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EXHIBIT 10.5
STOCK OPTION AGREEMENT
This Stock Option Agreement, (the "Agreement") is made and entered
into this 16th day of February, 1995 between Xxxxxx General Corporation
("Company"), and Xxxxxx Xxxxxxxx ("Principal").
WHEREAS, the Principal has served for an extended period of time as a
member of the Board of Directors of the Company; and
WHEREAS, the Company is desirous of recognizing the Principal's
service as a member of the Board of Directors of the Company;
NOW, THEREFORE, in consideration of the Principal's past service on
the Company's Board of Directors and for the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. Issuance of Options. Upon the terms and subject to the conditions
set forth in this Agreement, the Company hereby grants to Principal the right
and option ("Option") to purchase up to Fifty Thousand (50,000) shares of the
Company's authorized but unissued Common Stock (the "Shares").
2. Option Price. The Option price for all Options issuable pursuant
to Section 1 above shall be $2.625 per share, subject to adjustment as provided
in Section 6 hereof.
3. When Options May Be Exercised. Each Option issued pursuant to
Section 1 shall be exercisable at any time and from time to time, as to all or
any portion of the Shares, from the date of issuance until the fifth
anniversary of such issuance.
4. Investment Intent of Principals. Principal acknowledges that the
Option(s) issuable to Principal pursuant to this Agreement and the Shares
issuable upon exercise of such Option(s) (the "Restricted Securities") have not
been registered under the Securities Act of 1933, as amended (the "Act") or
applicable state securities laws. Principal acknowledges that the offer, sale
and delivery of the Restricted Securities to him is made in reliance upon his
representations, warranties, agreements and undertakings reflected herein.
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Principal represents and warrants that he is acquiring the Restricted
Securities solely for his own account and interest and not with a view to
distribute them to the public.
4.1 Principal understands and agrees that unless the
Restricted Securities either are registered under the Act or are disposed of in
transactions for which exemptions from such registration are available,
Principal must continue to own and hold the Restricted Securities for his own
account and interest indefinitely. Principal further understands that whether
an exemption from the registration requirements of the Act will be available
for such future transactions as he may propose will depend upon the nature of
each such transaction, the pertinent surrounding facts and circumstances then
extant, and the then applicable law.
4.1 Any certificate evidencing the Restricted Securities
shall bear a legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW.
5. Exercise of Options. Each Option, or any portion of such Option,
may be exercised from time to time, which exercise shall be effective
immediately upon written notice to the Company at its principal offices,
setting forth the number of Shares with respect to which the Option is being
exercised, accompanied by the full amount of the purchase price for such
Shares. The purchase price shall be payable in cash. Upon receipt of notice
and payment, the Company shall promptly make arrangements for the issuance of
the number of Shares as to which the Option was exercised. Upon exercise of
the Option, the number of Shares subject to the Option shall be automatically
reduced to the extent of the number of Shares as to which the Option is
exercised, and the Option shall remain in effect as the remaining number of
Shares. The Company reserves the right to require Principal, before receipt of
the Shares, to represent and warrant in writing, in form and substance
reasonably satisfactory to the Company, that the Shares purchased are being
acquired without any view to distribution and to agree in writing to the
imposition of legends on the
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share certificates setting forth any restrictions upon disposition required by
applicable federal or state securities laws.
6. Adjustments. If all or any portion of an Option issued pursuant
to this Agreement is exercised subsequent to any stock dividend, split-up,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of property for stock, separation, reorganization, or liquidation,
as a result of which shares of any class shall be issued in respect of
outstanding shares of Common Stock or shares, or shares of Common Stock shall
be changed into the same or a different number of shares of the same or another
class or classes, the Principal exercising such Option shall receive, upon the
exercise of such exercise right, the aggregate number and class of shares
which, if the Option had been exercised at the date hereof and the shares
acquired thereby had not been disposed of, Principal would be holding as a
result of any such stock dividend, split-up, recapitalization, combination or
exchange of shares, merger, consolidation, acquisition of property for stock,
separation, reorganization, or liquidation; provided, however, that no
fractional share shall be issued upon any such exercise.
7. Assignability of Options. An Option issued pursuant to this
Agreement may not be assigned, transferred, pledged, hypothecated, sold or
otherwise disposed of, in whole or in part, either voluntarily or
involuntarily, except as hereinafter provided, and the Option may be exercised,
during the lifetime of an Principal, only by him. Any attempted assignment,
transfer, pledge, hypothecation, sale or other disposition of an Option
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon an Option, shall be null and void and without effect.
Notwithstanding the foregoing, Principal should die prior to the
earlier of the expiration of this Agreement or the exercise in full of the
Option, then the Option may be exercised by the Investor's executors or
administrators. The Option, to the extent not so exercised, shall forthwith
terminate.
8. Registration Rights. The Company covenants and agrees to provide
the following registration rights at any time from and after the second
anniversary of the date of this Agreement to Principal:
8.1 Whenever the Company proposes to file a registration
statement relating to any of its capital stock under the Act, other than a
registration statement required to be filed in respect of employee benefit
plans on Form S-8 or similar form
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relating to securities issued in connection with a reorganization, the Company
shall, at least seven business days prior to such filing, give written notice
thereof to Principal. Upon receipt by the Company, not more than four business
days after receipt of such notice by Principal, of a written request by the
Principal for registration of all or a portion of the Shares then owed by
Principal (the "Registrable Shares"), the Company shall include separate
registration statement concurrently filed, and shall use all reasonable efforts
to cause such registration statement to become effective with respect to such
Registrable Shares, unless the managing underwriter therefor concludes in its
reasonable good faith judgment that compliance with this Section 8.1 would
materially adversely affect such offering. If the managing underwriter
determines in good faith that a portion but not all of such Registrable Shares
may be included, then only such portion shall be included.
8.2 The Company will use all reasonable efforts to cause
such registration statement to remain effective until the earlier of 45 days
from the effective date of the registration statement or the date that the
Principal completes his distribution of the Registrable Shares. The Company
will use all reasonable efforts to effect such qualifications under applicable
blue sky or other state securities laws as may be reasonably requested by the
Principal to permit or facilitate such sale or other distribution. The Company
will cause the Registrable Shares for which the registration statement is
effected to be listed on any national securities exchange or quoted on any
stock quotation system on which the shares of Common Stock are listed or
quoted.
8.3 The Principal shall furnish to the Company such
information as the Company may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 8. The Company agrees to furnish to the Principal the number of
prospectuses, offering circulars or other documents, or any amendments or
supplements thereto, incident to any registration, qualification or compliance
referred to in this Section 8 as the Principal from time to time may reasonably
request.
8.4 The Company shall bear all expenses of registrations,
qualifications or compliance pursuant to this Section 8 (other than
underwriting discounts and commissions and brokerage commissions and fees, if
any, payable with respect to the Registrable Shares or the cost of counsel for
the Principal), including, without limitation, registration fees, printing
expenses, expenses of blue
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sky or other state securities law registration or compliance, and legal and
auditing fees incurred by the Company in connection therewith.
8.5 In connection with any registration of Registrable
Shares pursuant to this Section 8, the Company agrees to provide reasonable
cooperation to Principal and any underwriters participating in such offering,
including, without limitation, entering into such customary underwriting or
other agreements (which may contain customary representations and warranties by
the Company and indemnification provisions); furnishing a customary comfort
letter or letters, dated the date of the final prospectus with respect to the
Registrable Shares, from the independent Principal and any such underwriters;
furnishing an opinion of counsel for the Company, dated the date of the closing
of the sale of the Registrable Shares, with respect to such matters as may be
reasonably requested; and making available for inspection by the Principal and
his agents all financial and other records, corporate documents and properties
of the Company as shall be reasonably requested.
8.6 During the effectiveness of a registration statement in
which Registrable Shares are included pursuant to this Section 8, the Company
will notify each Principal promptly of any notice from a regulatory authority
affecting the sale of the Registrable Shares and of any event or facts that, in
the reasonable judgment of the Company, should be set forth in such
registration statement. The Company will, as promptly as practicable, take
such action as may be necessary to amend or supplement such registration
statement in order to set forth or reflect such event or facts.
8.7 In the event of the registration of any Registrable
Shares pursuant to this Section 8, each party hereto (the "Indemnifying
Party"), to the extent permitted by law, shall indemnify and hold harmless the
other party hereto and its officers, directors, employees and agents
(collectively, the "Indemnified Parties") against any losses, claims, damages
or liabilities, joint or several (collectively "Claims"), to which any of the
Indemnified Parties may become subject under the Act or otherwise, insofar as
such Claims (or actions in respect thereof) arise out off or are based upon any
untrue statement or alleged untrue statement of material fact contained in the
registration statement (or any document contained in or incorporated by
reference in the registration statement) relating to the Registrable Shares, or
arise out of or are based upon any omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Indemnified Party for any legal
or
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other expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any Claims; provided however, that the Indemnifying
Party will not be liable in any such case to the extent that any such Claim
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made or incorporated by reference with written
information provided by such Indemnified Party specifically for use in the
preparation thereof. The indemnity provided by this paragraph shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Party. If the indemnification provided for by this paragraph
is unavailable to a party that would have been an Indemnified Party in respect
of any Claims, then each party that would have been an Indemnifying Party
shall, in lieu of indemnifying such Indemnified Party, contribute to the extent
permitted by law to the amount paid or payable by such Indemnified Party as a
result of such Claims in such proportion as is appropriate on an equitable
basis to reflect the relative fault of the Indemnifying Party on the one hand
and such Indemnified Party on the other hand in connection with the statement
or omission which resulted in such Claims; provided, however, that no person
guilty of fraudulent misrepresentation within the meaning of Section 11 (f) of
the Act shall be entitled to contribution from any person who was not found
guilty of such fraudulent misrepresentation.
9. Governing Law. The interpretation, performance and enforcement of
this Agreement shall be governed by the internal laws of the State of
California without giving effect to any choice-of-law provisions of such laws.
10. Binding Effect. The terms, conditions and provisions of this
Agreement shall inure to the benefit of any successors or assigns of the
Principals, and shall be binding upon any successors or assigns of the Company.
11. Reservation of Shares. The Company will at all times reserve and
keep available out of its authorized capital stock, solely for issuance upon
the exercise of each Option issued pursuant hereto, such number of shares of
Common Stock as shall be issuable upon the exercise of such Option(s). Such
Common Stock, when issued pursuant to this Agreement, shall be duly and validly
issued, fully paid and nonassessable.
12. Notices. Any notice or other communication between the parties
hereto shall be sufficiently given if sent by certified or registered mail,
postage prepaid, or by telecopy, if to Company, addressed to it at 00-X
Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000, or if to Principal, addressed to him at X.X.
Xxx 0000 Xxxxxx Xxxxx Xx, Xx
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00000 or to such other address as shall hereafter be designated in writing by
one party to the other. Such notice or other communication shall be deemed to
be given on the date sent.
13. Rights of Principal. Prior to the exercise of an Option, except
as otherwise provided herein, Principal shall not be entitled to any rights of
a stockholder of the Company, with respect to the shares underlying the
unexercised portion of the Option, including without limitation the right to
vote, to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive notice of any proceedings of the
Company.
14. Captions. The headings of the sections of this Agreement are
intended solely for convenience of reference and are not intended and shall not
be deemed for any purpose whatever to modify or explain or place any
construction upon any of the provisions of this Agreement.
15. Arbitration. Any controversy or claim arising out of or relating
to the terms of this Agreement, or otherwise related to the compliance by
either party with its obligations hereunder, shall be settled by binding
arbitration in accordance with the rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrator(s) may be
entered by any court having jurisdiction thereof. Any party to this Agreement
may submit to arbitration any such controversy or claim.
16. Attorney's Fees. In the event any party hereto shall institute
an action to enforce any rights hereunder, the prevailing party in such action
shall be entitled, in addition to any other relief granted, to such reasonable
attorneys' fees as may be awarded.
17. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings of
the parties, and there are no representations, warranties or other agreements
between the parties in connection with the subject matter hereof except as
specifically set forth herein. No supplement, modification, amendment, waiver
or termination of this Agreement shall be deemed or shall constitute a waiver
of any provision hereof (whether or not similar), nor shall waiver constitute a
continuing waiver.
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18. Severability. If any provision of this Agreement or any part
thereof shall be held invalid, illegal or void, the remainder of such provision
of this Agreement or part thereof shall continue in full force and effect as if
the void, illegal or invalid provision or part had not been contained herein.
In the event that any material provision of this Agreement in a manner
consistent with their original intentions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this day and year first above written.
XXXXXX GENERAL CORPORATION
By: /s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx, Chairman
By: /s/ XXXXXX XXXXXXXX
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Xxxxxx Xxxxxxxx
