any committee thereof) executes, amends or otherwise modifies any
option or similar agreement or arrangement with any executive officer of the
Company such that all or any portion of an option to purchase shares of Stock
held by such executive officer of the Company shall become exercisable on an
accelerated basis upon the occurrence of a Change of Control of the Company (as
such term is then defined by the board of directors of the Company or any
committee thereof), then any installment of the Option hereunder that has not
become exercisable shall automatically become exercisable in accordance with
the schedule and terms approved by the board of directors of the Company or any
committee thereof for such other executive officer(s) of the Company; provided
that such accelerated vesting shall not become effective hereunder until
approved by the stockholders of the Company to the extent required by
applicable law.

 

SECTION 6. 
METHOD OF EXERCISE AND ISSUANCE OF SHARES

 

(a)                                  Each exercise of the
Option, or all or any portion of an installment thereof, in accordance with the
provision of Section 5 of this Agreement, shall be in compliance with any
Company policy regarding insider trading and shall be by written notice of
exercise delivered to the Chief Executive Officer or Chief Financial Officer of
the Company at the Company’s principal place of business specifying the number
of shares of Stock to be purchased and accompanied by payment in the manner
elected in Section 3 hereof.

 

(b)                                 As soon as practicable
after any such exercise in accordance with the foregoing provisions, the
Company shall deliver certificate(s) to the Employee representing the Stock
which relates to such exercise.

 

SECTION 7. 
NONTRANSFERABILITY

 

The Option, and
all rights and privileges hereunder, shall be nonassignable and nontransferable
by the Employee, either voluntarily or by operation of law (except by will or
by operation of the laws of descent and distribution), nor shall they be
pledged or hypothecated in any way, and shall be exercisable only by the
Employee during his lifetime, except as provided in Section 4(b)(iii) of this
Agreement.

 

SECTION 8. 
SHARE AUTHORIZATIONS, CONSENTS, ETC.

 

The Company,
during the term of the Option, will have a sufficient number of shares of Stock
authorized to satisfy this Option.  The
Company will seek to obtain from each regulatory commission or agency having
jurisdiction, such authority as may be required to issue and sell Stock to
satisfy the Option.  The inability of
the Company to obtain from any such regulatory commission or agency authority,
which counsel for the Company deems necessary for the lawful issuance and sale
of the Stock to satisfy the Option, shall relieve the Company from any
liability for failure to issue and sell Stock to satisfy the Option until such
time as such authority is obtained.

 

3

 

SECTION 9. 
INVESTMENT REPRESENTATIONS

 

The Employee may
be required, if it is deemed necessary in the opinion of counsel of the
Company, to represent to the Company at the time of exercise that it is
Employee’s intention to acquire the Stock for Employee’s private investment
only and not for resale or distribution to the public.  The Company may stamp any certificate
representing such Stock with a legend to the effect that such Stock has not
been registered under the Securities Act of 1933, as amended, and that it may
not be sold or transferred until so registered, or until an opinion of counsel
satisfactory to the Company is received to the effect that such registration is
not necessary.  In the event any Stock
issued pursuant to this Agreement is registered under the Securities Act of
1933, as amended, then the investment representations and restrictions imposed
pursuant to federal securities law shall automatically be inoperative with
respect to the registered shares of Stock. 
Nothing herein shall be deemed to obligate the Company to so register
any of such Stock.  Whenever the Company
next files a registration statement on Form S-8 (it being understood that the
Company shall file a registration statement on Form S-8 within two years after
the date hereof), the Company will include in that registration statement the
unexercised Option Shares to the extent permitted by law.  The Company will maintain the effectiveness
of such registration statement on Form S-8 for all unexercised Option Shares,
to the extent permitted by law, until all such Option Shares become exercised.

 

SECTION 10. 
RIGHTS AS SHAREHOLDER

 

The Employee shall
have no rights as a shareholder with respect to any Stock issuable pursuant to
this Option until the certificate(s) representing such Stock shall have been
issued and delivered to Employee.  No
adjustment shall be made for dividends or other rights for which the record
date is prior to the date such Stock certificate(s) is delivered to the
Employee.

 

SECTION 11. 
CHANGES IN CAPITAL STRUCTURE

 

(a)                                  The Option granted
hereunder shall be subject to adjustment by the Board of Directors of the
Company as to the number and price of shares subject to such Option in the
event of changes in the outstanding shares of Stock by reason of stock
dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Grant Date of the Option.  In the event of any such change in the
outstanding shares of Stock, the aggregate number of Option Shares, which
remain outstanding, and the exercise price thereof, under this Agreement shall
be adjusted by the Board of Directors of the Company, whose determination shall
be conclusive.

 

(b)                                 Except as otherwise
expressly provided herein, the issuance by the Company of shares of its capital
stock of any class, or securities convertible into shares of capital stock of
any class, either in connection with a direct sale or upon the exercise of
options, rights or warrants to subscribe therefor, or upon conversion of shares
or obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or exercise price of the Option Shares which remain
outstanding.

 

(c)                                  Without limiting the
generality of the foregoing, the Option granted hereunder shall not affect in
any manner the right or power of the Company to make, authorize or consummate
(i) any or all adjustments, recapitalizations, reorganizations or other changes
in the Company’s capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt
securities, or preferred or preference stock that would rank above the shares
of Stock subject to Option; (iv) the dissolution or liquidation of the Company;
(v) any sale, transfer or assignment of all or any part of the assets or
business of the Company; or (vi) any other corporate act or proceedings,
whether of a similar character or otherwise.

 

4

 

SECTION 12. 
CONTINUATION OF EMPLOYMENT

 

Nothing herein
shall confer upon the Employee any right to continued employment, or interfere
with the right of the Employer, the Company or an Affiliate of the Company,
whichever is serving as the employer of the Employee, to terminate his
employment at any time, for any reason (subject to the terms of the Employment
Agreement).

 

SECTION 13. 
TAX TREATMENT AND WITHHOLDING TAXES

 

The Company intends that the Option will be considered a nonstatutory
or nonqualified stock option under the Code. 
The Employee, the Company or an Affiliate of the Company, whichever is
serving as the employer of the Employee, has the right to require the Employee
or Employee’s permitted successor in interest to pay to the Employer, the
Company or an Affiliate of the Company, whichever is serving as the employer of
the Employee, the amount of any taxes which said employer may be required to
withhold with respect to such Option Shares. 
If permitted by law, the Company has the right to issue or transfer
Option Shares net of the number of shares of Stock sufficient to satisfy tax
withholding requirements.  For
withholding tax purposes, the Option Shares to be withheld shall be the fair
market value on the date of the withholding obligation.

 

The foregoing is not intended as tax advice to Employee.  Furthermore, neither the Company nor the
Employer make any representation or warranty concerning the tax consequences to
the Employee upon grant or exercise of the Option, the receipt of the Option
Shares upon the exercise in whole or in part of the Option, or the subsequent
sale of the Option Shares acquired pursuant to the exercise, in whole or in
part, of the Option.  The Employee should
consult his or her own tax advisor.

 

SECTION 14. 
FAIR MARKET VALUE

 

As used herein, except with respect to the exercise price set forth in
Section 2, the fair market value shall be the closing price at which the Stock
is traded on the applicable date.  For
this purpose, the closing price of the Stock on any business day shall be (i)
if such Stock is listed or admitted for trading on any United States national
securities exchange, or if actual transactions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of the
Stock on such exchange or reporting system, as reported in any newspaper of
general circulation, (ii) if the Stock is quoted on the National Association of
Securities Dealers Automated Quotations System (“NASDAQ”), or any similar
system of automated dissemination of quotations of securities prices in common
use, the closing bid quotation for such day of the Stock on such system, or
(iii) if neither clause (i) or (ii) is applicable, the mean between the high
bid and low ask quotations for the Stock as reported by the National Quotation
Bureau, Incorporated if at least two securities dealers have inserted both bid
and ask quotations for the Stock on at least 5 of the 10 preceding days.

 

SECTION 15.  GOVERNING LAW

 

This Agreement shall be subject to, and governed by, the Laws of the
State of Missouri irrespective of the fact that one or more of the parties now
is, or may become, a resident of a different state.

 

SECTION 16. 
MISCELLANEOUS

 

The Option shall be administered by the Board of Directors of the
Company or a Committee of the Board of Directors of the Company (the Board of
Directors or Committee of the Board of Directors shall hereinafter be referred
to as the “Administrator”).  The parties
hereby acknowledge and agree that the Administrator shall have the authority,
consistent with this Agreement, to interpret this Agreement, to promulgate such
rules, policies and procedures to administer the Option and the exercise
thereof, to delegate ministerial responsibilities relating to the Option to
appropriate persons and to make all other determinations necessary or desirable
for the administration of this Agreement. 
All decisions, determinations and interpretations of the Administrator
shall be binding on the parties. 
Neither the Company, the Employer, nor

 

5

 

any Affiliate
of the Company is under any obligation to repurchase the Option Shares acquired
pursuant to the exercise of the Option. 
The proceeds received by the Company from the exercise of this Option
shall be used for any purposes as the Company shall determine in its sole and
absolute discretion.  If any provision
of this Agreement shall be held to be invalid, unenforceable or illegal for any
reason, such a determination shall not affect the validity, enforceability, or
legality of the remaining provisions hereof. 
In the event that any provision of this Agreement is determined to be
vague or ambiguous, the parties agree that such provision should not be
disregarded or eliminated, but construed in accordance with the intent of the
parties.  To the extent applicable and
without limiting the generality of the foregoing, the transactions contemplated
under this Agreement are intended to comply with all applicable conditions of
Rule 16b-3 or its successors promulgated under the Securities Exchange Act of
1934, as amended, and to the extent any provision of this Agreement or action
by any party hereunder is inconsistent with the foregoing requirements, it
shall be deemed null and void, to the extent required by law  The failure of any party to enforce any of
the provisions of this Agreement in any single instance, shall not prevent the
enforcement thereof in any other instance, and no provision of this Agreement
shall be deemed to have been waived or modified unless such waiver or
modification shall be in writing and signed by the parties hereto.  This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
matters contained herein and supersedes all prior agreements and
understandings, whether or not in writing, between the parties with respect to
these matters.  This Agreement may be
amended or modified only by the written agreement of the parties hereto.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, executors, administrators, successors and assigns.

 

IN WITNESS WHEREOF, the Company has caused this Stock
Option Agreement to be duly executed by its duly authorized officer, and the
Employee has executed this instrument, all as of the day and year first above
written.

 

	
  EPIQ
  SYSTEMS, INC.

  	
  JEFFREY B.
  BAKER

  
	
   

  	
   

  
	
  “Company”

  	
  “Employee”

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
     /s/   Christopher
  E. Olofson

  	
   

  	
    /s/   Jeffrey
  B. Baker

  	
   

  
	
  Name:

  	
  Christopher
  E. Olofson

  	
  Jeffrey B.
  Baker

  
	
  Title:

  	
  President
  and Chief Operating Officer

  	
   

  
						

 

6Exhibit 10.6

 

STOCK OPTION AGREEMENT

 

THIS STOCK OPTION
AGREEMENT (“Agreement”) is made as of this 30th day of  January, 2004, by and between EPIQ
Systems, Inc.  a Missouri
corporation (the “Company”) and Edward J. Nimmo (the “Employee”).

 

WITNESSETH:

 

WHEREAS,
Poorman-Douglas Corporation (the “Employer”) is a corporation which is
wholly-owned by P-D Holding Corp. which is a wholly-owned subsidiary of the
Company;

 

WHEREAS, as of January
30, 2004, the Employee has executed an employment and non-competition agreement
by and between the Employee and the Employer (the “Employment Agreement”)
pursuant to which the Employee will be employed by the Employer;

 

WHEREAS, as an inducement
for the Employee to enter into the Employment Agreement, the Company has agreed
to grant to the Employee the right and option to purchase up to One Hundred
Thousand (100,000) shares of common stock, one cent ($.01) par value of the
Company (the “Stock”); and

 

WHEREAS, the Employee
desires to accept the aforementioned option to purchase the Stock in accordance
with the provisions of the terms and conditions of this Agreement as set forth
herein.

 

NOW, THEREFORE, in
consideration of the mutual covenants hereinafter set forth and for other good
and valuable consideration, the parties agree as follows:

 

SECTION 1.  GRANT OF OPTION

 

The Company hereby
grants as of the date hereof (the “Grant Date”) to the Employee the right and
option (the “Option”) to purchase all or any part of an aggregate of One
Hundred Thousand (100,000) shares of the Stock (the “Option Shares”) (such
number being subject to adjustment as provided in Section 11 hereof) on the
terms and conditions set forth herein. 
The parties acknowledge and agree that this Option is intended to qualify
as a nonstatutory or nonqualified stock option (“NSO”) and not as an incentive
stock option under Section 422 of Internal Revenue Code of 1986, as amended
(the “Code”).

 

SECTION 2.  PURCHASE PRICE

 

The per share purchase or
exercise price of the Option Shares shall be $18.20, which is the closing bid
price of one (1) share of Stock as reported on the NASDAQ National Market as of
the close of trading on the Grant Date. 
The purchase price is subject to adjustment as provided in Section 11
hereof.

 

SECTION 3.  MEDIUM OF PAYMENT

 

The parties agree that
full payment of the purchase price for the Option Shares shall be payable in
either (a) United States Dollars by cash, certified or cashier’s check,
personal check, money order or wire transfer; or (b) in any combination of cash
or check as described in subsection (a).

 

1

 

SECTION 4.  OPTION TERM AND TERMINATION

 

(a)                                  No
part of the Option shall be exercised after ten (10) years after the date
hereof.

 

(b)                                 All
rights to exercise the Option hereunder shall be terminated in accordance with
the following provisions:

 

(i)                                   If
the Employee is no longer employed by the Employer or an Affiliate of the
Employer for any reason other than death, Disability (as defined in the
Employment Agreement), or for Cause (as defined in the Employment Agreement),
the Employee shall be entitled to exercise the Option, to the extent it is
exercisable, in whole or in part, within three (3) months after the date
Employee’s employment terminates, but in no event later than the date on which
the Option would have expired if Employee’s employment had not terminated.

 

(ii)                                  If
the Employee is no longer employed by the Employer or an Affiliate of the
Employer on account of Disability, the Employee may exercise the Option, to the
extent it is exercisable, in whole or in part, within one (1) year after the
date on which the Employee’s employment terminates on account of Disability,
but in no event later than the date on which the Option would have expired if
the Employee had not become Disabled.

 

(iii)                               If the Employee is no
longer employed by the Employer or an Affiliate of the Employer on account of
Employee’s death, the estate of the Employee or any person who acquires the
right to exercise the Option by will or the laws of descent or distribution or
by reason of the Employee’s death may exercise the Option, to the extent it is
exercisable, in whole or in part, within one (1) year after the Employee’s date
of death, but in no event later than the date on which the Option would have expired
if the Employee had not died.

 

(iv)                              If
the Employee is no longer employed by the Employer or an Affiliate of the
Employer on account of Employee’s termination for Cause, he shall forfeit any
and all outstanding rights under the Option and such rights shall be deemed to
have lapsed for purposes hereof as of the date of such termination of
employment for Cause.

 

(c)                                  For
purposes of this Agreement, an “Affiliate of the Employer” shall mean any
business entity directly or indirectly controlling, controlled by or under
common control with the Employer.  For
purposes of this definition, “controlling”, “controlled by” or “under common
control with” means a more than fifty percent (50%) voting, equity and profits
interest.

 

(d)                                 For
purposes of this Agreement, Employee’s employment with the Employer will not be
deemed terminated if Employee goes on a military leave, a sick leave, or any
other bona fide leave of absence that is approved by the Employer (or an
Affiliate of Employer) in accordance with the usual procedures of the Employer
(or its Affiliate) and if continued crediting of employment service is required
by the terms of the leave or applicable law.

 

SECTION 5.  TIME OF EXERCISE

 

(a)                                  The
Option shall become vested in accordance with the following schedule, if as of
each such date Employee is employed by Employer or an Affiliate of the Company:

 

	
  Date

  	
   

  	
  Cumulative
  Percentage of Option Vested

  
	
   

  	
   

  	
   

  
	
  First
  anniversary of the Grant Date

  	
   

  	
  20%

  
	
   

  	
   

  	
   

  
	
  Second
  anniversary of the Grant Date

  	
   

  	
  40%

  
	
   

  	
   

  	
   

  
	
  Third
  anniversary of the Grant Date

  	
   

  	
  60%

  
	
   

  	
   

  	
   

  
	
  Fourth
  anniversary of the Grant Date

  	
   

  	
  80%

  
	
   

  	
   

  	
   

  
	
  Fifth
  anniversary of the Grant Date

  	
   

  	
  100%

  

 

2

 

(b)                                 The
Option or any installment of the Option that has become exercisable in
accordance with Section 5(a) above, may be exercised at any time and from time
to time (so long as the term of the Option or such installment thereof has not
expired), as to all or any part of any installment thereof; provided, that the
Option may not be exercised for a fractional share of Stock.

 

(c)                                  If,
at any time after the date hereof, the Company (through action of the board of
directors of the Company or any committee thereof) executes, amends or
otherwise modifies any option or similar agreement or arrangement with any
executive officer of the Company such that all or any portion of an option to
purchase shares of Stock held by such executive officer of the Company shall
become exercisable on an accelerated basis upon the occurrence of a Change of
Control of the Company (as such term is then defined by the board of directors
of the Company or any committee thereof), then any installment of the Option
hereunder that has not become exercisable shall automatically become
exercisable in accordance with the schedule and terms approved by the board of
directors of the Company or any committee thereof for such other executive
officer(s) of the Company; provided that such accelerated vesting shall
not become effective hereunder until approved by the stockholders of the Company
to the extent required by applicable law.

 

SECTION 6.  METHOD OF EXERCISE AND ISSUANCE OF SHARES

 

(a)                                  Each
exercise of the Option, or all or any portion of an installment thereof, in
accordance with the provision of Section 5 of this Agreement, shall be in
compliance with any Company policy regarding insider trading and shall be by
written notice of exercise delivered to the Chief Executive Officer or Chief
Financial Officer of the Company at the Company’s principal place of business
specifying the number of shares of Stock to be purchased and accompanied by
payment in the manner elected in Section 3 hereof.

 

(b)                                 As
soon as practicable after any such exercise in accordance with the foregoing
provisions, the Company shall deliver certificate(s) to the Employee
representing the Stock which relates to such exercise.

 

SECTION 7.  NONTRANSFERABILITY

 

The Option, and
all rights and privileges hereunder, shall be nonassignable and nontransferable
by the Employee, either voluntarily or by operation of law (except by will or
by operation of the laws of descent and distribution), nor shall they be
pledged or hypothecated in any way, and shall be exercisable only by the
Employee during his lifetime, except as provided in Section 4(b)(iii) of this
Agreement.

 

SECTION 8.  SHARE AUTHORIZATIONS, CONSENTS, ETC.

 

The Company, during the term of the Option, will have
a sufficient number of shares of Stock authorized to satisfy this Option.  The Company will seek to obtain from each
regulatory commission or agency having jurisdiction, such authority as may be
required to issue and sell Stock to satisfy the Option.  The inability of the Company to obtain from
any such regulatory commission or agency authority, which counsel for the Company
deems necessary for the lawful issuance and sale of the Stock to satisfy the
Option, shall relieve the Company from any liability for failure to issue and
sell Stock to satisfy the Option until such time as such authority is obtained.

 

3

 

SECTION 9.  INVESTMENT REPRESENTATIONS

 

The Employee may be required, if it is deemed
necessary in the opinion of counsel of the Company, to represent to the Company
at the time of exercise that it is Employee’s intention to acquire the Stock
for Employee’s private investment only and not for resale or distribution to
the public.  The Company may stamp any
certificate representing such Stock with a legend to the effect that such Stock
has not been registered under the Securities Act of 1933, as amended, and that
it may not be sold or transferred until so registered, or until an opinion of
counsel satisfactory to the Company is received to the effect that such
registration is not necessary.  In the
event any Stock issued pursuant to this Agreement is registered under the
Securities Act of 1933, as amended, then the investment representations and
restrictions imposed pursuant to federal securities law shall automatically be
inoperative with respect to the registered shares of Stock.  Nothing herein shall be deemed to obligate
the Company to so register any of such Stock. 
Whenever the Company next files a registration statement on Form S-8 (it
being understood that the Company shall file a registration statement on Form
S-8 within two years after the date hereof), the Company will include in that
registration statement the unexercised Option Shares to the extent permitted by
law.  The Company will maintain the
effectiveness of such registration statement on Form S-8 for all unexercised
Option Shares, to the extent permitted by law, until all such Option Shares
become exercised.

 

SECTION 10.  RIGHTS AS SHAREHOLDER

 

The Employee shall have no rights as a shareholder
with respect to any Stock issuable pursuant to this Option until the
certificate(s) representing such Stock shall have been issued and delivered to
Employee.  No adjustment shall be made
for dividends or other rights for which the record date is prior to the date
such Stock certificate(s) is delivered to the Employee.

 

SECTION 11.  CHANGES IN CAPITAL STRUCTURE

 

(a)                                  The
Option granted hereunder shall be subject to adjustment by the Board of
Directors of the Company as to the number and price of shares subject to such
Option in the event of changes in the outstanding shares of Stock by reason of
stock dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the Grant Date of the Option.  In the event of any such change in the
outstanding shares of Stock, the aggregate number of Option Shares, which
remain outstanding, and the exercise price thereof, under this Agreement shall
be adjusted by the Board of Directors of the Company, whose determination shall
be conclusive.

 

(b)                                 Except
as otherwise expressly provided herein, the issuance by the Company of shares
of its capital stock of any class, or securities convertible into shares of
capital stock of any class, either in connection with a direct sale or upon the
exercise of options, rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or exercise price of the Option
Shares which remain outstanding.

 

(c)                                  Without
limiting the generality of the foregoing, the Option granted hereunder shall
not affect in any manner the right or power of the Company to make, authorize
or consummate (i) any or all adjustments, recapitalizations, reorganizations or
other changes in the Company’s capital structure or its business; (ii) any
merger or consolidation of the Company; (iii) any issue by the Company of debt
securities, or preferred or preference stock that would rank above the shares
of Stock subject to Option; (iv) the dissolution or liquidation of the Company;
(v) any sale, transfer or assignment of all or any part of the assets or
business of the Company; or (vi) any other corporate act or proceedings,
whether of a similar character or otherwise.

 

4

 

SECTION 12.  CONTINUATION OF EMPLOYMENT

 

Nothing herein shall confer upon the Employee any
right to continued employment, or interfere with the right of the Employer, the
Company or an Affiliate of the Company, whichever is serving as the employer of
the Employee, to terminate his employment at any time, for any reason (subject
to the terms of the Employment Agreement).

 

SECTION 13.  TAX TREATMENT AND WITHHOLDING TAXES

 

The Company intends that
the Option will be considered a nonstatutory or nonqualified stock option under
the Code.  The Employee, the Company or
an Affiliate of the Company, whichever is serving as the employer of the
Employee, has the right to require the Employee or Employee’s permitted
successor in interest to pay to the Employer, the Company or an Affiliate of
the Company, whichever is serving as the employer of the Employee, the amount
of any taxes which said employer may be required to withhold with respect to
such Option Shares.  If permitted by
law, the Company has the right to issue or transfer Option Shares net of the
number of shares of Stock sufficient to satisfy tax withholding requirements.  For withholding tax purposes, the Option
Shares to be withheld shall be the fair market value on the date of the
withholding obligation.

 

The foregoing is not
intended as tax advice to Employee. 
Furthermore, neither the Company nor the Employer make any
representation or warranty concerning the tax consequences to the Employee upon
grant or exercise of the Option, the receipt of the Option Shares upon the
exercise in whole or in part of the Option, or the subsequent sale of the
Option Shares acquired pursuant to the exercise, in whole or in part, of the
Option.  The Employee should consult his
or her own tax advisor.

 

SECTION 14.  FAIR MARKET VALUE

 

As used herein, except
with respect to the exercise price set forth in Section 2, the fair market
value shall be the closing price at which the Stock is traded on the applicable
date.  For this purpose, the closing
price of the Stock on any business day shall be (i) if such Stock is listed or
admitted for trading on any United States national securities exchange, or if
actual transactions are otherwise reported on a consolidated transaction
reporting system, the last reported sale price of the Stock on such exchange or
reporting system, as reported in any newspaper of general circulation, (ii) if
the Stock is quoted on the National Association of Securities Dealers Automated
Quotations System (“NASDAQ”), or any similar system of automated dissemination
of quotations of securities prices in common use, the closing bid quotation for
such day of the Stock on such system, or (iii) if neither clause (i) or (ii) is
applicable, the mean between the high bid and low ask quotations for the Stock
as reported by the National Quotation Bureau, Incorporated if at least two
securities dealers have inserted both bid and ask quotations for the Stock on
at least 5 of the 10 preceding days.

 

SECTION 15.  GOVERNING LAW

 

This Agreement shall be
subject to, and governed by, the Laws of the State of Missouri irrespective of
the fact that one or more of the parties now is, or may become, a resident of a
different state.

 

SECTION 16.  MISCELLANEOUS

 

The Option shall be
administered by the Board of Directors of the Company or a Committee of the
Board of Directors of the Company (the Board of Directors or Committee of the
Board of Directors shall hereinafter be referred to as the “Administrator”).  The parties hereby acknowledge and agree
that the Administrator shall have the authority, consistent with this
Agreement, to interpret this Agreement, to promulgate such rules, policies and
procedures to administer the Option and the exercise thereof, to delegate ministerial
responsibilities relating to the Option to appropriate persons and to make all
other determinations necessary or desirable for the administration of this
Agreement.  All decisions,
determinations and interpretations of the Administrator shall be binding on the
parties.  Neither the Company, the
Employer, nor

 

5

 

any Affiliate of the Company is under any obligation
to repurchase the Option Shares acquired pursuant to the exercise of the
Option.  The proceeds received by the
Company from the exercise of this Option shall be used for any purposes as the
Company shall determine in its sole and absolute discretion.  If any provision of this Agreement shall be
held to be invalid, unenforceable or illegal for any reason, such a
determination shall not affect the validity, enforceability, or legality of the
remaining provisions hereof.  In the
event that any provision of this Agreement is determined to be vague or ambiguous,
the parties agree that such provision should not be disregarded or eliminated,
but construed in accordance with the intent of the parties.  To the extent applicable and without
limiting the generality of the foregoing, the transactions contemplated under
this Agreement are intended to comply with all applicable conditions of Rule
16b-3 or its successors promulgated under the Securities Exchange Act of 1934,
as amended, and to the extent any provision of this Agreement or action by any
party hereunder is inconsistent with the foregoing requirements, it shall be
deemed null and void, to the extent required by law  The failure of any party to enforce any of the provisions of this
Agreement in any single instance, shall not prevent the enforcement thereof in
any other instance, and no provision of this Agreement shall be deemed to have
been waived or modified unless such waiver or modification shall be in writing
and signed by the parties hereto.  This
Agreement constitutes the full and entire understanding and agreement between
the parties with regard to the matters contained herein and supersedes all
prior agreements and understandings, whether or not in writing, between the
parties with respect to these matters. 
This Agreement may be amended or modified only by the written agreement
of the parties hereto.  This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, executors, administrators,
successors and assigns.

 

6

 

IN WITNESS WHEREOF, the Company has caused this Stock
Option Agreement to be duly executed by its duly authorized officer, and the
Employee has executed this instrument, all as of the day and year first above
written.

 

 

	
  EPIQ SYSTEMS, INC.

  	
  EDWARD J. NIMMO

  
	
   

  	
   

  
	
  “Company”

  	
  “Employee”

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
     /s/   Christopher
  E. Olofson

  	
   

  	
     /s/   Edward
  J. Nimmo

  	
   

  
	
  Name:

  	
  Christopher E. Olofson

  	
  Edward J. Nimmo

  
	
  Title:

  	
  President and Chief
  Operating Officer

  	
   

  
						

 

7

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