XXXXXX.XXX, INC.
STOCK VESTING AND PLEDGE AGREEMENT
This Stock Vesting and Pledge Agreement is entered into as of November 16,
1998 by and between XxxxxX.xxx, Inc., a Washington corporation (the "Company"),
and Xxxxxxx X. Xxxxxx (the "Shareholder").
RECITALS
A. In connection with the execution and delivery of this Agreement, the
Company is issuing to the Shareholder, in exchange for an aggregate of $200,000
payable pursuant to the terms of a Promissory Note in substantially the form
attached hereto as Exhibit A (the "Note"), 1,000,000 shares of common stock,
$.01 par value per share, of the Company (the "Shares").
B. Shareholder has agreed to pledge the Shares to Company to secure
payment and performance in full of his obligations under this Agreement and the
Note.
C. The Shares are being issued as an Award pursuant to the terms of the
Company's Amended and Restated 1996 Stock Incentive Compensation Plan, a copy of
which is attached hereto as Exhibit B (the "Plan").
D. In order to induce the Company to issue the Shares, the Shareholder has
agreed that the Shares will be subject to a repurchase option in favor of the
Company as set forth herein.
E. Capitalized terms used and not otherwise defined herein shall have the
meanings assigned thereto in the Plan.
AGREEMENTS
In consideration of the foregoing and the other provisions set forth
herein, the parties hereby agree as follows:
1. Purchase Option
The Shares shall be subject to the following option (the "Purchase
Option"):
(a) In the event that, prior to the termination of this Agreement,
the Shareholder ceases to be continuously employed by the Company, or a parent,
subsidiary, successor or affiliate of the Company (any such other company being
a "Related Company"), the Company may exercise the Purchase Option as to any or
all of the Shares then subject to the Purchase Option. For the purpose of this
paragraph 1, the Shareholder's "continuous employment" shall cease when the
Shareholder ceases to be actively employed by the Company or a Related Company,
as determined in the reasonable discretion of the Board of Directors of the
Company. The date when continuous employment ceases is hereinafter referred to
as the "Termination Date."
(b) The Purchase Option may be exercised by the Company at any time
within ninety (90) days after the Termination Date, provided that the
Termination Date is prior to the termination of this Agreement. The Purchase
Option shall entitle the Company to purchase from the Shareholder, at a price
per share of $.20 (appropriately adjusted for any stock split, dividend,
combination, or other recapitalization) (the "Repurchase Price"), up to but not
exceeding a number of Shares determined in accordance with the following table:
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Period of Continuous Employment From Number of Shares Subject to Purchase
Date Hereof to Termination Date Option
------------------------------------ ---------------------------------------
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Less than 12 months 1,000,000
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12 months 760,000
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Each additional month after 12 months 20,000 fewer shares
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50 months 0 shares
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(c) The Purchase Option, if exercised by the Company, shall be
exercised by written notice signed by an officer or director of the Company
after approval by the Board of Directors and shall be delivered to the
Shareholder on or prior to the expiration of the 90-day period referred to in
paragraph (b) above. The Company may pay for the Shares it has elected to
repurchase (i) by delivery to the Shareholder of a check in the amount of the
aggregate Repurchase Price for the number of Shares being repurchased, (ii) by
cancellation of an amount of the Shareholder's indebtedness to the Company equal
to the aggregate Repurchase Price for the number of Shares being repurchased or
(iii) by a combination of (i) and (ii). Payment of the Repurchase Price shall be
completed as promptly as practicable after notice of exercise of the Purchase
Option is delivered to the Shareholder.
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(d) In the event that, in connection with any exercise of the
Purchase Option under this Agreement, the Company elects to exercise the
Purchase Option as to fewer than all the Shares then subject thereto, the
Purchase Option shall expire as to any Shares that the Company has not elected
to repurchase.
(e) Notwithstanding subsections (b) and (c) of this Section, the
Company shall be entitled for a period of one year from the Termination Date
(rather than 90 days) to give notice to the Shareholder and to purchase the
shares to the extent that the Company reasonably determines that such an
extension of time is necessary to prevent the repurchase of the Shares from
causing other capital stock of the Company to not qualify as "small business
stock" under Section 1202 of the Internal Revenue Code of 1986, as amended.
2. Pledge
The Shareholder hereby grants to the Company a first priority, perfected
security interest in the Shares as security for payment of the Note. Upon
execution of this Agreement and receipt of the Note by the Company, the Company
shall deliver a certificate representing the Shares to the Shareholder, and
thereupon the Shareholder shall immediately pledge and deliver the certificate
to the Company, as pledgeholder, and shall execute and deliver to the Company an
assignment separate from certificate endorsed in blank in substantially the form
of Exhibit C. In the event that the Shareholder defaults with respect to any of
his obligations under the Note, the Company shall have all rights awarded upon
default to a secured party under the Uniform Commercial Code and other
applicable law (and in equity), including the right to sell the security at any
public or private sale in a commercially reasonable manner. The Company shall
also have the right to cancel some or all of the Shares and attribute the value
thereof to the obligations outstanding under the Note.
3. Legend
All certificates representing any Shares subject to this Agreement shall
have endorsed thereon the following legend, in addition to any other legend
required by the Company respecting the restricted nature of the Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS OF A CERTAIN STOCK VESTING AND PLEDGE AGREEMENT THAT
INCLUDES A REPURCHASE RIGHT IN FAVOR OF THE CORPORATION RELATING TO THESE
SECURITIES. COPIES OF THE STOCK VESTING AND PLEDGE AGREEMENT MAY BE
OBTAINED
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UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
4. Rights as Shareholder
Subject to the terms hereof, the Shareholder shall have all the rights of
a shareholder with respect to the Shares during the term of this Agreement,
including without limitation the right to vote and receive any dividends or
other distributions declared thereon.
5. Adjustments for Stock Splits, Recapitalizations and Similar
Events
If, at any time or from time to time, there is (i) a dividend of any
security, stock split or other change in the character or amount of any of the
outstanding securities of the Company, or (ii) any consolidation, merger or
similar event in connection with which the Purchase Option does not lapse under
the terms of this Agreement, then, in such event, any and all new, substituted
or additional securities or other property to which the Shareholder is entitled
by reason of his ownership of the Shares then subject to the Purchase Option
shall be immediately included in the definition of "Shares" under this Agreement
and shall be subject to the Purchase Option with the same force and effect as
the Shares currently subject to this Agreement and the Purchase Option. The
Repurchase Price per Share shall be appropriately adjusted as determined by the
Board of Directors of the Company to reflect any such event referred to in this
Section 5.
6. Termination
This Agreement shall terminate in its entirety upon the lapse of the
Purchase Option in its entirety pursuant to Section 1 or otherwise, or upon the
completion of a repurchase transaction pursuant to an exercise of the Purchase
Option, in either case in accordance with the terms of this Agreement.
7. Corporate Transactions
In the event of any Corporate Transaction (as defined in the Plan), the
Shares shall be treated (as to vesting and related matters) in a manner that is
comparable to the treatment of options outstanding under the Plan, such that any
acceleration of the vesting provisions applicable to such options shall result
in the lapse of the Purchase Option to the same extent. The issuance of the
Shares as contemplated by this Agreement shall be treated as the grant of an
Award under the Plan, and the terms of the Plan (and any amendments or
modifications thereto) shall be applicable to the Shares to the extent so
provided in the Plan or in this Agreement.
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8. Tax Matters
The Shareholder acknowledges that he has considered and analyzed the
appropriate treatment by him of the transactions contemplated hereby under the
Internal Revenue Code of 1986, as amended (the "Code"), including without
limitation Section 83 thereof. The Shareholder agrees that any decision as to
whether to file an election relating thereto, and the due and proper filing of
any such election, are solely the Shareholder's responsibilities.
9. No Right to Continued Employment
Nothing in this Agreement shall create any right to continued employment
of the Shareholder, or to affect in any manner the right and power of the
Company to terminate the employment of the Shareholder for any reason or for no
reason.
10. Cooperation
The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
11. Specific Enforcement
Each party expressly agrees that the other party would be irreparably
damaged if this Agreement were not specifically enforced. Upon a breach or
threatened breach of the terms, covenants and/or conditions of this Agreement by
any party, the other party shall, in addition to all other remedies, each be
entitled to a temporary or permanent injunction, without showing any actual
damage, and/or a decree for specific performance, in accordance with the
provisions of this Agreement.
12. Notices
All notices and other communications required or permitted hereunder shall
be in writing and shall be mailed by first class mail, postage prepaid, or
otherwise delivered by hand or by messenger, facsimile or courier, addressed (a)
if to the Shareholder, at the Shareholder's then current address on the
Company's books or at such other address as the Shareholder shall have furnished
to the Company in writing, or (b) if to the Company, at its principal executive
office, attention Board of Directors, with a copy to Xxxxx X. Xxxxxx, Xxxxxxx
Coie, 0000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, XX 00000. If notice is provided by
mail, it shall be deemed to be given three (3) business days after proper
deposit in the U.S. Mail, and if notice is given by hand or by messenger,
facsimile or courier, it shall be deemed to be given upon receipt.
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13. Entire Agreement
This Agreement and the Plan and other attachments and Exhibits hereto and
thereto constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
oral and written, among such parties, or any of them, with respect to such
subject matter. No such prior agreement or undertaking may contradict, vary or
supplement this Agreement.
14. Amendment and Waiver
Neither this Agreement nor any provision hereof may be modified, amended
or terminated except by a written agreement signed by the parties hereto, and no
waiver of any provision of this Agreement shall be effective unless in writing
and signed by or on behalf of the party to be bound by such waiver; provided,
however, that the Shareholder shall have no authority to bind the Company in
connection with any such modification, amendment, waiver or termination.
15. Governing Law
This Agreement shall be governed by and construed under the laws of the
state of Washington as applied to agreements among Washington residents, made
and to be performed entirely within Washington.
16. Successors and Assigns; Transfer Restriction
The provisions hereof shall inure to the benefit of, and be binding upon,
the successors, permitted assigns, heirs, executors, administrators and personal
representatives of the parties hereto. Notwithstanding anything to the contrary
contained in this Agreement, no Shares may be transferred by the Shareholder
under any circumstances without the prior written consent of the Company (which
may be withheld for any reason,) so long as such Shares are subject to the
Purchase Option contained in this Agreement. Any transfer or purported transfer
in violation of this Section 16 shall be void.
17. Headings
The headings of the sections and paragraphs of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
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18. Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
19. Severability
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provisions shall be excluded from this Agreement and
the balance of this Agreement shall be interpreted as if such provisions were so
excluded and shall be enforceable in accordance with its terms.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
XXXXXX.XXX, INC.
By /s/ F. XXXXXX XXXXXXXXXXX
--------------------------
Name: F. Xxxxxx Xxxxxxxxxxx
-----------------------
Title: Chairman
----------------------
Address: 00000 XX 0xx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
SHAREHOLDER
/s/ XXXXXXX X. XXXXXX
---------------------------------
Xxxxxxx X. Xxxxxx
Address: 00000 XX 00xx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
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EXHIBIT A
PROMISSORY NOTE
Bellevue, Washington
$200,000 Principal Amount November 16, 1998
FOR VALUE RECEIVED, Xxxxxxx X. Xxxxxx ("Maker") hereby promises to pay to
the order of XxxxxX.xxx, Inc., a Washington corporation ("Payee"), the principal
sum of two hundred thousand dollars ($200,000) (the "Original Principal
Amount"), together with simple interest on the unpaid principal balance at a
rate of seven percent (7%) per annum compounded monthly (calculated on the basis
of actual days elapsed). This Note is being made in connection with the purchase
by Maker from Payee of 1,000,000 shares of the Common Stock of Payee pursuant to
Payee's Amended and Restated 1996 Stock Incentive Compensation Plan, and in
connection with a Stock Vesting and Pledge Agreement of even date herewith (the
"Stock Vesting and Pledge Agreement") relating to such shares under which Maker
is agreeing that such shares shall be subject to repurchase by Payee under
certain conditions as provided therein, and that such shares shall be pledged by
Maker as security for payment of this Note. This Note is the Note referred to
in, and is secured by the pledge of stock described in Section 2 of, the Stock
Vesting and Pledge Agreement.
1. Payments. All payments on account of the indebtedness evidenced by
this Note shall be applied first to full payment of accrued interest and then to
reduction of the outstanding principal balance. All such payments shall be made
in the form of cash or check.
2. Maturity and Repayment Schedule. This Note shall mature, and all
unpaid principal and accrued interest shall be due and payable, on the earliest
to occur of (a) an Event of Default or (b) January 16, 2003. Principal and
accrued interest under this Note shall be repaid according to the following
schedule: (a) 24% of the Original Principal Amount, plus accrued interest
thereon, shall be paid in full on November 16, 1999; (b) thereafter 2% of the
Original Principal Amount, plus accrued interest thereon, shall be paid in full
on or before the 16th of each calendar month thereafter (e.g., December 16,
January 16, etc.) until the entire Original Principal Amount and all accrued
interest are repaid in full
3. Default. The entire unpaid principal of, and all accrued interest
on, this Note shall become immediately due and payable upon the occurrence of
any one or more of the following events of default (each, an "Event of
Default"):
(a) Failure to pay all or any part of the principal or accrued interest
on this Note when the same shall be due and payable as provided in
the repayment schedule set forth herein;
(b) Maker shall (i) be made the subject of any proceeding under
the Bankruptcy Code of the United States, as amended or any
similar statute and which proceeding shall not be dismissed
within 60 days thereafter, (ii) admit in writing its inability
to pay its debts generally as they become due, (iii)
voluntarily seek the benefit of the Bankruptcy Code of the
United States, as amended, or any other applicable
liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, or
similar debtor relief laws, from time to time in effect,
affecting the rights of creditors generally (collectively,
"Debtor Relief Laws"), or (iv) be made the subject of any
proceeding provided for by any Debtor Relief Laws that
suspends or otherwise materially affects any of the rights of
Payee under this Note and which proceeding shall not be
dismissed within 60 days thereafter;
(c) The 91st day after Maker's continuous employment with the Payee
terminates for any reason. The term "continuous employment" shall
have the meaning given to such term in the Stock Vesting Agreement;
or
(d) Payee's Repurchase Option (as defined in the Stock Vesting
Agreement) shall lapse as to all the shares of Stock subject
thereto.
4. Prepayment. Maker may, at any time, prepay all or any portion of the
principal and accrued interest due under this Note without premium or penalty.
5. Notices. Any notices to be given to Payee in connection with this
Note shall be deemed to be delivered (i) ten days after deposit in the United
States mail, first-class postage prepaid, registered or certified, and addressed
to the recipient or (ii) one business day after the transmission by facsimile.
6. Waiver. Maker hereby waives presentment, notice of dishonor,
protest, notice of protest and diligence in collection, and consents that the
time of payment on any part of this Note may be extended by Payee without
otherwise modifying, altering, releasing, affecting or limiting its liability.
7. Attorneys' Fees. If any suit or action arising out of or related to
this Note is brought by any party, the prevailing party or parties shall be
entitled to recover the costs and fees (including without limitation reasonable
attorneys' fees, the fees and costs of experts and consultants, and copying,
courier and telecommunication costs) incurred by such party or parties in such
suit or action, including without limitation any post-trial or appellate
proceeding, or in the collection or enforcement of any judgment or award entered
or made in such suit or action.
8. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Washington.
10. Assignment; Successors. This Note shall not be assignable by Maker,
by operation of law or otherwise, without the prior written consent of Payee.
This Note shall be binding upon, and shall inure to the benefit of, Maker, Payee
and their respective permitted successors, assigns, heirs and legal
representatives, as the case may be.
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Maker hereby executes and delivers this Note, and Payee hereby accepts
this Note, as of the date first set forth above.
/s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
ACCEPTED:
XXXXXX.XXX, INC.
By /s/ F. XXXXXX XXXXXXXXXXX
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Title Chairman
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EXHIBIT C
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Vesting and Pledge
Agreement dated as of November 16, 1998, _________________ hereby sells,
assigns, and transfers unto ______________ ______________ (___________) shares
of the Common Stock of XXXXXX.XXX, INC., a Washington corporation (the
"Company"), standing in the undersigned's name on the books of the Company
represented by Certificate No. ___ delivered herewith, and does hereby
irrevocably constitute and appoint _____________ as attorney-in-fact to transfer
such stock on the books of the Company with full power of substitution in the
premises.
Dated: _____________________
Signature /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
