XXXXXXXXX & XXXXX GROUP
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of March 21, 1996, between Xxxxxxxxx &
Xxxxx Group, a California corporation (the "Company"), and Xxxxxx X. Case III
(the "Optionee"),
W I T N E S S E T H:
WHEREAS, the Company's Board of Directors has determined that it would be
in the best interests of the Company and its shareholders to grant the
nonstatutory stock option described in this Agreement to the Optionee as an
inducement to remain in the service of the Company and as an incentive for
extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" shall mean the Committee of the Board described in Section
3 of the Plan or, if none has been appointed, the full Board.
(e) "CONSULTANT" shall mean any individual who is a consultant to the
Company or a Subsidiary.
(f) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(g) "EMPLOYEE" shall mean any individual who is an employee (within the
meaning of Section 3401(c) of the Code and the regulations thereunder) of the
Company or of a Subsidiary.
(h) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(i) "NONSTATUTORY OPTION" shall mean a stock option not intended to be an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
(j) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(k) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(l) "PLAN" shall mean the Xxxxxxxxx & Xxxxx Group 1995 Stock Option Plan,
as in effect on the Date of Grant.
(m) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(n) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(o) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(p) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(q) "SERVICE" shall mean service as an Employee, Consultant or as a
director of the Company or a Subsidiary.
(r) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 14 hereof (if applicable).
(s) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983, as amended, among all of the Company's shareholders, or
any successor agreement thereto.
(t) "STOCK" shall mean the Common Stock of the Company.
(u) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(v) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(w) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase two hundred twenty three thousand
one hundred and seventy (223,170) shares for the sum of five million eight
hundred eighteen thousand forty one dollars and ninety cents ($5,818,041.90)
($26.07 per Share), which is agreed to be 100% of the fair market value thereof
on the Date of Grant.
(b) STOCK OPTION PLAN. This Option is not being granted pursuant to the
Plan and shares that would be issued upon the exercise of this Option shall not
be issued from those shares authorized for issuance under the Plan.
(c) TAX TREATMENT. This Option is a nonstatutory stock option and is not
intended to qualify as an Incentive Stock Option.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon
any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of
this Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety at any time prior to its expiration. No Partial
Exercise of this Option may be made for a number of Shares other than 100 Shares
or a multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 15(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates of Restricted Shares
will be held by the Secretary of the Company pursuant to the terms of the Escrow
Agreement signed as part of the Shareholders' Agreement. Shares that are not
Restricted Shares and that are not security for a promissory note for the
purchase price of the Shares shall be issued to the Optionee and shall not be
subject to the Escrow Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 6 months by the Optionee or the Optionee's representative and must have a
fair market value (as determined by the Committee) on the date of exercise of
this Option which, together with any amount paid in a form other than Shares, is
equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or director of or
Consultant to the Company or a Subsidiary at the time of exercise, all or part
of the Purchase Price may be paid with a limited-recourse promissory note
executed by the Optionee. The terms of such note shall be one of the following:
(i) BONUS NOTE. If the Optionee is a salaried employee, the term
of such note shall be 60 months, and such note shall be payable in
full at the Company's option immediately upon termination of
Service of the Optionee. Such note shall bear interest at a fixed
rate equal to the Test Rate and shall be deducted from the
Optionee's wages each pay period. Such note shall be repaid in
full by way of payroll deductions from future bonuses until the
principal is fully repaid, and shall be secured by a pledge of the
Shares so acquired.
(ii) COMMISSION NOTE. If the Optionee is an employee paid by
commissions, the term of such note shall be 60 months, and such
note shall be payable in full at the Company's option immediately
upon termination of Service of the Optionee. Such note shall bear
interest at a fixed rate equal to the Test Rate and shall be
deducted from the Optionee's wages each pay period. Such note
shall be repaid in full by way of payroll deductions at a
percentage of the net monthly commission (before withholdings) in
excess of $10,000 earned by the Optionee for any month until the
Note has been fully repaid. Should the net gross commissions for
any month be less than $10,000, the amount by which the net
commissions for that month is less than $10,000 shall be carried
forward to the following months for the purpose of determining
amounts then due until the shortage is fully offset by future
amounts in excess of $10,000. Such note shall be secured by a
pledge of the Shares so acquired.
(d) CASHLESS EXERCISE. With the Committee's express consent and at its
sole discretion, by delivery of a properly executed exercise notice together
with such other documentation as the Committee and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on March 20, 2003.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
Cause or because the Optionee is disabled);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
Cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the Optionee
is disabled.
For purposes of this Agreement, "Cause" shall mean (i) gross negligence by the
Employee in the performance of his or her duties; (ii) any act of fraud,
misappropriation, dishonesty, embezzlement or similar conduct against the
Company; (iii) conviction of a felony or any crime involving moral turpitude; or
(iv) willful and continuing failure by the Employee to comply with any policy of
the Company which is applicable to Employees of the Company.
The Optionee may exercise all or part of this Option at any time before its
expiration under this Section 7(b). The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or administrators of the Optionee's estate or by any person who has acquired
this Option directly from the Optionee by bequest or inheritance.
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are
provided under the Shareholders' Agreement. Shares subject to this special
right of repurchase are referred to as "Restricted Shares." The per share
repurchase price of the Restricted Shares shall be equal to the Exercise Price.
The Optionee shall not transfer, assign, encumber, or otherwise dispose of any
Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close of business on the date specified
for the repurchase, be delivered to the Secretary of the Company. Each
certificate shall be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such certificate(s), pay to the Optionee an
amount equal to the Exercise Price multiplied by the number of the Restricted
Shares to be repurchased. Payment shall be made, first, by the discharge of any
outstanding indebtedness (principal plus accrued but unpaid interest) under any
promissory note used by the Optionee to pay for the Restricted Shares under
Section 6 (c) hereof and, second, in cash or cash equivalents. The Company's
right of repurchase shall terminate with respect to any Restricted Shares for
which it has not been timely exercised pursuant to this Section (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ ---------------------
Date of Grant . . . . . . . . . . . . . . . . 0%
First . . . . . . . . . . . . . . . . . . . . 20%
Second. . . . . . . . . . . . . . . . . . . . 40%
Third . . . . . . . . . . . . . . . . . . . . 60%
Fourth. . . . . . . . . . . . . . . . . . . . 80%
Fifth . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares. As long as the Company retains
any special right of repurchase, or as long as the Shares are security for a
promissory note for the purchase price of the Shares, the Optionee shall deliver
to such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the
time and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities effected without
receipt of consideration therefor; provided, however, that the aggregate
purchase price payable for the Restricted Shares shall remain the same.
(h) BINDING EFFECT. The Company's special right of repurchase shall
inure to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
(i) TAX CONSEQUENCES. The Optionee understands that the exercise of
the Option to purchase Restricted Shares may subject the Optionee to federal and
state income tax liability. The Optionee has reviewed with the Optionee's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The Optionee is
relying solely on such advisors and not any statements or representations of the
Company or any of its agents. The Optionee understands that the Optionee (and
not the Company) shall be responsible for the Optionee's own tax liability that
may arise as a result of the transactions contemplated by this Agreement. The
Optionee understands that Section 83 of the Code taxes as ordinary income the
difference between the purchase price for the Shares and the fair market value
of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to the Company's special right of repurchase. The Optionee understands
that the Optionee may elect to be taxed at the time the Shares are purchased
rather than when and as the repurchase option expires by filing an election
under Section 83(b) of the Code with the IRS within thirty days from the date of
purchase.
THE OPTIONEE ACKNOWLEDGES THAT IT IS THE OPTIONEE'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), EVEN IF THE
OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE
OPTIONEE'S BEHALF.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIVE LEGENDS.
Optionee understands and agrees that the Company shall cause the legend set
forth below or legends substantially equivalent thereto, in addition to the
legends set forth in the Shareholders' Agreement, to be placed upon any
certificate(s) evidencing ownership of the Shares together with any other
legends that may be required by the Company or by state or federal securities
laws:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Optionee understand that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached as Exhibit A.
SECTION 13. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
that might be received upon exercise of this Option have been registered under
the Securities Act or have been registered or qualified under the securities
laws of any state, the Company may impose restrictions upon the sale, pledge, or
other transfer of such Shares (including the placement of appropriate legends on
stock certificates) if, in the judgment of the Company and its counsel, such
restrictions are necessary or desirable in order to achieve compliance with the
provisions of the Securities Act, the securities laws of any state or any other
law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
that might be received upon exercise of this Option is not registered under the
Securities Act but an exemption is available which requires an investment
representation or other representation, the Optionee shall represent and agree
at the time of exercise that the Shares being acquired upon exercising this
Option are being acquired for investment, and not with a view to the sale or
distribution thereof, and shall make such other representations as are set forth
in the Shareholders' Agreement or which are deemed necessary or
appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 13 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 14. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan or otherwise, and the
number and/or kind of Shares as to which Options (or portions thereof) are
outstanding, shall be adjusted proportionately by the Committee.
Notwithstanding the foregoing, the 100-share minimum for partial exercise under
Section 4(a) hereof shall not change as a result of any such adjustment unless
the outstanding Shares are exchanged for or changed into other securities of the
Company or another corporation. Any such adjustment of an outstanding Option
shall be made without a change in the total Exercise Price applicable to the
unexercised portion of such Option and with a corresponding adjustment in the
Exercise Price per Share. Any such adjustment under this Section 14 shall be
subject to the provisions of the Company's Articles of Incorporation, as
amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 15. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to
enable it to satisfy any withholding requirements that may arise in connection
with the disposition of Shares purchased by exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee, director or
Consultant. The Company reserves the right to terminate the Optionee's Service
at any time, with or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement and the Shareholders' Agreement
constitute the entire contract between the parties hereto with regard to the
subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
__________________________________________
XXXXXX X. CASE III
Optionee's Address:
__________________________________________
__________________________________________
__________________________________________
XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of OCTOBER 1, 1994, between Xxxxxxxxx &
Xxxxx Group, a California corporation (the "Company"), and XXXX X. XXXXXXXXX
(the "Optionee"),
W I T N E S S E T H:
WHEREAS, the Company's Board of Directors has established the Xxxxxxxxx &
Xxxxx Group 1985 Stock Option Plan in order to provide the employees and
directors of the Company and its Subsidiaries with an opportunity to acquire
Common Stock of the Company; and
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company and as an incentive for
extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "COMMITTEE" shall mean the Committee of the Board described in Section
3 of the Plan or, if none has been appointed, the full Board.
(e) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(f) "EMPLOYEE" shall mean any individual who is an employee (within the
meaning of Section 3401(c) of the Code and the regulations thereunder) of the
Company or of a Subsidiary.
(g) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(h) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(i) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(j) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(k) "PLAN" shall mean the Xxxxxxxxx & Xxxxx Group 1985 Stock Option Plan,
as in effect on the Date of Grant.
(l) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(m) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(n) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(o) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(p) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(q) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(r) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(s) "STOCK" shall mean the Common Stock of the Company.
(t) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(u) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(v) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase TEN THOUSAND (10,000) Shares for
the sum of ONE HUNDRED EIGHTY NINE THOUSAND FIVE HUNDRED DOLLARS ($18.95 per
Share), which is agreed to be 100% of the fair market value thereof on the Date
of Grant.
(b) STOCK OPTION PLAN. This Option is granted pursuant to the Plan, a
copy of which the Optionee acknowledges having received and read.
(c) TAX TREATMENT. This Option is a nonstatutory stock option and is not
intended to qualify as an Incentive Stock Option.
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SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or (ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6
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hereof for the full amount of the Purchase Price. A copy of the Shareholders'
Agreement, as amended, will be delivered to the Optionee promptly after receipt
of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's representative and must have a
fair market value (as determined by the Committee) on the date of exercise of
this Option which, together with any amount paid in a form other than Shares, is
equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on SEPTEMBER 30,
2001.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection
(a) above;
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(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right
-5-
of repurchase are referred to as "Restricted Shares." The per share repurchase
price of the Restricted Shares shall be equal to the Exercise Price. The
Optionee shall not transfer, assign, encumber, or otherwise dispose of any
Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close of business on the date specified
for the repurchase, be delivered to the Secretary of the Company. Each
certificate shall be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such certificate(s), pay to the Optionee an
amount equal to the Exercise Price multiplied by the number of the Restricted
Shares to be repurchased. Payment shall be made, first, by the discharge of any
outstanding indebtedness (principal plus accrued but unpaid interest) under any
promissory note used by the Optionee to pay for the Restricted Shares under
Section 6 (c) hereof and, second, in cash or cash equivalents. The Company's
right of repurchase shall terminate with respect to any Restricted Shares for
which it has not been timely exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ ---------------------
Date of Grant . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . 80%
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Fourth. . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
(iii) The sale of all or substantially all of the
Company's assets;
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
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holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities effected without
receipt of consideration therefor; provided, however, that the aggregate
purchase price payable for the Restricted Shares shall remain the same.
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
-8-
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are
-9-
set forth in the Shareholders' Agreement or which are deemed necessary or
appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
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(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
__________________________________________
Optionee's Address:
__________________________________________
__________________________________________
__________________________________________
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STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of May 7, 1991, between Xxxxxxxxx & Xxxxx
Group, a California corporation (the "Company"), and Xxxxxx X. Xxxxxxx (the
"Optionee"),
W I T N E S S E T H:
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company as an outside Director and as an
incentive for extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(e) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(f) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(g) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(h) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(i) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(j) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(k) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(m) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(n) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(o) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(p) "STOCK" shall mean the Common Stock of the Company.
(q) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(r) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(s) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase all or any part of ten thousand
(10,000) Shares for the sum of One Hundred Twenty-Three Thousand Three Hundred
Dollars ($12.33 per Share), which is agreed to be 100% of the fair market value
thereof on the Date of Grant.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or
-2-
(ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's
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representative and must have a fair market value (as determined by the
Committee) on the date of exercise of this Option which, together with any
amount paid in a form other than Shares, is equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on MAY 6, 1998.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
-4-
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right of repurchase are referred to as "Restricted
Shares." The per share repurchase price of the Restricted Shares shall be equal
to the Exercise Price. The Optionee shall not transfer, assign, encumber, or
otherwise dispose of any Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close
-5-
of business on the date specified for the repurchase, be delivered to the
Secretary of the Company. Each certificate shall be properly endorsed for
transfer. The Company shall, concurrently with the receipt of such
certificate(s), pay to the Optionee an amount equal to the Exercise Price
multiplied by the number of the Restricted Shares to be repurchased. Payment
shall be made, first, by the discharge of any outstanding indebtedness
(principal plus accrued but unpaid interest) under any promissory note used by
the Optionee to pay for the Restricted Shares under Section 6 (c) hereof and,
second, in cash or cash equivalents. The Company's right of repurchase shall
terminate with respect to any Restricted Shares for which it has not been timely
exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant To Repurchase
----------- ---------------------
Date of Grant . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . 80%
Fourth. . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
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(iii) The sale of all or substantially all of the
Company's assets;
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities
-7-
effected without receipt of consideration therefor; provided, however, that the
aggregate purchase price payable for the Restricted Shares shall remain the
same.
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
-8-
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are set forth in the Shareholders' Agreement or which
are deemed necessary or appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
-9-
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
-10-
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
/s/ Xxxxxx X. Xxxxxxx
__________________________________________
Xxxxxx X. Xxxxxxx
Optionee's Address:
000 Xxxx Xxxxxx
_________________________________________
Xxx Xxxxxx, Xx
__________________________________________
06840
__________________________________________
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XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of September 15, 1992, between Xxxxxxxxx &
Xxxxx Group, a California corporation (the "Company"), and Xxxxxx X. Xxxxxxx
(the "Optionee"),
W I T N E S S E T H:
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company as an outside Director and as an
incentive for extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(e) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(f) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(g) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(h) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(i) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(j) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(k) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(m) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(n) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(o) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(p) "STOCK" shall mean the Common Stock of the Company.
(q) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(r) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(s) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase two thousand (2,000) Shares for
the sum of Sixteen Thousand Eight Hundred Twenty Dollars ($8.41 per Share),
which is agreed to be 100% of the fair market value thereof on the Date of
Grant.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or
-2-
(ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's
-3-
representative and must have a fair market value (as determined by the
Committee) on the date of exercise of this Option which, together with any
amount paid in a form other than Shares, is equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on SEPTEMBER 15,
1999.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
-4-
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right of repurchase are referred to as "Restricted
Shares." The per share repurchase price of the Restricted Shares shall be equal
to the Exercise Price. The Optionee shall not transfer, assign, encumber, or
otherwise dispose of any Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close
-5-
of business on the date specified for the repurchase, be delivered to the
Secretary of the Company. Each certificate shall be properly endorsed for
transfer. The Company shall, concurrently with the receipt of such
certificate(s), pay to the Optionee an amount equal to the Exercise Price
multiplied by the number of the Restricted Shares to be repurchased. Payment
shall be made, first, by the discharge of any outstanding indebtedness
(principal plus accrued but unpaid interest) under any promissory note used by
the Optionee to pay for the Restricted Shares under Section 6 (c) hereof and,
second, in cash or cash equivalents. The Company's right of repurchase shall
terminate with respect to any Restricted Shares for which it has not been timely
exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ -------------------
Date of Grant . . . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . . . 80%
Fourth. . . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
-6-
(iii) The sale of all or substantially all of the
Company's assets;
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities
-7-
effected without receipt of consideration therefor; provided, however, that the
aggregate purchase price payable for the Restricted Shares shall remain the
same.
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
-8-
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are set forth in the Shareholders' Agreement or which
are deemed necessary or appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
-9-
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
-10-
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
Xxxxxx X. Xxxxxxx
__________________________________________
Optionee's Address:
000 Xxxx Xxxxxx
__________________________________________
Xxx Xxxxxx, XX 00000
__________________________________________
__________________________________________
-00-
XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of JUNE 30, 1994, between Xxxxxxxxx & Xxxxx
Group, a California corporation (the "Company"), and XXXXXX X. XXXXXXX (the
"Optionee"),
W I T N E S S E T H:
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company as an outside Director and as an
incentive for extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(e) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(f) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(g) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(h) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(i) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(j) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(k) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(m) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(n) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(o) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(p) "STOCK" shall mean the Common Stock of the Company.
(q) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(r) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(s) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase TWO THOUSAND (2,000) Shares for
the sum of THIRTY SIX THOUSAND TWO HUNDRED DOLLARS ($18.10 per Share), which is
agreed to be 100% of the fair market value thereof on the Date of Grant.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or
-2-
(ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's
-3-
representative and must have a fair market value (as determined by the
Committee) on the date of exercise of this Option which, together with any
amount paid in a form other than Shares, is equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on JUNE 29, 2001.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
-4-
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right of repurchase are referred to as "Restricted
Shares." The per share repurchase price of the Restricted Shares shall be equal
to the Exercise Price. The Optionee shall not transfer, assign, encumber, or
otherwise dispose of any Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close of business on the date specified
for the repurchase, be delivered to the Secretary of the Company.
-5-
Each certificate shall be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such certificate(s), pay to the Optionee an
amount equal to the Exercise Price multiplied by the number of the Restricted
Shares to be repurchased. Payment shall be made, first, by the discharge of any
outstanding indebtedness (principal plus accrued but unpaid interest) under any
promissory note used by the Optionee to pay for the Restricted Shares under
Section 6 (c) hereof and, second, in cash or cash equivalents. The Company's
right of repurchase shall terminate with respect to any Restricted Shares for
which it has not been timely exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ -------------------
Date of Grant . . . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . . . 80%
Fourth. . . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
(iii) The sale of all or substantially all of the
Company's assets;
-6-
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities effected without
receipt of consideration therefor; provided, however, that the aggregate
purchase price payable for the Restricted Shares shall remain the same.
-7-
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
-8-
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are set forth in the Shareholders' Agreement or which
are deemed necessary or appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
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(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
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(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
/s/ Xxxxxx X. Xxxxxxx
__________________________________________
Optionee's Address:
000 Xxxx Xxxxxx
__________________________________________
Xxx Xxxxxx, XX 00000
__________________________________________
__________________________________________
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XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of SEPTEMBER 15, 1992, between Xxxxxxxxx &
Xxxxx Group, a California corporation (the "Company"), and XXXXXXX X. XXXXX (the
"Optionee"),
W I T N E S S E T H:
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company as an outside Director and as an
incentive for extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(e) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(f) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(g) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(h) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(i) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(j) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(k) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(m) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(n) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(o) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(p) "STOCK" shall mean the Common Stock of the Company.
(q) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(r) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(s) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase TEN THOUSAND (10,000) Shares for
the sum of EIGHTY FOUR THOUSAND ONE HUNDRED DOLLARS ($8.41 per Share), which is
agreed to be 100% of the fair market value thereof on the Date of Grant.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or
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(ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's
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representative and must have a fair market value (as determined by the
Committee) on the date of exercise of this Option which, together with any
amount paid in a form other than Shares, is equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on SEPTEMBER 15,
1999.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
-4-
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right of repurchase are referred to as "Restricted
Shares." The per share repurchase price of the Restricted Shares shall be equal
to the Exercise Price. The Optionee shall not transfer, assign, encumber, or
otherwise dispose of any Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close
-5-
of business on the date specified for the repurchase, be delivered to the
Secretary of the Company. Each certificate shall be properly endorsed for
transfer. The Company shall, concurrently with the receipt of such
certificate(s), pay to the Optionee an amount equal to the Exercise Price
multiplied by the number of the Restricted Shares to be repurchased. Payment
shall be made, first, by the discharge of any outstanding indebtedness
(principal plus accrued but unpaid interest) under any promissory note used by
the Optionee to pay for the Restricted Shares under Section 6 (c) hereof and,
second, in cash or cash equivalents. The Company's right of repurchase shall
terminate with respect to any Restricted Shares for which it has not been timely
exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ -------------------
Date of Grant . . . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . . . 80%
Fourth. . . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
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(iii) The sale of all or substantially all of the
Company's assets;
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities
-7-
effected without receipt of consideration therefor; provided, however, that the
aggregate purchase price payable for the Restricted Shares shall remain the
same.
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to perfect
an exemption from the registration requirements thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied; and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
-8-
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are set forth in the Shareholders' Agreement or which
are deemed necessary or appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
-9-
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
-10-
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
/s/ Xxxxxxx X. Xxxxx
__________________________________________
Xxxxxxx X. Xxxxx
Optionee's Address:
000 Xxxx Xxxx Xxxxx
__________________________________________
Xxxxxx XX. 00000
__________________________________________
__________________________________________
-00-
XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of JUNE 30, 1994, between Xxxxxxxxx & Xxxxx
Group, a California corporation (the "Company"), and XXXXXXX X. XXXXX (the
"Optionee"),
W I T N E S S E T H:
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company as an outside Director and as an
incentive for extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(e) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(f) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(g) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(h) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(i) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(j) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(k) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(m) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(n) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(o) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(p) "STOCK" shall mean the Common Stock of the Company.
(q) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(r) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(s) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase TEN THOUSAND (10,000) Shares for
the sum of ONE HUNDRED EIGHTY ONE THOUSAND DOLLARS ($18.10 per Share), which is
agreed to be 100% of the fair market value thereof on the Date of Grant.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or
-2-
(ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's
-3-
representative and must have a fair market value (as determined by the
Committee) on the date of exercise of this Option which, together with any
amount paid in a form other than Shares, is equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on JUNE 29, 2001.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
-4-
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right of repurchase are referred to as "Restricted
Shares." The per share repurchase price of the Restricted Shares shall be equal
to the Exercise Price. The Optionee shall not transfer, assign, encumber, or
otherwise dispose of any Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close of business on the date specified
for the repurchase, be delivered to the Secretary of the Company.
-5-
Each certificate shall be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such certificate(s), pay to the Optionee an
amount equal to the Exercise Price multiplied by the number of the Restricted
Shares to be repurchased. Payment shall be made, first, by the discharge of any
outstanding indebtedness (principal plus accrued but unpaid interest) under any
promissory note used by the Optionee to pay for the Restricted Shares under
Section 6 (c) hereof and, second, in cash or cash equivalents. The Company's
right of repurchase shall terminate with respect to any Restricted Shares for
which it has not been timely exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ -------------------
Date of Grant . . . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . . . 80%
Fourth. . . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
(iii) The sale of all or substantially all of the
Company's assets;
-6-
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities effected without
receipt of consideration therefor; provided, however, that the aggregate
purchase price payable for the Restricted Shares shall remain the same.
-7-
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
-8-
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are set forth in the Shareholders' Agreement or which
are deemed necessary or appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
-9-
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
-10-
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
/s/ Xxxxxxx X. Xxxxx
__________________________________________
Xxxxxxx X. Xxxxx
Optionee's Address:
000 Xxxx Xxxx Xxxxx
__________________________________________
Xxxxxx XX. 00000
__________________________________________
__________________________________________
-00-
XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of SEPTEMBER 1, 1995, between Xxxxxxxxx &
Xxxxx Group, a California corporation (the "Company"), and XXXXX X.
XXXXXXXXX(the "Optionee"),
W I T N E S S E T H:
WHEREAS, the Company's Board of Directors has established the Xxxxxxxxx &
Xxxxx Group 1985 Stock Option Plan in order to provide the employees and
directors of the Company and its Subsidiaries with an opportunity to acquire
Common Stock of the Company; and
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company and as an incentive for
extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "COMMITTEE" shall mean the Committee of the Board described in Section
3 of the Plan or, if none has been appointed, the full Board.
(e) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(f) "EMPLOYEE" shall mean any individual who is an employee (within the
meaning of Section 3401(c) of the Code and the regulations thereunder) of the
Company or of a Subsidiary.
(g) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(h) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(i) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(j) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(k) "PLAN" shall mean the Xxxxxxxxx & Xxxxx Group 1985 Stock Option Plan,
as in effect on the Date of Grant.
(l) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(m) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(n) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(o) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(p) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(q) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(r) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(s) "STOCK" shall mean the Common Stock of the Company.
(t) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(u) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(v) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase FIFTEEN THOUSAND (15,000) Shares
for the sum of THREE HUNDRED TWENTY FOUR THOUSAND ($21.60 per Share), which is
agreed to be 100% of the fair market value thereof on the Date of Grant.
(b) STOCK OPTION PLAN. This Option is granted pursuant to the Plan, a
copy of which the Optionee acknowledges having received and read.
(c) TAX TREATMENT. This Option is a nonstatutory stock option and is not
intended to qualify as an Incentive Stock Option.
-2-
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or (ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6
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hereof for the full amount of the Purchase Price. A copy of the Shareholders'
Agreement, as amended, will be delivered to the Optionee promptly after receipt
of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's representative and must have a
fair market value (as determined by the Committee) on the date of exercise of
this Option which, together with any amount paid in a form other than Shares, is
equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on AUGUST 31, 2002.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection
(a) above;
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(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right
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of repurchase are referred to as "Restricted Shares." The per share repurchase
price of the Restricted Shares shall be equal to the Exercise Price. The
Optionee shall not transfer, assign, encumber, or otherwise dispose of any
Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close of business on the date specified
for the repurchase, be delivered to the Secretary of the Company. Each
certificate shall be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such certificate(s), pay to the Optionee an
amount equal to the Exercise Price multiplied by the number of the Restricted
Shares to be repurchased. Payment shall be made, first, by the discharge of any
outstanding indebtedness (principal plus accrued but unpaid interest) under any
promissory note used by the Optionee to pay for the Restricted Shares under
Section 6 (c) hereof and, second, in cash or cash equivalents. The Company's
right of repurchase shall terminate with respect to any Restricted Shares for
which it has not been timely exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ -------------------
Date of Grant . . . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . . . 80%
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Fourth. . . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
(iii) The sale of all or substantially all of the
Company's assets;
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
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holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities effected without
receipt of consideration therefor; provided, however, that the aggregate
purchase price payable for the Restricted Shares shall remain the same.
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
-8-
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are
-9-
set forth in the Shareholders' Agreement or which are deemed necessary or
appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
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(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
-11-
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
__________________________________________
Optionee's Address:
__________________________________________
__________________________________________
__________________________________________
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XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of September 15, 1992, between Xxxxxxxxx &
Xxxxx Group, a California corporation (the "Company"), and Xxxxxx X. Xxxx, Xx.
(the "Optionee"),
W I T N E S S E T H:
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company as an outside Director and as an
incentive for extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(e) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(f) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(g) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(h) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(i) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(j) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(k) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(m) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(n) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(o) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(p) "STOCK" shall mean the Common Stock of the Company.
(q) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(r) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(s) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase TWO THOUSAND (2,000) Shares for
the sum of SIXTEEN THOUSAND EIGHT HUNDRED TWENTY DOLLARS ($8.41 per Share),
which is agreed to be 100% of the fair market value thereof on the Date of
Grant.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or
-2-
(ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's
-3-
representative and must have a fair market value (as determined by the
Committee) on the date of exercise of this Option which, together with any
amount paid in a form other than Shares, is equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on SEPTEMBER 15,
1999.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
-4-
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right of repurchase are referred to as "Restricted
Shares." The per share repurchase price of the Restricted Shares shall be equal
to the Exercise Price. The Optionee shall not transfer, assign, encumber, or
otherwise dispose of any Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close
-5-
of business on the date specified for the repurchase, be delivered to the
Secretary of the Company. Each certificate shall be properly endorsed for
transfer. The Company shall, concurrently with the receipt of such
certificate(s), pay to the Optionee an amount equal to the Exercise Price
multiplied by the number of the Restricted Shares to be repurchased. Payment
shall be made, first, by the discharge of any outstanding indebtedness
(principal plus accrued but unpaid interest) under any promissory note used by
the Optionee to pay for the Restricted Shares under Section 6 (c) hereof and,
second, in cash or cash equivalents. The Company's right of repurchase shall
terminate with respect to any Restricted Shares for which it has not been timely
exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ -------------------
Date of Grant . . . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . . . 80%
Fourth. . . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
-6-
(iii) The sale of all or substantially all of the
Company's assets;
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities
-7-
effected without receipt of consideration therefor; provided, however, that the
aggregate purchase price payable for the Restricted Shares shall remain the
same.
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
-8-
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are set forth in the Shareholders' Agreement or which
are deemed necessary or appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
-9-
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
-10-
(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE: Xxxxxx X. Xxxx, Xx.
/s/ Xxxxxx X. Xxxx, Xx.
__________________________________________
Optionee's Address:
000 Xxxx Xxxxxx Xxxx
__________________________________________
Walnut
__________________________________________
California 91789
__________________________________________
-00-
XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of June 30, 1994, between Xxxxxxxxx & Xxxxx
Group, a California corporation (the "Company"), and Xxxxxx X. Xxxx (the
"Optionee"),
W I T N E S S E T H:
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company as an outside Director and as an
incentive for extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(e) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(f) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(g) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(h) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(i) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(j) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(k) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(m) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(n) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(o) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(p) "STOCK" shall mean the Common Stock of the Company.
(q) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(r) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(s) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase two thousand (2,000) Shares for
the sum of Thirty Six Thousand Two Hundred Dollars ($18.10 per Share), which is
agreed to be 100% of the fair market value thereof on the Date of Grant.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or
-2-
(ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's
-3-
representative and must have a fair market value (as determined by the
Committee) on the date of exercise of this Option which, together with any
amount paid in a form other than Shares, is equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on June 29, 2001.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
-4-
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right of repurchase are referred to as "Restricted
Shares." The per share repurchase price of the Restricted Shares shall be equal
to the Exercise Price. The Optionee shall not transfer, assign, encumber, or
otherwise dispose of any Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close of business on the date specified
for the repurchase, be delivered to the Secretary of the Company.
-5-
Each certificate shall be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such certificate(s), pay to the Optionee an
amount equal to the Exercise Price multiplied by the number of the Restricted
Shares to be repurchased. Payment shall be made, first, by the discharge of any
outstanding indebtedness (principal plus accrued but unpaid interest) under any
promissory note used by the Optionee to pay for the Restricted Shares under
Section 6 (c) hereof and, second, in cash or cash equivalents. The Company's
right of repurchase shall terminate with respect to any Restricted Shares for
which it has not been timely exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ -------------------
Date of Grant . . . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . . . 80%
Fourth. . . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
(iii) The sale of all or substantially all of the
Company's assets;
-6-
(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities effected without
receipt of consideration therefor; provided, however, that the aggregate
purchase price payable for the Restricted Shares shall remain the same.
-7-
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
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SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are set forth in the Shareholders' Agreement or which
are deemed necessary or appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
-9-
(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
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(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: ____________________________________
Its: _______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
/s/ Xxxxxx X. Xxxx, Xx.
__________________________________________
Optionee's Address:
__________________________________________
000 Xxxx Xxxxxx Xxxx
__________________________________________
Walnut, Calif. 91789
__________________________________________
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XXXXXXXXX & XXXXX GROUP
1985 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, entered into as of OCTOBER 1, 1994, between Xxxxxxxxx &
Xxxxx Group, a California corporation (the "Company"), and XXXXXXXX X. XXXXXXX
(the "Optionee"),
W I T N E S S E T H:
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the nonstatutory stock
option described in this Agreement to the Optionee as an inducement to enter
into or remain in the service of the Company as an outside Director and as an
incentive for extraordinary efforts during such service:
NOW, THEREFORE, it is agreed as follows:
SECTION 1. DEFINITIONS.
(a) "AGREEMENT" shall mean this Nonstatutory Stock Option Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(d) "DATE OF GRANT" shall mean the date on which the Committee resolved to
grant this Option, which is the date as of which this Agreement is entered into.
(e) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of this option, as specified in Section 2(a) hereof.
(f) "INCENTIVE STOCK OPTION" shall mean an employee incentive stock option
as described in Section 422A(b) of the Code.
(g) "OPTION" shall mean the nonstatutory stock option granted under this
Agreement.
(h) "PARTIAL EXERCISE" shall mean an exercise with respect to less than
all of the remaining Shares subject to this Option.
(i) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this Option is being exercised.
(j) "RESTRICTED SHARES" shall mean a Share which is subject to the
Company's right of repurchase under Section 8 hereof.
(k) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 9 hereof.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(m) "SERVICE" shall mean service as an Employee or as a director of the
Company or a Subsidiary.
(n) "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 13 hereof (if applicable).
(o) "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement dated
as of January 1, 1983 among all of the Company's shareholders.
(p) "STOCK" shall mean the Common Stock of the Company.
(q) "SUBSIDIARY" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50% of the total combined voting power
of all classes of outstanding stock of such corporation.
(r) "TEST RATE" shall mean the lowest rate of interest which will not
result in the imputation of additional interest under the applicable provision
of the Code.
(s) "TRANSFEREE" shall mean any person to whom the Optionee has directly
or indirectly transferred any Share acquired under this Agreement.
SECTION 2. GRANT OF OPTION.
(a) OPTION. On the terms and conditions stated below, the Company hereby
grants to the Optionee the Option to purchase TEN THOUSAND (10,000) Shares for
the sum of ONE HUNDRED EIGHTY THREE THOUSAND, EIGHT HUNDRED DOLLARS ($18.38 per
Share), which is agreed to be 100% of the fair market value thereof on the Date
of Grant.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this Option and the rights
and privileges conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
Option, or of any right or privilege conferred hereby, contrary to the
provisions hereof, or upon any attempted sale under any execution, attachment or
similar process upon the rights and privileges conferred hereby, this Option and
the rights and privileges conferred hereby shall immediately become null and
void.
SECTION 4. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsection (b) below, this Option shall be
exercisable in its entirety each year between October 1 and November 30, and at
no other time, unless (i) one of the transactions described in Section 8(d)(i),
(ii) or (iii) occurs, in which case this Option becomes exercisable in its
entirety immediately prior to the closing or the occurence of said transaction,
or
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(ii) the Optionee's death or termination of Service occurs, in which case the
terms and conditions of Section 7 hereof shall apply. No Partial Exercise of
this Option may be made for a number of Shares other than 100 Shares or a
multiple thereof (without regard to adjustments).
(b) SHAREHOLDERS' AGREEMENT. No part of this Option shall be exercisable
unless the Optionee or his representative has delivered, or delivers
contemporaneously with his notice of exercise, an executed signature page to the
Shareholders' Agreement, to which he and his Shares shall become subject.
SECTION 5. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's representative may
exercise this Option by giving written notice to the Secretary of the Company
pursuant to Section 14(d) hereof. The notice shall specify the election to
exercise this Option and the number of Shares for which it is being exercised.
The notice may also request a form of payment other than cash under Sections 6
(b) or (c) hereof. The notice, along with a signature page to the Shareholders'
Agreement and any other documentation required thereunder, shall be signed by
the person or persons exercising this Option. In the event that this Option is
being exercised by the representative of the Optionee, the notice shall be
accompanied by proof satisfactory to the Company of the representative's right
to exercise this Option. The Optionee or the Optionee's representative shall
deliver to the Secretary of the Company, at the time of giving the notice,
payment in a form which conforms to Section 6 hereof for the full amount of the
Purchase Price. A copy of the Shareholders' Agreement, as amended, will be
delivered to the Optionee promptly after receipt of notice.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise and
accompanying documentation, the Company shall cause to be issued a certificate
or certificates for the Shares as to which this Option has been exercised,
registered in the name of the person exercising this Option (or in the names of
such person and his or her spouse as community property or as joint tenants with
right of survivorship). The certificate or certificates will be held by the
Secretary of the Company pursuant to the terms of the Escrow Agreement signed as
part of the Shareholders' Agreement.
SECTION 6. PAYMENT FOR STOCK.
(a) PAYMENT IN CASH. The entire Purchase Price may be paid in U.S.
Dollars.
(b) SURRENDER OF STOCK. With the Committee's express consent and at its
sole discretion, all or part of the Purchase Price may be paid by the surrender
of Shares in good form for transfer. Such Shares must have been owned for more
than 12 months by the Optionee or the Optionee's
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representative and must have a fair market value (as determined by the
Committee) on the date of exercise of this Option which, together with any
amount paid in a form other than Shares, is equal to the Purchase Price.
(c) PROMISSORY NOTE. With the Committee's express consent and at its sole
discretion, and if the Optionee still qualifies as an Employee or as a director
of the Company or a Subsidiary at the time of exercise, then all or part of the
Purchase Price may be paid with a full-recourse promissory note executed by the
Optionee. The term of such note shall be 60 months, and such note shall be
payable in full within 90 days after the Optionee's Service terminates. Such
note shall bear interest at a fixed rate equal to the Test Rate and shall be
fully amortized with 60 payments of principal and interest. Such note may, at
the option of the Committee, be repaid in full or in part by way of payroll
deduction, and shall be secured by a pledge of the Shares being acquired.
SECTION 7. TERM AND EXPIRATION.
(a) BASIC TERM. This Option shall in any event expire on SEPTEMBER 30,
2001.
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's Service
terminates for any reason other than death, then this Option shall expire on the
earliest of the following occasions:
(i) The expiration date determined pursuant to
Subsection (a) above;
(ii) The date three months after the termination of the
Optionee's Service (other than a discharge for
cause or because the Optionee is permanently and
totally disabled within the meaning of Section
22(e)(3) of the Code);
(iii) The time when the Optionee is notified (orally or
in writing) that he or she is being discharged for
cause; or
(iv) The date six months after the termination of the
Optionee's service as an Employee because the
Optionee is permanently and totally disabled
within the meaning of Section 22(e)(3) of the
Code.
The Optionee may exercise all or part of this Option at any time before its
expiration under the preceding sentence. The balance of this Option shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of Service but before the expiration of this Option, all
or part of this Option may be exercised (prior to expiration) by the executors
or adminstrators of the Optionee's estate or by any person who has acquired this
Option directly from the Optionee by bequest or inheritance.
-4-
(c) DEATH OF OPTIONEE. If the Optionee dies in Service, then this Option
shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection
(a) above; or
(ii) The date six months after the Optionee's death.
All or part of this Option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this Option directly from
the Optionee by bequest or inheritance.
(d) LEAVE OF ABSENCE. For purposes of this Section 7, the Employee
relationship shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee).
SECTION 8. THE COMPANY'S RIGHT OF REPURCHASE.
(a) BASIC REPURCHASE RIGHT. All Shares purchased pursuant to this
Agreement shall be subject to the terms and conditions of the Shareholders'
Agreement. Except to the extent otherwise provided in Subsection (d), Shares
purchased pursuant to this Agreement shall also be subject to a special right
(but not an obligation) of repurchase by the Company which is in addition to
whatever similar rights are provided under the Shareholders' Agreement. Shares
subject to this special right of repurchase are referred to as "Restricted
Shares." The per share repurchase price of the Restricted Shares shall be equal
to the Exercise Price. The Optionee shall not transfer, assign, encumber, or
otherwise dispose of any Restricted Shares.
(b) CONDITION PRECEDENT TO EXERCISE. The Company's special right of
repurchase shall be exercisable only during the 60-day period next following the
later of (i) the date when the Optionee's Service terminates for any reason,
with or without cause, or (ii) the date when the Optionee purchases the
Restricted Shares. The determination of whether or when the Optionee's Service
has terminated shall be made by the Committee in its sole and absolute
discretion.
(c) EXERCISE OF REPURCHASE RIGHT. The Company's right of repurchase shall
be exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall indicate the number of Restricted Shares to be repurchased and the date on
which the repurchase is to be effected. Such date shall not be more than 30
days after the date of the notice. The certificate(s) representing the
Restricted Shares to be repurchased shall, if in the possession or under the
control of the Optionee, prior to the close of business on the date specified
for the repurchase, be delivered to the Secretary of the Company.
-5-
Each certificate shall be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such certificate(s), pay to the Optionee an
amount equal to the Exercise Price multiplied by the number of the Restricted
Shares to be repurchased. Payment shall be made, first, by the discharge of any
outstanding indebtedness (principal plus accrued but unpaid interest) under any
promissory note used by the Optionee to pay for the Restricted Shares under
Section 6 (c) hereof and, second, in cash or cash equivalents. The Company's
right of repurchase shall terminate with respect to any Restricted Shares for
which it has not been timely exercised pursuant to this Section 8 (c).
(d) PHASE-OUT OF REPURCHASE RIGHT. On and after each date specified in
the following schedule, the Company's special right of repurchase under this
Agreement shall terminate and shall not be exercisable with respect to that
number of Shares purchased pursuant to this Agreement which does not exceed the
percentage set forth opposite such date multiplied by the total number of Shares
subject to this Option.
Anniversary Percentage of Shares
of Date of No Longer Subject
Grant to Repurchase
------------ -------------------
Date of Grant . . . . . . . . . . . . . . . . . . 20%
First . . . . . . . . . . . . . . . . . . . . . . 40%
Second. . . . . . . . . . . . . . . . . . . . . . 60%
Third . . . . . . . . . . . . . . . . . . . . . . 80%
Fourth. . . . . . . . . . . . . . . . . . . . . . 100%
The termination and phase-out of the Company's special repurchase right will
have no effect on any rights the Company may have (as to repurchase or
otherwise) under the Shareholders' Agreement, which will continue in full force
and effect.
The foregoing notwithstanding, the Company's special right of repurchase
shall terminate with respect to all Shares subject to this Option immediately
prior to the closing or occurance of any of the following transactions or
events:
(i) A merger or other reorganization (within the
meaning of Section 181 of the California
Corporations Code) in which the Company is not the
surviving entity;
(ii) The transfer of more than 50% of the Company's
voting power to one person or to a group of
affiliated persons, whether in one transaction or
in a series of related transactions;
(iii) The sale of all or substantially all of the
Company's assets;
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(iv) The Optionee's death; or
(v) The Optionee is permanently and totally disabled
(within the meaning of Section 22(e)(3) of the
Code).
(e) ESTABLISHMENT OF ESCROW. In conformance with the terms of the
Shareholders' Agreement and in order to facilitate the exercise of the Company's
special right of repurchase, the Optionee shall, concurrently with the exercise
of this Option, execute joint escrow instructions prescribed by the Committee.
The Optionee shall also deliver to and deposit with the designated escrow agent
the certificate(s) for any Restricted Shares, except as provided in any security
agreement executed under Section 6(c) hereof. As long as the Company retains
any right of repurchase (special or otherwise), the Optionee shall deliver to
such escrow agent, promptly upon receipt, any additional securities or other
property (including money paid other than as a cash dividend) distributed with
respect to any Restricted Shares, except as provided in any such security
agreement. Any certificate(s) delivered into escrow shall be accompanied by an
assignment of stock powers properly endorsed by the Optionee.
(f) CANCELLATION OF SHARES. If the Company makes available, at the time
and place and in the amount and form provided in this Agreement, the
consideration for the Restricted Shares to be repurchased in accordance with the
provisions of this Agreement, then after such time, the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(g) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of any
stock dividend, stock split, adjustment in conversion ratio, recapitalization or
similar transaction affecting the Company's outstanding securities without
receipt of consideration, any new, substituted or additional securities or other
property (including money paid other than as a cash dividend) which are by
reason of such transaction distributed with respect to any Restricted Shares or
into which such Restricted Shares thereby become convertible shall immediately
be subject to the Company's special right of repurchase. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of the Restricted Shares. Appropriate
adjustments shall also, after each such transaction, be made to the price per
share to be paid upon the exercise of the special right of repurchase in order
to reflect any change in the Company's outstanding securities effected without
receipt of consideration therefor; provided, however, that the aggregate
purchase price payable for the Restricted Shares shall remain the same.
-7-
(h) LEGEND. All certificates representing Restricted Shares shall be
endorsed with the following legend:
SALE OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY THE PROVISIONS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY SPECIAL REPURCHASE RIGHTS.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.
(i) BINDING EFFECT. The Company's special right of repurchase shall inure
to the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir or legatee of the Optionee.
SECTION 9. THE COMPANY'S RIGHT OF FIRST REFUSAL.
In the event that the Optionee or a Transferee proposes to sell, pledge or
otherwise transfer to any person any Shares acquired under this Agreement, or
any interest in such Shares, the Company shall have the Right of First Refusal
set forth in Section 4 of the Shareholders' Agreement.
SECTION 10. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this Option unless and until
the Company has determined that:
(a) It and the Optionee have taken any actions required to
register the Shares under the Securities Act or to
perfect an exemption from the registration requirements
thereof;
(b) Any applicable listing requirement of any stock
exchange on which Stock is listed has been satisfied;
and
(c) Any other applicable provision of state, federal or
foreign law has been satisfied.
-8-
SECTION 11. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or qualify the
sale of Shares under the Securities Act or any other applicable law. The
Company shall not be obligated to take any affirmative action in order to cause
the sale of Shares under this Agreement to comply with any law.
SECTION 12. RESTRICTIONS ON TRANSFER OF SHARES.
(a) RESTRICTIONS. Regardless of whether the offering and sale of Shares
under the Plan have been registered under the Securities Act or have been
registered or qualified under the securities laws of any state, the Company may
impose restrictions upon the sale, pledge, or other transfer of such Shares
(including the placement of appropriate legends on stock certificates) if, in
the judgment of the Company and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the Securities
Act, the securities laws of any state or any other law.
(b) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees that
the Shares to be acquired upon exercising this Option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(c) INVESTMENT INTENT AT EXERCISE. In the event that the sale of Shares
under the Plan is not registered under the Securities Act but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree at the time of exercise that the Shares
being acquired upon exercising this Option are being acquired for investment,
and not with a view to the sale or distribution thereof, and shall make such
other representations as are set forth in the Shareholders' Agreement or which
are deemed necessary or appropriate by the Company and its counsel.
(d) LEGEND. All certificates evidencing Shares acquired under this
Agreement in an unregistered transaction shall bear the restrictive legends set
forth in Section 10 of the Shareholders' Agreement (and such other restrictive
legends as are required or deemed advisable under the provisions of any
applicable law).
(e) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
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(f) ADMINISTRATION. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 13. SHARES AND ADJUSTMENTS.
(a) ADJUSTMENT. In the event that the outstanding Shares are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, combination of shares or
declaration of stock dividends, the total number and/or kind of Shares for the
purchase of which Options may be granted under the Plan, and the number and/or
kind of Shares as to which Options (or portions thereof) are outstanding, shall
be adjusted proportionately by the Committee. Notwithstanding the foregoing,
the 100-share minimum for partial exercise under Section 4(a) hereof shall not
change as a result of any such adjustment unless the outstanding Shares are
exchanged for or changed into other securities of the Company or another
corporation. Any such adjustment of an outstanding Option shall be made without
a change in the total Exercise Price applicable to the unexercised portion of
such Option and with a corresponding adjustment in the Exercise Price per Share.
Any such adjustment under this Section 13 shall be subject to the provisions of
the Company's Articles of Incorporation, as amended, and applicable law.
(b) ADMINISTRATION. All such adjustments shall be made by the Committee,
whose determination shall be conclusive and binding on all persons.
SECTION 14. MISCELLANEOUS PROVISIONS.
(a) WITHHOLDING TAXES. In the event that the Company determines that it
is required to withhold Federal, state, local or foreign taxes as a result of
the exercise of this Option, the Optionee, as a condition to the exercise of
this Option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements
satisfactory to the Company to enable it to satisfy any withholding requirements
that may arise in connection with the disposition of Shares purchased by
exercising this Option.
(b) RIGHTS AS A SHAREHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a shareholder with respect to any Shares
subject to this Option until such Shares have been issued in the name of the
Optionee or the Optionee's representative.
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(c) NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall be construed as
giving the Optionee the right to be retained as an Employee or director. The
Company reserves the right to terminate the Optionee's Service at any time, with
or without cause.
(d) NOTICE. Any notice required by the terms of this Agreement shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail
with postage and fees prepaid and addressed to the party entitled to such notice
at the address shown below such party's signature on this Agreement, or at such
other address as such party may designate by 10 days' advance written notice to
the other party to this Agreement.
(e) ENTIRE AGREEMENT. This Agreement, the Plan and the Shareholders'
Agreement constitute the entire contract between the parties hereto with regard
to the subject matter hereof.
(f) CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf of its officer duly authorized to act on behalf of the Committee, and
the Optionee has personally executed this Agreement.
XXXXXXXXX & XXXXX GROUP
By: /s/ Xxxxxxx X. Xxxxxxx
____________________________________
Its: Chief Financial Officer
_______________________________
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
OPTIONEE:
__________________________________________
Optionee's Address:
7 Via Paraiso East
__________________________________________
Xxxxxxxx XX 00000
__________________________________________
__________________________________________
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