Document:

Exhibit 10.2

 

VOTING AGREEMENT

 

This
Voting Agreement (this “Agreement”)
is dated as of April 3, 2005, by and among Petrohawk Energy Corporation (“Petrohawk Energy Corporation” or “Petrohawk”),
Mission Resources Corporation, a Delaware corporation (“Mission”) and Stellar
Funding, Ltd., a Cayman Islands company (“Stellar”) and Guggenheim Capital,
LLC, a Delaware limited liability company (“GC”) (Stellar and GC, each a
Stockholder and together, the “Stockholders”).

 

WHEREAS,
Stockholders desire that Petrohawk, Petrohawk Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of Petrohawk (“Purchaser”), and Mission, enter
into the Agreement and Plan of Merger dated the date hereof (the “Merger Agreemen”)”; undefined
capitalized terms herein are defined in the Merger Agreement) providing for the
merger of Mission with and into Purchaser (the “Merger”) upon the terms and subject
to the conditions set forth in the Merger Agreement;

 

WHEREAS,
Stockholders are executing this Agreement as an inducement to Petrohawk to
enter into and execute the Merger Agreement (and this Agreement shall not be
effective until the parties to the Merger Agreement execute the Merger
Agreement); and

 

WHEREAS,
the Board of Directors of Mission has adopted such resolutions as are necessary
so that the provisions of Section 203 of the DGCL are inapplicable to the
execution and performance of this Agreement;

 

NOW,
THEREFORE, in consideration of the execution and delivery by Petrohawk of the
Merger Agreement and the mutual covenants, conditions and agreements contained
herein and therein, the parties agree as follows:

 

1.                                       Representations and Warranties.

 

(a)                                  Each Stockholder represents and warrants to Petrohawk as follows:

 

(i)                                     Stockholder is the record (through a nominee or pledgee) and beneficial
owner of that number of shares of capital stock of Mission set forth opposite its
name on Schedule A (together with any other shares of other capital
stock of Mission acquired after the date hereof including through the exercise
of any stock options, warrants or similar instruments) being collectively
referred to herein as the “Subject Shares”) and the other
securities exercisable or exchangeable for such capital stock listed on Schedule A
(the “Other Securities”
and, together with the Subject Shares, the “Covered Securities”). Stockholder has the sole right to
vote and Transfer (as defined herein) the Covered Securities set forth opposite
its name on Schedule A, and none of such Covered Securities is
subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting or the Transfer of the Subject Shares, except (A) as
provided by this Agreement (it being understood that any pledge of the Pledged
Shares (as defined below) shall not be a breach of this representation) and (B) those
arising under applicable securities laws and (C) in the case of Stellar,
those arising under the indenture and management arrangements to which Stellar
is a party (the “Stellar
Arrangements”) and under the February 25th PSA.  Stockholder has all requisite power and
authority to enter into this Agreement and to perform its obligations
hereunder.  Stockholder is duly 

 

 

organized, validly existing and in good standing
under the laws of its jurisdiction of organization.  The execution and delivery of this Agreement
by Stockholder and the performance by Stockholder of its obligations hereunder
have been duly authorized by all necessary action on the part of
Stockholder.  This Agreement has been
duly executed and delivered by, and constitutes a valid and binding agreement
of, Stockholder, enforceable against Stockholder in accordance with its terms,
except as enforcement may be limited by or subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and other laws relating to
or affecting the rights of creditors and of general principles of equity.

 

(ii)                                  Neither the execution and delivery of this Agreement nor the performance
by Stockholder of its obligations hereunder will result in a violation of, or a
default under, or conflict with, (A) any provision of its certificate of
incorporation, bylaws, partnership agreement, limited liability company
agreement or similar organizational documents, (B) any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind
(other than as may relate to the Pledged Shares but subject to the proviso set
forth in (iv) below) to which Stockholder is a party or bound or to which
the Covered Securities are subject, except, in the case of clause (B), as would
not prevent, delay or otherwise materially impair Stockholder’s ability to
perform its obligations hereunder. 
Execution, delivery and performance of this Agreement by Stockholder
will not violate, or require any consent, approval or notice under, any provision
of any judgment, order, decree, statute, law, rule or regulation
applicable to Stockholder or the Covered Securities, except (x) for any reports under Sections 13(d) of the Exchange
Act as may be required in connection with this Agreement and the transactions
contemplated hereby or (y) as would not reasonably be expected to prevent,
delay or otherwise materially impair Stockholder’s ability to perform its
obligations hereunder.

 

(iii)                               [Intentionally omitted]

 

(iv)                              The Covered Securities
and the certificates representing such Covered Securities are held by
Stockholder, or by a nominee or custodian for the benefit of Stockholder, or,
in the case of Stellar, for the benefit of the indenture trustee pursuant to
the Stellar Arrangements, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for (A) any such encumbrances
arising hereunder, or (B) any such encumbrances arising pursuant to the
pledge of any Covered Securities by Stockholder to a financial institution (including,
in the case of Stellar, the indenture trustee pursuant to the Stellar
Arrangements) or a brokerage firm (the “Pledged Shares”); provided,
however, that Stockholder represents that any such arrangement regarding such
Pledged Shares shall not prevent, delay or otherwise materially impair
Stockholder’s ability to execute and deliver this Agreement or perform its
obligations hereunder and Stockholder shall use its reasonable efforts to
obtain an acknowledgment by the pledgee of the terms of this Agreement and such
pledgee’s agreement to vote the Pledged Shares (if and to the extent the voting
power of the Pledged Shares is being or to be exercised by pledgee) in
accordance with Section 2.

 

2

 

(v)                                 No broker, investment
banker, financial advisor or other person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission based upon arrangements made
by or on behalf of Stockholder in connection with its entering into this
Agreement.   Stockholder shall have no
obligation or liability of any kind with respect to any fee, commission or
other amount of any kind incurred or payable by or on behalf of Petrohawk or
Mission in connection with the Merger.

 

(vi)                              Stockholder understands and acknowledges that Petrohawk is entering into
the Merger Agreement in reliance upon Stockholder’s execution and delivery of
this Agreement.   Mission and Petrohawk
understand and acknowledge that Stockholder is entering into this Agreement in
reliance upon Petrohawk’s and Mission’s execution and delivery of the Merger
Agreement and intended consummation of the Merger.

 

(b)                                 Petrohawk represents and warrants to Stockholders and Mission that:

 

(i)                                     The execution and delivery of this Agreement and the Merger Agreement (the
“Transaction Documents”)
by Petrohawk and the performance by Petrohawk of its obligations thereunder and
the consummation of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of Petrohawk. Each of the
Transaction Documents has been duly executed and delivered by, and constitutes
a valid and binding agreement of, Petrohawk, enforceable against Petrohawk in
accordance with its terms, except as enforcement may be limited by or subject
to the effects of bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting the rights of creditors and of general principles
of equity.

 

(ii)                                  Neither the execution and delivery of the Transaction Documents nor the
performance by Petrohawk of its obligations thereunder will result in a
violation of, or a default under, or conflict with, (A) any provision of
its certificate of incorporation, bylaws, partnership agreement, limited
liability company agreement or similar organizational documents, (B) any
contract, trust, commitment, agreement, understanding, arrangement or
restriction of any kind to which Petrohawk is a party or bound, except, in the
case of clause (B), as would not prevent, delay or otherwise materially impair
Petrohawk’s ability to perform its obligations thereunder or consummate the
Merger.  Execution, delivery and
performance of the Transaction Documents by Petrohawk will not violate, or require
any consent, approval or notice under, any provision of any judgment, order,
decree, statute, law, rule or regulation applicable to Petrohawk or the
Covered Securities, except (x) for
any reports under Sections 13(d) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby or (y)
as would not reasonably be expected to prevent, delay or otherwise materially
impair Petrohawks’s ability to perform its obligations thereunder or consummate
the Merger.

 

(iii)                               There is no action, claim, suit, demand, hearing, notice of violation or
deficiency, or proceeding (including any investigation or partial proceeding,
such as a deposition), domestic or foreign, pending, or to the knowledge of
Petrohawk threatened, that could prevent the consummation of, materially impair
or materially delay the Merger or any of the transactions contemplated hereby.

 

3

 

(c)                                  Mission represents and warrants to Stockholders and Petrohawk that:

 

(i)                                     The execution and delivery of the Transaction Documents by Mission and the
performance by Mission of its obligations thereunder and consummation of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of Mission. Each of the Transaction Documents has been duly
executed and delivered by, and constitutes a valid and binding agreement of,
Mission, enforceable against Mission in accordance with its terms, except as
enforcement may be limited by or subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
the rights of creditors and of general principles of equity.

 

(ii)                                  Neither the execution and delivery of the Transaction Documents nor the
performance by Mission of its obligations thereunder will result in a violation
of, or a default under, or conflict with, (A) any provision of its
certificate of incorporation, bylaws, partnership agreement, limited liability
company agreement or similar organizational documents, (B) any contract,
trust, commitment, agreement, understanding, arrangement or restriction of any
kind to which Mission is a party or bound, except, in the case of clause (B),
as would not prevent, delay or otherwise materially impair Mission’s ability to
perform its obligations thereunder or consummate the Merger.  Execution, delivery and performance of the
Transaction Documents by Mission will not violate, or require any consent,
approval or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Mission or the Covered
Securities, except (x) for any
reports under Sections 13(d) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby or (y)
as would not reasonably be expected to prevent, delay or otherwise materially
impair Mission’s ability to perform its obligations thereunder or consummate
the Merger.

 

(iii)                               There is no action, claim, suit, demand, hearing, notice of violation or
deficiency, or proceeding (including any investigation or partial proceeding,
such as a deposition), domestic or foreign, pending, or to the knowledge of
Mission threatened, that could prevent the consummation of, materially impair
or materially delay the Merger or any of the transactions contemplated hereby.

 

(d)                                 Petrohawk and Mission each represent and warrant to Stockholders that:

 

(i)                                     Other than the voting agreements of even date herewith between Petrohawk,
Mission and Harbert Distressed Investment Master Fund, Ltd. (the “Other Support Agreement”) and
the Purchase and Sale Agreements dated December 17, 2003, February 25,
2004 and March 15, 2004 between Mission, Stockholder and others, which
agreements are publicly filed, it is not a party to any agreement or
understanding with any stockholder with respect to shares of capital stock of
Mission.

 

(ii)                                  The Other Support
Agreement contains terms and conditions substantially the same as and no more
or less favorable to any other stockholder party thereto than those contained
in this Agreement.

 

4

 

(iii)                               Entering into this Agreement and the Other Support Agreement shall not result
in any adverse consequence to the Stockholders under Mission’s rights plan, under
Section 203 of the DGCL or any similar protective provisions of the DGCL.

 

(iv)                              The Other Support Agreement is the only other voting agreement which
Petrohawk and Mission are entering into with respect to the Merger, and
Petrohawk and Mission will not enter into any other voting agreements regarding
the Merger.

 

(v)                                 To our knowledge, no filings of any kind (other than a Schedule 13D
under the Exchange Act reflecting this Agreement and any such Other Support
Agreement) shall be required to be filed by Stockholder or any such other
stockholders in connection with the entering into this Agreement or the Other
Support Agreement or the consummation of the Merger, including without
limitation any Section 16 filings under the Exchange Act.

 

(e)                                  Mission
hereby agrees with Stockholders that:

 

(i)  Mission hereby waives the provisions of Section 7.2
of that certain Purchase and Sale Agreement dated as of February 25, 2004
by and between Stellar and Mission (“February 25 PSA”), with respect to
the Excess Voting Securities (as that term is defined in the February 25
PSA); provided, however, that such waiver shall only be effective during the
Term and only with respect to the matters described in Section 2.  Stockholders and Mission agree and
acknowledge that notwithstanding the provisions of Section 7.2 of the February 25
PSA, Stockholders shall vote all of their Subject Shares (including the Excess
Voting Securities) in accordance with the provisions of this Agreement
including but not limited to Section 2 hereof; provided, however, that
such ability to vote all of the Subject Shares notwithstanding the provisions
of Section 7.2 of the February 25 PSA shall only be effective during
the Term and only with respect to the matters described in Section 2.

 

2.                                       Voting Agreements.  During the Term (as defined below) of this
Agreement, at any meeting of stockholders of Mission or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval (including by written consent) relating to the Merger is sought,
Stockholders shall, including by executing a written consent solicitation if
requested by Petrohawk, vote (or cause to be voted) the Subject Shares: (a) in
favor of the Merger, the adoption by Mission of the Merger Agreement and the
approval of the terms thereof and (b) against any transaction, agreement,
matter or other Acquisition Proposal that would reasonably be expected to impede,
interfere with, delay, postpone or attempt to discourage the Merger and the
Merger Agreement.

 

3.                                       Irrevocable Proxy.  Each Stockholder hereby appoints Petrohawk as
its proxy to vote all of Stockholder’s Subject Shares at any meeting of
stockholders of Mission (including any adjournments and postponements thereof)
on the matters described in Section 2, and to execute and deliver
any written consents to fulfill such Stockholder’s obligations under this
Agreement.  This proxy is coupled with an
interest and is irrevocable until the end of the Term, at which time it shall
terminate.

 

5

 

4.                                       Revocation of Other Proxies.   To the extent inconsistent with the other
provisions of this Agreement or the Merger Agreement, each Stockholder hereby
revokes any and all previous proxies with respect to such Stockholder’s Subject
Shares (other than, in the case of Stellar, the proxies granted by Stellar
pursuant to the Stellar Arrangements to the related indenture trustee and
collateral manager).

 

5.                                       Other Covenants.  Each Stockholder agrees with, and covenants
to, Petrohawk during the Term of this Agreement as follows:

 

(a)          Stockholder shall not after the
date hereof (i) sell, transfer, pledge, assign or otherwise dispose of
(including by gift) (collectively, “Transfer”),
or consent to any Transfer of, any Covered Securities or any interest therein,
except pursuant to the Merger, (ii) enter into any contract, option or
other agreement with respect to any Transfer of any or all of the Covered
Securities or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to the Subject
Shares or (iv) deposit the Subject Shares into a voting trust or enter
into a voting agreement or voting arrangement with respect to the Subject
Shares; provided, that Stockholder may Transfer any of the Covered Securities to
an affiliate of Stockholder (provided such affiliates evidences in a writing
reasonably satisfactory to the other parties hereto such affiliate’s agreement
to the terms hereof) or any other person or entity who is on the date hereof or
hereafter becomes a party to a similar agreement; provided, further, that the
restrictions in this Section 5 shall not be deemed violated by any
Transfer of Covered Securities pursuant to a cashless exercise of stock options
or warrants; and provided, further, that a pledge of Pledged Shares made in
accordance with Section 1(a)(iv) shall not be deemed to be a
violation of the restrictions in this Section 5 and, in the case of
Stellar, none of the following shall be deemed to be a violation of the
restrictions in this Section 5: (A) the pledge by Stellar of the
Covered Securities pursuant to the Stellar Arrangements, (B) any sale of
the Covered Securities that is required by the Stellar Arrangements (for
example, upon the occurrence of an event of default thereunder and the liquidation
of the collateral under the related indenture (provided that Stellar uses
reasonable efforts to cause the purchaser in such sale to evidence in a writing
reasonably satisfactory to the other parties hereto such purchaser’s agreement
to the terms hereof) and (C) any other sale of the Covered Securities that
is permitted by the Stellar Arrangements (provided that, as a condition to such
sale, Stellar causes the purchaser in such sale to evidence in writing
reasonably satisfactory to the other parties hereto such purchaser’s agreement
to the terms hereto.

 

(b)         Stockholder hereby waives any
rights of appraisal, or rights to dissent from the Merger, that such
Stockholder may have.

 

6

 

6.                                       Additional Covenants.  During the Term of this Agreement the Stockholders
shall not exercise any of the Other Securities other than as contemplated by Section 1.8
of the Merger Agreement.

 

7.                                       Certain Events.  This Agreement and the obligations hereunder
shall, during the Term hereof, attach to each Stockholder’s Covered Securities
and shall be binding upon any Person to which legal or beneficial ownership of
such Shares shall pass, whether by operation of law or otherwise, including such
Stockholder’s administrators or successors except to the extent that more
specific provision is made herein with respect to the transfer of Covered
Securities (such as exceptions in the cases of Pledged Shares and Stellar
Arrangements.  In the event of any stock
split, stock dividend, merger, reorganization, recapitalization or other change
in the capital structure of Mission affecting the Covered Securities or the
acquisition of additional shares of Covered Securities or other voting
securities of Mission by a Stockholder, the number of Covered Securities listed
on Schedule A beside the name of each Stockholder shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional Covered Securities or other voting securities of Mission issued
to or acquired by each Stockholder.

 

8.                                      Stop Transfer.  Mission shall not register the transfer of
any certificate representing any Covered Securities during the Term hereof,
unless such transfer is made to Petrohawk or otherwise in compliance with this
Agreement.

 

9.                                      Stockholder Capacity.  No person executing this Agreement (or an affiliate
thereof) who is or becomes during the Term a director of Mission makes any
agreement or understanding herein in his capacity as such director.  Each Stockholder signs solely in its capacity
as the record and beneficial owner of, or the trustee of a trust whose
beneficiaries are the beneficial owners of, such Stockholder’s Covered
Securities.

 

10.                               Further
Assurances.  Each Stockholder shall, upon request of Petrohawk,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by Petrohawk to be necessary or desirable to carry out
the provisions hereof.

 

11.                               Termination.  This Agreement, and all rights and
obligations of the parties hereunder, shall commence upon the execution of the
Merger Agreement as contemplated above and terminate upon (and shall only be
effective from the date hereof until) the first to occur of (i) the
Effective Time, (ii) the date upon which the Merger Agreement is
terminated in accordance with its terms, (iii) the mutual consent of
Petrohawk and Stockholders, (iv) material breach of any representation,
warranty or covenant hereunder, (v) the date of any amendment, waiver or
modification to the Merger Agreement in a manner that reduces the Merger
Consideration or otherwise materially adversely affects the Stockholders, or (vi) December 31,
2005 (such period from the date hereof until such termination is referred to
herein as the “Term”);
provided, however, that (x) Section 12 shall survive any termination of
this Agreement and (y) termination of this Agreement pursuant to clause (iv) above
shall not relieve any party hereto from liability for any willful and knowing
breach hereof prior to such termination.

 

12.                                 Payment for Shares.  Petrohawk hereby covenants and agrees with the Stockholders that it shall
take all actions reasonably necessary to ensure that immediately 

 

7

 

following the Effective Time, each Stockholder shall
receive, if applicable, the Per Share Cash Consideration which the Stockholder
is entitled to receive pursuant to the terms of the Merger Agreement in
immediately available funds.  The
remainder of the Merger Consideration that the Stockholders would be entitled
to receive under the Merger Agreement would be distributed following the
Effective Time in the manner set forth in the Merger Agreement.

 

13.                                 Miscellaneous.

 

(a)                                  All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given if delivered personally
or sent by overnight courier (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice): (i) if to Petrohawk or Mission, to the
appropriate address set forth in Section 8.4 of the Merger Agreement; and (ii) if
to Stockholders, to the appropriate address set forth on Schedule A.

 

(b)                                 Each
party to this Agreement (“Party”) submits to the jurisdiction of any state or
federal court sitting in the State of Delaware in any dispute or action arising
out of or relating to this Agreement and agrees that all claims in respect of
such dispute or action may be heard and determined in any such court.  Each Party also agrees not to bring any
dispute or action arising out of or relating to this Agreement in any other
court.  Each Party agrees that a final
judgment in any dispute or action so brought will be conclusive and may be
enforced by action on the judgment or in any other manner provided at law
(common, statutory or other) or in equity. Each Party waives any defense of
inconvenient forum to the maintenance of any dispute or action so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto.

 

(c)                                  Each Party appoints CSC Corporation, Wilmington, Delaware their agent to
receive on their behalf service of copies of the summons and complaint and any
other process that might be served in an dispute or action (the “Process Agent”).   Any Party may make service on any other
Party by sending or delivering a copy of the process (i) to the Party to
be served at the address and in the manner provided for the giving of notices
in Section 12(a) or (ii) to the Party to be served in care of
the Process Agent at the address and in the manner provided for the giving of
notices in Section 12(a).

 

(d)                                 The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.

 

(e)                                  This Agreement may be executed in two or more counterparts, all of which
shall be considered one and the same agreement and shall become effective as to
each Stockholder when one or more counterparts have been signed by each of Petrohawk,
Mission and the Stockholders and delivered to Petrohawk, Mission and the Stockholders.

 

(f)                                    This
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and this Agreement is not intended to confer upon any
other person (other than Petrohawk) any rights or remedies hereunder.

 

8

 

(g)                                 This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.

 

(h)                                 Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by operation of law or
otherwise, by any of the parties without the prior written consent of the other
parties.  Any assignment in violation of
the foregoing shall be void.

 

(i)                                     As
between Stockholders and Petrohawk, each of such Parties agrees that
irreparable damage to the other, non-breaching party would occur and that such
non-breaching party would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached.  It is accordingly agreed that the
non-breaching party shall be entitled to an injunction or injunctions to
prevent breaches by the other party of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in addition
to any other remedy to which it may be entitled at law or in equity.

 

(j)                                     If any term, provision, covenant or restriction herein, or the application
thereof to any circumstance, shall, to any extent, be held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions herein and the application
thereof to any other circumstances shall remain in full force and effect, shall
not in any way be affected, impaired or invalidated, and shall be enforced to
the fullest extent permitted by law.

 

(k)                                  No
amendment, modification or waiver in respect of this Agreement shall be
effective against any Party unless it shall be in writing and signed by such Party.

 

 

[SIGNATURE PAGE FOLLOWS]

 

9

 

IN
WITNESS WHEREOF, Petrohawk, Mission, and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.

 

	
   

  	
  Petrohawk Energy
  Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ FLOYD C. WILSON

  	
   

  
	
   

  	
  Name:

  	
  Floyd C. Wilson

  
	
   

  	
  Title:

  	
  Chairman, President and Chief Executive 

  
	
   

  	
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Mission Resources Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ROBERT L. CAVNAR

  	
   

  
	
   

  	
  Name:

  	
   Robert L. Cavnar

  
	
   

  	
  Title:

  	
   Chairman, President and Chief Executive 

  
	
   

  	
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STOCKHOLDERS:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Stellar Funding, Ltd.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: Guggenheim
  Investment Management, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Guggenheim Capital,
  LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
													

 

 

SCHEDULE A

 

	
  NAME AND ADDRESS

  	
   

  	
  NUMBER 

  OF SHARES

  	
   

  	
  NUMBER

  OF OPTIONS, 

  WARRANTS, ETC.

  	
   

  
	
  Stellar Funding, Ltd. 

  c/o Guggenheim Investment 

  Management, LLC 

  135 E. 57th Street 

  New York, NY 10022 

  	
   

  	
  5,000,000 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Guggenheim Capital, LLC 

  227 West Monroe Street, 

  Suite 4000 

  Chicago IL 60606

  	
   

  	
  1,250,000

  	
   

  	
   

  	
   

  

 

11EXHIBIT 10.1

 

SRS LABS, INC.

 

Nonqualified
Stock Option Agreement

 

Date
of Grant:   March 29, 2005

 

WHEREAS,
                                 ,
(the “Optionee”) is an Employee, Board Director, or Consultant of SRS Labs,
Inc. (the “Company”) or one of its wholly-owned subsidiaries;

 

WHEREAS,
the status of the Optionee as an Employee, Board Director, or Consultant shall
collectively be referred to as “employee” or “employment” herein; however, a
change of status of the Optionee from one position to another (e.g., from
Employee to Consultant) shall be determined to be a cessation of employment for
purposes of this Agreement, unless the Company approves otherwise;

 

WHEREAS,
the execution of a stock option agreement in the form hereof has been
authorized by a resolution of the Compensation Committee (the “Committee”) of
the Board of Directors (the “Board”) of the Company that was duly adopted on
the 29th day of March, 2005 and is incorporated herein by this reference; and

 

WHEREAS,
the option granted hereby is intended to be a nonqualified stock option and
shall not be treated as an “incentive stock option” within the meaning of that
term under Section 422 of the Internal Revenue Code of 1986;

 

NOW,
THEREFORE, pursuant to the Company’s 1996 Long-Term Incentive Plan (the “Plan”)
and subject to the terms and conditions thereof and the terms and conditions
hereinafter set forth, the Company hereby grants to the Optionee, a nonqualified stock option (the “Option”)
to purchase
               shares of the Company’s common stock, par
value $.001 per share (the “Common Shares”), at the exercise price of $4.01 per Common Share (the “Exercise Price”).

 

1.                                       Vesting
of Option.

 

(a)                                  Except
as may otherwise be provided in this Agreement, the options granted hereunder
shall become exercisable according to the following schedule:

 

	
  Vesting Date

  	
   

  	
  Amount of Shares 

  Vested on Vesting Date

  
	
   

  	
   

  	
   

  
	
  March 29,
  2006

  	
   

  	
  100%

  

 

To the extent
exercisable, this Option may be exercised in whole or in part from time to
time. Except as provided in Paragraph 2 hereof, the Option may not be exercised
at any time unless the Optionee shall have been in the continuous employ of the
Company or a subsidiary from the date hereof to the date of the exercise of the
Option.  For the purposes of this
agreement: “subsidiary” shall mean a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a direct or
indirect ownership or other equity interest; the continuous employment of the
Optionee with the Company or a subsidiary shall not be deemed to have been
interrupted, and the Optionee shall not be deemed to have ceased to be an
employee of the Company or a subsidiary, by reason of the transfer of his
employment among the Company and its subsidiaries.

 

1

 

(b)                                 Notwithstanding
the provisions of Section 1(a) hereof, the Option shall become immediately
exercisable in full upon any change in control of the Company that shall occur
while the Optionee is an employee of the Company or a subsidiary.  For the purposes of this agreement, the term
“change in control” shall mean the occurrence of any of the following events:

 

(i)                                     all
or substantially all of the assets of the Company are sold or transferred to
another corporation or entity, or the Company is merged, consolidated or
reorganized into or with another corporation or entity, with the result that
upon conclusion of the transaction less than 51 percent of the outstanding
securities entitled to vote generally in the election of directors or other
capital interests of the acquiring corporation or entity is owned, directly or
indirectly, by the shareholders of the Company generally prior to the
transaction; or

 

(ii)                                  there
is a report filed on Schedule 13D or Schedule 14D-1 (or any successor
schedule, form or report thereto), as promulgated pursuant to the Securities
Exchange Act of 1934 (the “Exchange Act”), disclosing that any person (as the
term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term “beneficial owner”
is defined under Rule 13d-3 or any successor rule or regulation thereto
under the Exchange Act) of securities representing 30 percent or more of the
combined voting power of the then-outstanding voting securities of the Company;
or

 

(iii)                               the Company shall file a
report or proxy statement with the Securities and Exchange Commission (the
“SEC”) pursuant to the Exchange Act disclosing in response to Item 1 of Form
8-K thereunder or Item 5(f) of Schedule 14A thereunder (or any successor
schedule, form, report or item thereto) that a change in control of the Company
has or may have occurred, or will or may occur in the future, pursuant to any
then-existing contract or transaction; or

 

(iv)                              the
individuals who constituted the Board at the beginning of any period of two
consecutive calendar years cease for any reason to constitute at least a
majority thereof unless the nomination for election by the Company’s
shareholders of each new member of the Board was approved by a vote of at least
two-thirds of the members of the Board still in office who were members of the
Board at the beginning of any such period.

 

In the event that any
person described in Section 1(b)(ii) hereof files an amendment to any
report referred to in Section 1(b)(ii) hereof that shows the beneficial
ownership described in Section 1(b)(ii) hereof to have decreased to less
than 30 percent, or in the event that any anticipated change in control
referred to in Section 1(b)(iii) hereof does not occur following the
filing with the SEC of any report or proxy statement described in Section 1(b)(iii)
hereof because any contract or transaction referred to in Section 1(b)(iii)
hereof is canceled or abandoned, the Committee may nullify the effect of Section 1(b)(ii)
or 1(b)(iii) hereof, as the case may be, and reinstate the provisions of Section 1(a)
hereof by giving notice thereof to the Optionee; provided, however,
that any such action by the Committee shall not prejudice any exercise of the
Option that may have occurred prior to the nullification and
reinstatement.  The provisions of Section 1(b)(ii)
hereof shall again become automatically effective following any such
nullification of the provisions thereof and reinstatement of the provisions of Section 1(a)
hereof in the event that any person described in Section 1(b)(ii) hereof
that shows the beneficial ownership described in Section 1(b)(ii) hereof
to have again increased to 30 percent or more.

 

(c)                                  Notwithstanding
the provisions of Section 1(a) hereof, the Option shall become immediately
exercisable in full if the Optionee should die or become permanently disabled
(within the meaning of the Company’s long-term disability plan) while in the
employ of the Company or any subsidiary, or if the Optionee should retire under
a retirement plan of the Company or any subsidiary at or after age 62 or at an
earlier age with the consent of the Board.

 

(d)                                 To
the extent that the Option shall have become exercisable in accordance with the
terms of this agreement, it may be exercised in whole or in part from time to
time thereafter.

 

2

 

2.                                       Termination
of Option.  The Option shall
terminate automatically and without further notice on the earliest of the
following dates:

 

(a)                                  three
months after the date upon which the Optionee ceases to be an employee of the
Company or a subsidiary, unless the cessation of his employment (i)  is a result of his death, disability or
retirement with the Company’s consent or (ii) follows a change in control;

 

(b)                                 three
years after the date upon which the Optionee ceases to be an employee of the
Company or a subsidiary (i) as a result of his disability, (ii) as a
result of his retirement with the Company’s consent, unless he is also a
director of the Company who continues to serve as such following his retirement
with the Company’s consent, or (iii) following a change in control, unless the
cessation of his employment following a change in control is a result of his
death;

 

(c)                                  one
year after the date which the Optionee ceases to be a director of the Company,
but not less than three years after the date upon which he ceases to be an
employee of the Company or a subsidiary, if (i) the cessation of his employment
is a result of his retirement with the Company’s consent and (ii) he
continues to serve as a director of the Company following the cessation of his
employment;

 

(d)                                 one
year after the date of the Optionee’s death regardless of whether he ceases to
be an employee of the Company or a subsidiary prior to his death (i)  as a
result of his disability or retirement with the Company’s consent or (ii)
following a change in control;

 

(e)                                  in
the event that the Optionee shall intentionally commit an act that the
Committee determines to be materially adverse to the interests of the Company
or a subsidiary, the Option shall terminate at the time of the determination
notwithstanding any other provision of this agreement; or

 

(f)                                    ten
years after the Date of Grant.

 

For the purposes of this
agreement:  “retirement with the
Company’s consent” shall mean the retirement of the Optionee prior to age 62,
if the Board or the Committee determines that his retirement is for the
convenience of the Company or a subsidiary, or the retirement of the Optionee
at or after age 62 under a retirement plan of the Company or a subsidiary;
“disability” shall mean that the Optionee has qualified for disability benefits
under the Company’s Long-Term Disability Program or any successor disability
plan or program of the Company.

 

3.                                       Payment
of Exercise Price.  The Exercise
Price shall be payable (a) in cash in the form of currency or check or other
cash equivalent acceptable to the Company, (b) by actual or constructive
transfer to the Company of nonforfeitable, unrestricted Common Shares that have
been owned by the Optionee for at least six months prior to the date of
exercise or (c) by any combination of the methods of payment described in
Sections 3(a) and 3(b) hereof.  The
requirement of payment in cash shall be deemed satisfied if the Optionee shall
have made arrangements satisfactory to the Company with a bank or broker who is
a member of the National Association of Securities Dealers, Inc. to sell on the
exercise date a sufficient number of shares being purchased so that the net proceeds
of the sale transaction will at least equal the Option Price plus payment of
any applicable withholding taxes and pursuant to which the bank or broker
undertakes to deliver the full Option Price plus payment of any applicable
withholding taxes to the Company on a date satisfactory to the Company, but not
later than the date on which the sale transaction will settle in the ordinary
course of business.

 

4.                                       Compliance
with Law.  The Company shall make
reasonable efforts to comply with all applicable federal and state securities
laws; provided, however, notwithstanding any other provisions of
this agreement, the Option shall not be exercisable if the exercise thereof
would result in a violation of any such law.

 

5.                                       Transferability
and Exercisability.  The Option,
including any interest thereof, shall not be transferable by the Optionee
except by will or the laws of descent and distribution, and the Option shall be
exercisable during the lifetime of the Optionee only by him or, in the event of
his legal incapacity to do so, by his guardian or legal representative acting
on behalf of the Optionee in a fiduciary capacity under state law and court
supervision.

 

3

 

6.                                       Adjustments.  The Committee shall make any adjustments in
the Exercise Price and the number or kind of shares of stock or other
securities covered by the Option that the Committee may determine to be
equitably required to prevent any dilution or expansion of the Optionee’s
rights under this agreement that otherwise would result from any (a) stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, (b) merger, consolidation, spin-off,
spin-out, split-off, split-up, reorganization, partial or complete liquidation
or other distribution of assets involving the Company or (c) other transaction
or event having an effect similar to any of those referred to in Section 6(a)
or 6(b) hereof.  Furthermore, in the
event that any transaction or event described or referred to in the immediately
preceding sentence shall occur, the Committee may provide in substitution of
any or all of the Optionee’s rights under this agreement such alternative
consideration as the Committee may determine in good faith to be equitable
under the circumstances and may require in connection therewith the surrender
of this Option to the extent replaced.

 

7.                                       Withholding
Taxes.  If the Company shall be
required to withhold any federal, state, local or foreign tax in connection with
any exercise of the Option, the Optionee shall pay the tax or make provisions
that are satisfactory to the Company for the payment thereof.

 

8.                                       Right
to Terminate Employment.  No
provision of this agreement shall limit in any way whatsoever any right that
the Company or a subsidiary may otherwise have to terminate the employment of
the Optionee at any time.

 

9.                                       Relation
to Other Benefits.  Any economic or
other benefit to the Optionee under this agreement or the Plan shall not be
taken into account in determining any benefits to which the Optionee may be
entitled under any profit-sharing, retirement or other benefit or compensation
plan maintained by the Company or a subsidiary and shall not affect the amount
of any life insurance coverage available to any beneficiary under any life
insurance plan covering employees of the Company or a subsidiary.

 

10.                                 Amendments.  Any amendment to the Plan shall be deemed to
be an amendment to this agreement to the extent that the amendment is
applicable hereto; provided, however, that no amendment shall
adversely affect the rights of the Optionee with respect to the Option without
the Optionee’s consent.

 

11.                                 Severability.  In the event that one or more of the
provisions of this agreement shall be invalidated for any reason by a court of
competent jurisdiction, any provision so invalidated shall be deemed to be
separable from the other provisions hereof, and the remaining provisions hereof
shall continue to be valid and fully enforceable.

 

12.                                 Governing
Law.  This agreement is made under,
and shall be construed in accordance with, the laws of the State of California.

 

 

	
   

  	
  SRS LABS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

 

The
undersigned Optionee hereby acknowledges receipt of an executed original of
this agreement and accepts the Option granted hereunder, subject to the terms
and conditions of the Plan and the terms and conditions hereinabove set forth.

 

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ,
  Optionee

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
						

 

4

 

SCHEDULE TO
EXHIBIT 10.1

 

SRS
Labs, Inc. entered into Nonqualified Stock Option Agreements on March 29,
2005 with several executive officers, each substantially identical to this
Exhibit 10.1 except that the Optionee and the number of Option Shares were
as follows: 

 

	
  Officer

  	
   

  	
  Number of Shares

  Subject to Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas C.K. Yuen

  	
   

  	
  11,250

  	
   

  
	
  Janet M. Biski

  	
   

  	
  7,500

  	
   

  
	
  Alan D. Kraemer

  	
   

  	
  7,500

  	
   

  
	
  Philip Wong

  	
   

  	
  7,500

  	
   

  
	
  Jennifer A. Drescher

  	
   

  	
  7,500

  	
   

  

 

5

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