EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of the 19th day of December,
2006 by and between XXXXXX ELECTRONICS, INC., a New York corporation (the
"Company"), and XXXXXX X. XxXXXXXX ("Executive").
In consideration of the mutual covenants contained in this Agreement, the
Company and Executive agree as follows:
1. Employment. During the term of this Agreement (as defined in Section 2),
the Company shall employ Executive, and Executive hereby accepts such employment
by the Company, in accordance with the terms and conditions set forth in this
Agreement.
a) Position and Duties. Executive shall serve as Interim Chief Executive
Officer and President of the Company or in such other position with the Company,
as the Board of Directors of the Company shall, from time to time, specify.
Executive shall perform all duties, services and responsibilities and have such
authority and powers for, and on behalf of, the Company as are customary and
appropriate for such position designated by, as are established from time to
time by, or in accordance with procedures established by, the Company's Board of
Directors.
(b) Performance. Executive shall perform the duties called for under this
Agreement to the best of his ability and shall devote an appropriate amount of
his business time (no less than 40 hours per week), energies, efforts and skill
to such duties during the term of his employment and shall not accept employment
with any other employer or business or engage in any other business of any
nature whatsoever, in any capacity whatsoever, unless approved in writing in
advance by the Board of Directors of the Company. During the term of this
Agreement, Executive shall be physically present in the Metropolitan New
York/New Jersey or other Xxxxxx related business location area not less than
fifteen (15) business days out of every calendar month. Vacation days shall be
excluded from this requirement.
2. Term. The term of Executive's employment under this Agreement shall
begin on the date hereof and shall continue until January 31, 2007 (the
"Termination Date"). Subject to Section 4 hereof, at any time on or before the
Termination Date or any Extended Termination Date (as defined herein), the
Company may, at its sole option, extend this Agreement for a period of one (1)
month (the expiration of any extension being referred to herein as the "Extended
Termination Date"); provided, however, that the Company may extend this
Agreement no more than three (3) times for an aggregate of three (3) months.
3. Compensation, Expenses and Benefits. As full compensation for
Executive's performance of his duties pursuant to this Agreement, the Company
shall pay Executive during the term of this Agreement, and Executive shall
accept as full payment for such performance, the following aggregate amounts and
benefits:
(a) Salary. As salary for Executive's services to be rendered under this
Agreement, the Company shall pay Executive a monthly salary of $21,500, such
salary to be paid in accordance with the regular payroll practices of the
Company.
(b) Business Expenses. Within seven (7) days of the presentation of
receipts therefor, the Company shall pay or reimburse Executive for airfare for
weekly round trips between New York and his Continental U.S. location per month
(coach class; lowest available fare), rental car while in the New York area
(lowest available rate for mid-sized vehicle) and for lodging in either
Metropolitan New York or New Jersey, provided that the cost of said lodging
shall not exceed $3,500 per month. In addition, the Company shall reimburse
Executive, or cause him to be reimbursed, for all reasonable out-of-pocket
expenses incurred by him in the performance of his duties hereunder or in
furtherance of the business and/or interests of the Company. While traveling out
of the San Francisco area on Company related matters, Executive shall be
entitled to a $35 per day pier diem meal allotment. If legitimate business
entertainment expenses exceed $35 per day, Executive will need to file for
expense reimbursement and not receive a per diem allocation for that day.
Executive will be entitled to a $50 per week communications allocation
regardless of location. The communications allocation is intended to cover
cellular phone, home office phone, mobile Wi-Fi and other forms of paid internet
connectivity. Such expenses, will not be reimbursed by the Company beyond the
agreed amount. Other out of pocket expenses will be reimbursed provided, that
(i) such expenses are incurred in accordance with Company policy, and (ii)
Executive furnishes to the Company an itemized account (including receipts),
satisfactory to the Company, in substantiation of such expenditures.
(c) Vacation. Executive shall be entitled to 5 paid vacation days per three
month period with the first accruing between October 1, 2006-December 31, 2006.
(d) Options. Upon the execution of this Agreement, the Company shall grant
Executive a "non-qualified stock option" (the "Option") pursuant to the Free
Standing Non-Qualified Stock Option Agreement attached hereto as Annex A.
The parties agree that Executive shall be granted certain "piggy-back"
registration rights to the extent the shares of common stock underlying the
Option are not covered by an effective registration statement. The parties
further acknowledge and agree that the number of shares and exercise prices set
forth in Annex A reflect a one-for-four reverse split consummated by the Company
on November 10, 2006. Executive further agrees and acknowledges that he shall
not sell any shares of the Company's common stock underlying the Option until a
period commencing one year from the later of the Termination Date and the final
Extended Termination Date and Executive further agrees and acknowledges that he
shall not sell more than 25,000 Option Shares in any three-month period.
Should Executive purchase shares of the common stock of the Company outside of
the scope of this Agreement and the option granted hereunder, Executive agrees
that such purchases shall be made pursuant to a plan meeting the requirements of
Rule 10b5-1(c) under the Securities and Exchange Act of 1934, as amended. The
prohibition on the sale of shares set forth in this Agreement shall not apply to
such shares, provided, however, that Executive acknowledges that to the extent
Executive purchases such shares at any time the Executive is deemed an
"affiliate" (as such term is defined under Rule 144(a)(1) of the Securities Act
of 1933, as amended (the "Act")) of the Company, such shares shall be
"restricted securities" (as such term is defined under Rule 144(a)(3) of the
Act) and may only be resold pursuant to an effective registration statement
under the Act or pursuant to an applicable exemption under the Act. .
(e) Executive shall have the right to participate, on the same basis and to
the same extent as other executive employees of the Company, in the Company's
employee benefit programs, if any, including, without limitation, group life and
medical insurance programs covering Executive and his dependents.
(f) Indemnification; Directors and Officers Insurance. The Company shall,
to the fullest extent authorized or permitted by the New York Business
Corporation Law, the Company's Charter and the Company's By-Laws, defend,
indemnify and hold Executive, his heirs, executors, administrators and other
legal representatives, harmless from and against any and all claims, suits,
debts, causes of action, proceedings or other actions, at law or in equity
("Claims"), which any person or entity may have had, now has or may in the
future have with respect to Executive's service to the Company as an officer,
director, executive or agent thereof, including any costs and reasonable
attorney fees incurred in connection with defending such Claims. This provision
shall survive the termination of this agreement.
(g) The Company shall deduct from Executive's compensation hereunder and
any other payment, any federal, state, or city withholding taxes, social
security contributions, and any other amounts which may be required to be
deducted or withheld by the Company pursuant to any federal, state, or city
laws, rules, or regulations.
4. Termination.
The Company or Executive can terminate this Agreement on thirty (30) days'
notice to the other party; provided however this Agreement shall terminate
immediately upon Executive's death.
5. Effects of Expiration or Termination.
(a) Expiration under Section 2 or Termination under Section 4. If this
Agreement expires or Executive's employment with the Company under this
Agreement is terminated pursuant to Section 4, the Company's obligations under
this Agreement, including obligations under Section 3, shall end except for the
Company's obligation to: (i) reimburse Executive (or his estate) for all
out-of-pocket expenses incurred and unpaid pursuant to Section 3(b); (ii) pay to
Executive (or his estate) any salary and accrued vacation, pursuant to Sections
3(a) and (c), actually earned, accrued and unpaid through the date of
termination and (iii) indemnify Executive as provided under section 3(e). All
unvested options as of the termination of this Agreement shall be forfeited.
(b) Rights and Obligations. Termination of Executive's employment under
this Agreement shall not affect any party's rights and obligations under
Sections 3 (subject to the limitations set forth in Sections 5(a), 6, 7, 8, 9,
10, 11 and 12, such rights and obligations shall continue and survive the
termination of Executive's employment and this Agreement.
6. Solicitation of Employees and Consultants. Upon expiration of this
Agreement or termination of Executive's employment with the Company under this
Agreement pursuant to Section 4, Executive shall not for a period of three years
following the date of such termination, without the written consent of the
Company, directly or indirectly:
(i) solicit, recruit, or attempt to hire any person who is then employed
by, or is a consultant to, the Company or who, to Executive's knowledge, was
employed by, or was a consultant to, the Company at any time during the period
of Executive's employment with the Company under this Agreement; or
(ii) encourage, solicit or entice any such person to terminate his or her
employment or consultation with the Company, or employ or engage any such person
as an employee, or independent contractor of any person or entity other than the
Company or a Company subsidiary.
This provision will not apply to Executive's appointment of the Company's
employees, board members or consultants to serve on the board of directors of
another company, provided such appointment is to the board of directors of a
company whose interests are not adverse to the Company.
7. Covenant Not to Compete/ Non Disparagement.
(a) During the term of Executive's employment under this Agreement and for
a period of three years following expiration of this Agreement or the
termination of Executive's employment with the Company under this Agreement
pursuant to Section 4, Executive shall not, directly or indirectly, himself, or
through or for an individual, person or entity wherever located: (i) engage in
any activities or perform any services for a company that specializes in the
sale and custom installation of audio visual and home theater products for
consumers or, businesses located in the states of Alabama, South Carolina, North
Carolina, Kentucky, Tennesee, Illinois, Michigan, Ohio, Pennsylvania, West
Virginia, Virginia, Maryland, Delaware, New Jersey, New York, Connecticut, Rhode
Island, Massachusetts, Vermont, New Hampshire, Maine, Florida, Georgia, Texas,
or any other jurisdiction or state in which the Company does business (the
"Prohibited Area"); or (ii) be employed by, consult with, own any capital stock
of, or have any financial interest of any kind in, any individual, person or
entity, wherever located, for a company that specializes in the sale and custom
installation of audio visual and home theater products for consumers or
businesses in a Prohibited Area; provided that Executive may own, for investment
purposes up to 1% of the securities of any such publicly traded company whose
securities (i) trade or are listed on a national securities exchange registered
under Section 6 of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") or (ii) are quoted on the National Association of Securities
Dealers' electronic bulletin board or any other "over-the-counter market"(so
long as Executive is not otherwise affiliated with such business).
(b) Each of the parties agrees that it will not, and will instruct, as the
case may be, each of its respective representatives, officers and members of its
board of directors not to, make any statements, written or oral, which would be
reasonably likely to disparage or damage the other party. Executive further
acknowledges and agrees that, following the expiration of the Agreement or
termination of Executive's employment with the Company pursuant to Section 4, he
will not make any statement about the Company or his service thereto, or any
related matter, without the prior written consent of the Company. Following the
expiration of this Agreement or termination of Executive's employment with the
Company pursuant to Section 4, Executive further agrees to provide assistance to
and shall cooperate with the Company upon its reasonable request with respect to
matters within the scope of Executive's duties and responsibilities during
employment. The Company agrees and acknowledges that it shall, to the maximum
extent possible under then prevailing circumstances, coordinate any such request
with Executive's other commitments and responsibilities to minimize the degree
to which such request interferes with such commitments and responsibilities. The
Company agrees that it will reimburse Executive for reasonable travel expenses
(i.e., travel, meals, and lodging) that Executive may incur in providing
assistance to the Company hereunder.
8. Solicitation of Company Customers. Upon expiration of this Agreement or
termination of Executive's employment with the Company under this Agreement
pursuant to Section 4, Executive shall not, directly or indirectly, at any time
within three years after the date of such termination, solicit any entity that,
to Executive's knowledge, was a customer of the Company within the year before
the date of such termination, to perform services or supply products for such
customer of a similar nature to those services performed or products provided by
the Company to such customer.
9. Intellectual Property/Confidential Information; Return of Documents.
(a) Executive covenants and undertakes that he will not at any time during
or after the expiration of this Agreement or termination of Executive's
employment with the Company under this Agreement pursuant to Section 4, in
perpetuity, reveal, divulge, or make known to any person, firm, corporation, or
other business organization (other than the Company or its affiliates, if any),
or use for his own account or for the account of another, directly or
indirectly, any customer lists, pricing policies, marketing plans or strategies,
financial information, trade secrets, "know-how", or any other secret or
confidential information of any kind used by the Company (the "Confidential
Information") during his employment by the Company, and made known (whether or
not with the knowledge and permission of the Company, whether or not developed,
devised, or otherwise created in whole or in part by the efforts of Executive,
and whether or not a matter of public knowledge unless as a result of authorized
disclosure) to Executive by reason of his employment by the Company. Executive
further covenants and agrees that he shall retain and use the Confidential
Information in trust for the sole benefit of the Company, its successors and
assigns.
(b) Executive shall promptly communicate and disclose to the Company all
inventions, ideas, discoveries, improvements, modifications, writings, artistic
or creative material, or other intellectual property in any form whatsoever
(hereinafter "Inventions"), conceived, developed, or made by him during his
employment by the Company, whether solely or jointly with others, and whether or
not patentable or copyrightable, (a) which relate to any matters or business of
the type carried on or being developed by the Company, or (b) which result from
or are suggested by any work done by him in the course of his employment by the
Company. Executive shall also promptly communicate and disclose to the Company
all other data obtained by him concerning the business or affairs of the Company
in the course of his employment by the Company.
(c) All written materials, records, and documents (in any form) made by
Executive or coming into his possession during the term of this Agreement
concerning the business or affairs of the Company shall be the sole property of
the Company, and, upon the expiration of this Agreement or termination of
Executive's employment with the Company under this Agreement pursuant to Section
4, or upon the request of the Company during the term hereof, Executive shall
promptly deliver the original and all copies (whether physical or electronic) of
same to the Company. Executive agrees to render to the Company such reports of
the activities undertaken by Executive or conducted under Executive's direction
pursuant hereto during the term hereof as the Company may request from time to
time.
10. Company' Remedies. Executive acknowledges and agrees that the covenants
and undertakings contained in Sections 1(b), 6, 7, 8, and 9 of this Agreement
relate to matters which are of a special, unique and extraordinary character and
that a violation of any of the terms of such Sections will cause irreparable
injury to the Company, the amount of which will be difficult, if not impossible,
to estimate or determine and which cannot be adequately compensated. Executive
further acknowledges and agrees that the compensation paid, or to be paid to him
hereunder, is adequate and sufficient for the covenants and agreements he is
making hereunder. Therefore, Executive agrees that the Company, in addition to
any other available remedies under applicable law, shall be entitled, as a
matter of course, to an injunction, restraining order or other equitable relief
from any court of competent jurisdiction, restraining any violation or
threatened violation of any such terms by Executive and such other persons as
the court shall order. Nothing contained in this section shall be construed to
prevent the Company from seeking and recovering from Executive damages sustained
as a result of any breach or violation by Executive of any of the covenants or
agreements contained in the Agreement, and that in the event of any such breach,
the Company shall avail itself of all remedies available both at law and at
equity.
11. Executive's Remedies. Executive's remedy against the Company for breach
of this Agreement is the collection of any compensation due him as provided in
Section 3 subject to Section 5(a) and such other remedies available to Executive
under law or in equity.
12. Assignment. The Company shall not be required to make any payment under
this Agreement to any assignee or creditor of Executive, other than to
Executive's legal representative or his estate on death. Executive's obligations
under this Agreement are personal and may not be assigned, delegated or
transferred in any manner and any attempt to do so shall be void. Executive, or
his legal representative, shall have no rights by way of anticipation or
otherwise to assign or otherwise dispose of any right of Executive under this
Agreement. The Company may assign this Agreement without Executive's consent to
any successor to the Company's business. This Agreement shall be binding upon,
and shall inure to the benefit of, the Company, Executive and their permitted
successors and assigns.
13. Notices. Any notice to be given under this Agreement by either party
shall be deemed to be given if delivered to the other party in person, one
business day after deposited with a nationally recognized overnight courier, or
three business days after mailed by certified or registered mail, postage
prepaid, return receipt requested. If to Executive, notice shall be sent to:
Xxxxxx X. XxXxxxxx, 000 0xx Xxxxxx, Xxx Xxxxxxxxx, XX 00000, with a copy to:
Xxxxx X. Xxxxx, Esq., Cornerstone Law Group, 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxxxxxxx, XX 00000; and if to the Company, notice shall be sent to: Xxxxxx
Electronics, Inc., 000 Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000, Attn: Xxxxxx X.
Xxxxxxxxx, with a copy to: Ruskin Moscou Faltischek, P.C., 0000 Xxxxxxx Xxxxx,
Xxxx Xxxxx, 00xx Xxxxx, Xxxxxxxxx, XX 00000, Attn: Xxxx X. Xxxxx, Esq.; or at
such other address as the Company or Executive shall have advised the other in
writing.
14. General. This Agreement shall not be amended, in whole or in part,
except by an agreement in writing signed by the Company and Executive. This
Agreement constitutes the entire agreement between the parties with respect to
the subject matter of this Agreement and all prior agreements or understandings,
oral or written, are merged in this Agreement and are of no further force or
effect including, without limitation, that certain consulting agreement by and
between Executive and the Company, dated September 25, 2006, and all obligations
arising thereunder. The parties acknowledge that they are not relying on any
representations, express or implied, oral or written, (relating to any aspect of
Executive's current or future employment or otherwise), except for those stated
in this Agreement. Executive further acknowledges that his sole rights and
remedies with respect to any aspect of his employment or termination of his
employment are provided for in this Agreement. The captions of this Agreement
are included for convenience only and shall not affect the construction of any
provision of this Agreement. All provisions, agreements, and covenants contained
in this Agreement are severable, and in the event any of them shall be held to
be illegal, void or invalid by any competent court or under any applicable law,
such provision shall be changed to the extent reasonably necessary to make the
provision, as so changed, legal, valid and binding. If any provision of this
Agreement is held illegal, void or invalid in its entirety, the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain binding in accordance with their terms.
15. Consultation with Counsel. Executive acknowledges that he has been
given the opportunity to consult, and has consulted, with his personal legal
counsel concerning all aspects of this Agreement and the Company have urged
Executive to so consult with such counsel.
16. No Conflicts. Executive represents and warrants that his execution,
delivery and performance of this Agreement will not (i) constitute a breach or
violation of any agreement or arrangement to which he is a party or by which the
is bound; (ii) constitute a violation of any order, judgment or decree to which
he is a party; or (iii) require the consent of any third party.
17. Governing Law. This Agreement, its construction, and the determination
of any rights, duties or remedies of the parties arising out of or relating to
this Agreement, shall be governed by, and interpreted in accordance with, the
laws of the State of New York. Each party consents to be subject to personal
jurisdiction of the courts located in the State of New York, County of New York,
and any lawsuit or other court action or proceeding relating to, or arising out
of, this Agreement or Executive's employment with the Company shall be
instituted only in the state or federal court of proper jurisdiction located in
the State of New York, County of New York and those courts shall have exclusive
jurisdiction over any case or controversy arising out of or relating to this
Agreement.
IN WITNESS WHEREOF, the Company and Executive have duly executed this
Agreement as of the date and year first above written.
XXXXXX ELECTRONICS, INC.
By:/s/D. Xxxxxx Xxxxxxxxx
---------------------------
Name: D. Xxxxxx Xxxxxxxxx
Title: Chairman
/s/Xxxxxx X. XxXxxxxx
-----------------------------
XXXXXX X. XxXXXXXX
ANNEX A
XXXXXX X. XxXXXXXX
75,000 Shares (NQ)
XXXXXX ELECTRONICS, INC.
FREESTANDING NONQUALIFIED STOCK OPTION AGREEMENT
AGREEMENT, made as of this 19 day of December 2006, by and between XXXXXX
ELECTRONICS, INC., a New York corporation, (the "Company") having offices at 000
Xxxxx Xxxxxx, Xxxxxxxxx, XX 00000; and XXXXXX X. XxXXXXXX (the "Optionee").
WHEREAS, on (the "Grant Date" as defined below) the Board of Directors of
the Company (the "Board") authorized the grant to the Optionee of an Option (the
"Option") to purchase up to 75,000 shares of the authorized but unissued Common
Stock (the "Option Shares"), conditioned upon the Optionee's acceptance thereof
upon the terms and conditions set forth in this Agreement and the Optionee's
acceptance of the terms and conditions of that certain Employment Agreement with
the Company dated December 19, 2006 (the "Employment Agreement"); and
WHEREAS, the Optionee desires to acquire the Option on the terms and
conditions set forth in this Agreement and the Employment Agreement;
WHEREAS, all capitalized terms not otherwise defined herein shall have the
meanings given them in the Employment Agreement;
NOW, THEREFORE, it is agreed:
1. DATE OF GRANT. The date of grant of this Option is December 19, 2006 (the
"Grant Date").
2. NATURE OF THE OPTION. This Option is a non-qualified Option.
3. EXERCISE PRICE. The exercise price is $4.00 for each share of Common Stock,
subject to adjustment in accordance with this Agreement (the "Exercise Price").
The parties acknowledge and agree that the number of shares and exercise prices
set forth herein reflect a one-for-four reverse split consummated by the Company
on November 10, 2006.
4. EXERCISABILITY OF OPTION. This Option shall be exercisable during its term as
follows:
4.1 The Option granted hereby shall be exercisable as follows:
(i) Options to purchase 37,500 Option Shares, shall vest on January 31,
2007, provided Optionee continues to be employed by the Company until
such date;
(ii) Options to purchase 12,500 Option Shares shall vest one (1) month
after the first Extended Termination Date [February 28, 2007],
provided the Company has elected to extend the Employment Agreement
for one (1) month as provided in Section 2(b) thereof;
(iii) Options to purchase an additional 12,500 Option Shares shall vest one
(1) month after the second Extended Termination [March 31, 2007] Date,
provided the Company has elected to extend the Employment Agreement
for a second one (1) month extension as provided in Section 2(b)
thereof;
(iv) Options to purchase an additional 12,500 Option Shares shall vest one
(1) month after the third and final Extended Termination Date [April
30, 2007], provided the Company has elected to extend the Employment
Agreement for a third and final one (1) month extension as provided in
Section 2(b) thereof; and
(v) In the event the Company or Optionee, during any extension period,
elects to terminate the Employment Agreement before the applicable
Extended Termination Date, then options shall vest based on the time
elapsed during such one (1) month extension period. By way of example
and for illustration purposes only, in the event the Company
terminates Optionee after ten days of the second extension period,
then in connection with such ten day period, Optionee shall be
entitled to receive options to purchase 4,032 Option Shares, this
being the number of options multiplied by the fraction 10/31.
4.2 This Option may not be exercised for a fraction of a share.
4.3 After a portion of the Option becomes exercisable it shall remain
exercisable except as otherwise provided herein, until the close of business on
December __, 2009 (the "Expiration Date")
5. METHOD OF EXERCISE.
5.1 Notice to the Company. The Option shall be exercised in whole or in
part by written notice in substantially the form attached hereto as Exhibit A
directed to the Company at its principal place of business accompanied by full
payment as hereinafter provided of the exercise price for the number of Option
Shares specified in the notice.
5.2 Delivery of Option Shares. The Company or its transfer agent shall
deliver a certificate for the Option Shares to the Optionee as soon as
practicable after payment therefor.
5.3 Payment of Purchase Price.
5.3.1 Cash Payment. The Optionee shall make cash payments by wire transfer,
certified or bank check or personal check, in each case payable to the order of
the Company; the Company shall not be required to deliver certificates for
Option Shares until the Company has confirmed the receipt of good and available
funds in payment of the Exercise Price thereof.
5.3.2 Cashless Payment. The Exercise Price for any or all of the Option
Shares to be acquired may be paid by the surrender of any exercisable but
unexercised portion of the Option having a Fair Market Value equal to the
purchase price multiplied by the number of Option Shares to be purchased. In
either case, the Fair Market Value of the surrendered shares or options shall be
determined as of the date of exercise as follows: "Fair Market Value" of the
Common Stock means, as of the exercise date: (i) if the Common Stock is listed
on a national securities exchange or quoted on the NASDAQ National Market or
NASDAQ SmallCap Market, the last sale price of the Common Stock in the principal
trading market for the Common Stock on the last trading day preceding such date,
as reported by the exchange or NASDAQ, as the case may be; (ii) if the Common
Stock is not listed on a national securities exchange or quoted on the NASDAQ
National Market or NASDAQ SmallCap Market, but is traded in the over-the-counter
market, the closing bid price of the Common Stock on the last trading day
preceding such date for which such quotations are reported by the National
Quotation Bureau, Incorporated or similar publisher of such quotations; and
(iii) if the fair market value of the Common Stock cannot be determined pursuant
to clause (i) or (ii) above, such price as the Company shall determine, in good
faith. The Fair Market Value of a surrendered portion of the Option means, as of
the exercise date, an amount equal to the excess of the total fair market value
of the shares of Common Stock underlying the surrendered portion of the Option
(as determined in accordance with the immediately preceding sentence) over the
total purchase price of such shares of Common Stock underlying the surrendered
portion of the Option. The Company shall issue a certificate or certificates
evidencing the Option Shares as soon as practicable after the notice and payment
is received. The certificate or certificates evidencing the Option Shares shall
be registered in the name of the person or persons so exercising the Option.
5.3.3 Payment of Withholding Tax. If at any time, the Company is required
under applicable laws and regulations, to withhold, or to make any deduction for
any taxes, or take any other action in connection with any Option exercise, the
Optionee shall be required to pay to the Company the amount of any taxes
required to be withheld, or, in lieu thereof, at the election of the Company,
the Company may accept Common Stock valued at its Fair Market Value on the date
of payment, to cover the amount required to be withheld.
5.3.4 Exchange Act Compliance. Notwithstanding the foregoing, the Company
shall have the right to reject the payment in the form of Common Stock if in the
opinion of counsel for the Company, (i) it could result in an event of
"recapture" under Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); (ii) such shares of Common Stock may not be sold
or transferred to the Company; or (iii) such transfer could create legal
difficulties for the Company.
5.3.5 Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rules
promulgated by any national securities exchange or the Federal Reserve Board
relating to margin requirements. As a condition to the exercise of this Option,
the Company may require the Optionee to make any representation and warranty to
the Company as may be required by any applicable law or regulation.
6. OPTIONEE'S REPRESENTATIONS. The Optionee hereby represents and warrants to
the Company that:
6.1 Investment Intent. The Optionee is acquiring the Option and shall
acquire the Option Shares for its own account and not with a view towards the
distribution thereof;
6.2 Exchange Act Documents. The Optionee has received a copy of all reports
and documents required to be filed by the Company with the Securities and
Exchange Commission (the "SEC") pursuant to the Exchange Act within the last 24
months and all reports issued by the Company to its stockholders;
6.3 Option Shares Restricted. In the event that the Company shall not have
an effective Form S-8 Registration Statement with respect to the Option Shares,
the Optionee understands that it must for an indefinite period of time bear the
economic risk of the investment in the Option Shares, which cannot be sold by
the Optionee unless they are registered under the Securities Act of 1933, as
amended (the "Securities Act") or an exemption therefrom is available thereunder
and that the Company is under no obligation to register the Option Shares for
sale under the Securities Act;
6.4 Access to Information. In the Optionee's position with the Company, it
has had both the opportunity to ask questions and receive answers from the
officers and directors of the Company and all persons acting on its behalf
concerning the terms and conditions of the offer made hereunder and to obtain
any additional information to the extent the Company possesses or may possess
such information or can acquire it without unreasonable effort or expense
necessary to verify the accuracy of the information obtained pursuant to Section
6.2 above;
6.5 Transfer Restrictions. In the event that the Company does not have an
effective Form S-8 Registration Statement with respect to the Option Shares, the
Optionee is aware that the Company shall place stop transfer orders with its
transfer agent against the transfer of the Option Shares in the absence of
registration under the Securities Act or an exemption therefrom as provided
herein; and
6.6 Legends. In the event that the Company shall not have an effective Form
S-8 Registration Statement, then the certificates evidencing the Option Shares
shall bear the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SHARES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE SECURITIES ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
PURSUANT TO A STOCK OPTION AGREEMENT, DATED AS OF [INSERT GRANT DATE],
A COPY OF WHICH IS ON FILE WITH THE COMPANY, AND MAY NOT BE
TRANSFERRED, PLEDGED OR DISPOSED OF EXCEPT IN ACCORDANCE WITH THE
TERMS AND CONDITIONS THEREOF."
6.7 Lockup Agreement. Optionee further agrees and acknowledges that he
shall not sell any Option Shares until a period commencing one year from the
later of the Termination Date and the final Extended Termination Date and
Optionee further agrees and acknowledges that he shall not sell more than 25,000
Option Shares in any three-month period.
7. WITHHOLDING TAX. Not later than the date as of which an amount first becomes
includable in the gross income of the Optionee for Federal income tax purposes
with respect to the Option, the Optionee shall pay to the Company, or make
arrangements satisfactory to the Board regarding the payment of, any Federal,
state and local taxes of any kind required by law to be withheld or paid with
respect to such amount. The obligations of the Company under the Plan and
pursuant to this Agreement shall be conditional upon such payment or
arrangements with the Company and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Optionee from the Company.
8. EFFECT OF TERMINATION OF EMPLOYMENT. Intentionally Omitted.
9. TERMINATION FOR CAUSE. Intentionally Omitted.
10. TERM OF OPTION. This Option may not be exercised beyond the Expiration Date,
and may be exercised during such term only in accordance with the terms of this
Option Agreement.
11. RESTRICTION ON TRANSFER OF OPTION SHARES. Anything in this Agreement to the
contrary notwithstanding, the Optionee hereby agrees that Optionee shall not
sell, transfer by any means or otherwise dispose of the Option Shares acquired
by the Optionee without registration under the Securities Act, or in the event
that they are not so registered, unless (i) an exemption from the Securities Act
registration requirements is available thereunder, and (ii) the Optionee has
furnished the Company with notice of such proposed transfer and the Company's
legal counsel, in its reasonable opinion, shall deem such proposed transfer to
be so exempt.
12. RESERVED SHARES. The Company warrants that there have been reserved, and
covenants that at all times in the future it shall keep reserved, out of the
authorized and unissued Common Stock, a number of Option Shares sufficient to
provide for the exercise of the rights of purchase represented by this
Agreement.
13. DIVIDENDS, RECLASSIFICATIONS, ETC.
13.1 Dividends; Reclassifications, etc. In the event that the Company
shall, at any time prior to the exercise of this Option: (i) declare or pay to
the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or in shares of any class or classes; or (iii) make any distribution of
its assets to holders of its Common Stock as a liquidation or partial
liquidation dividend or by way of return of capital; then, upon the subsequent
exercise of this Option, the Optionee shall receive, in addition to or in
substitution for the Option Shares to which it would otherwise be entitled upon
such exercise, such additional shares of stock or scrip of the Company, or such
reclassified shares of stock of the Company, or such assets of the Company,
which it would have been entitled to receive had it exercised this Option prior
to the happening of any of the foregoing events.
13.2 Notice. If, at any time while this Option is outstanding, the Company
shall pay any dividend payable in cash or in Common Stock, the Company shall
cause notice thereof to be mailed to the registered holder of this Option at its
address appearing on the registration books of the Company, at least l0 days
prior to the record date as of which holders of Common Stock shall participate
in such dividend or distribution at least l0 days prior to the effective date of
the merger or consolidation. Failure to give notice as required by this Section,
or any defect therein, shall not affect the legality or validity of any
dividend, distribution or subscription or other right.
13.3 Anything in this Section 13 to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in such Exercise Price; provided,
however, that any adjustments which by reason of this Section 13.3 are not
required to be made shall be carried forward and taken into account in making
subsequent adjustments. All calculations under this Section 13.3 shall be made
to the nearest cent or to the nearest tenth of a share, as the case may be.
13.4 Upon any adjustment of any Exercise Price, then and in each such case
the Company shall promptly deliver a notice to the Optionee, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of Option Shares purchasable at such price upon
the exercise hereof, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
14. MISCELLANEOUS.
14.1 Notices. All notices, requests, deliveries, payments, demands and
other communications which are required or permitted to be given under this
Agreement shall be in writing and shall be either delivered personally or sent
by registered or certified mail, or by private courier, return receipt
requested, postage prepaid to the Company at its principal executive office and
to the Optionee at its address set forth below, or to such other address as
either party shall have specified by notice in writing to the other. Notice
shall be deemed duly given hereunder when delivered or mailed as provided
herein.
14.2 Stockholder Rights. The Optionee shall not have any of the rights of a
stockholder with respect to the Option Shares until such shares have been issued
after the due exercise of the Option.
14.3 Waiver. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any other or
subsequent breach.
14.4 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. This Agreement
may not be amended except by writing executed by the Optionee and the Company.
14.5 Binding Effect; Successors. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and, to the extent not prohibited
herein, their respective heirs, successors, assigns and representatives. Nothing
in this Agreement expressed or implied, is intended to confer on any person
other than the parties hereto and as provided above, their respective heirs,
successors, assigns and representatives any rights, remedies, obligations or
liabilities.
14.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without regard to choice of
law provisions).
14.7 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
XXXXXX ELECTRONICS, INC.
(a New York corporation)
By: /s/ D. Xxxxxx Xxxxxxxxx
-------------------------------
D. Xxxxxx Xxxxxxxxx, Chairman
Optionee represents that the Optionee is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Agreement.
/s/Xxxxxx X. XxXxxxxx
--------------------------------
Xxxxxx X. XxXxxxxx, Optionee
