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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
November 26, 1996, by and between Xxxxx Xxxxxx X'Xxxxxxx (the "Executive"),
Milgray Electronics, Inc., a New York corporation (the "Company"), and Xxxx
Industries, Inc., a California corporation (the "Guarantor"), to be effective as
of the effective date of the Merger (as defined below) with reference to the
following facts:
A. Executive is currently employed as Vice President--Marketing
of the Company;
B. Pursuant to an agreement dated as of November 26, 1996, ME
Acquisition, Inc., a New York corporation and wholly owned subsidiary of the
Company ("Acquisition Sub") will make a tender offer to acquire all of the
outstanding capital stock of Milgray (the "Tender Offer"). After completion of
the Tender Offer, it is intended that Acquisition Sub will be merged with and
into Milgray, and Milgray will become a wholly-owned subsidiary of the Guarantor
(the "Merger");
C. The Company wishes to ensure the continued services of
Executive after the Merger; and
D. Executive is willing to continue his employment with the
Company on the terms and conditions hereinafter set forth.
NOW THEREFORE, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. EMPLOYMENT
1.1 Duties and Responsibilities
The Company does hereby employ Executive and Executive hereby accepts
such employment as Vice President--Marketing. Executive shall report to the
President of the Company, and subject to the directions of the President, shall
be responsible for marketing, product and asset management and related matters
and performing other functions similar to the functions presently performed by
Executive at the Company with respect to passives, electromechanical and power
supplies; provided, however, that Executive shall not be required to undertake
duties not commensurate with his position as Vice President--Marketing of the
Company. Notwithstanding anything contained in the preceding sentence, Executive
acknowledges that, following the Merger, the Guarantor plans to investigate
combining its existing distribution business, or segments thereof, with those of
the Company, and where feasible or practicable, to combine such business, or
segments thereof, and that as a result of such combination, the Company may
change the exact nature of Executive's responsibilities (but not Executive's job
title), but in no event will Executive be required to accept job
responsibilities in an area
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outside of his current expertise or to act in less than an executive capacity;
moreover, Executive's status and position in the Company (or its successor)
organization chart (i.e., the status and position of the person to whom
Executive reports and the class of employees who report to Executive) shall be
similar to other Vice Presidents of the Company and/or the Guarantor with
responsibilities similar to those of Executive. Any such change in
responsibility will not constitute a breach of this Agreement by the Company or
the Guarantor. During the term of this Agreement, Executive shall devote his
full business time and attention to the business of the Company and shall not be
engaged in any other duties which interfere with the performance of his duties
hereunder. Executive shall be entitled to an office, secretarial help and other
accommodations and amenities comparable to those Executive presently has at the
Company.
1.2 Place of Performance
Executive's duties under this Agreement are to be performed on Long
Island in New York State and Executive shall not be required to travel or be
assigned away from this location more than seventy five days in any twelve-month
period or more than five consecutive days in any thirty-day period.
2. TERM
This Agreement shall be in full force and effect for a period (the
"Term") which shall commence as of the effective date of the Merger (the
"Effective Date") and shall continue for a period of three (3) years, unless
sooner terminated as hereafter provided.
3. COMPENSATION
3.1 Base Salary
As compensation for the services to be performed by Executive during
the continuance of this Agreement, the Company shall pay Executive a base salary
of $225,000 per year for each year of his employment hereunder (the "Base
Salary"). Base Salary shall be payable in substantially equal bi-weekly
installments and reduced on a pro rata basis for any fraction of a year or month
during which Executive is not so employed.
3.2 Bonus
Executive shall be entitled to earn an incentive bonus based upon
achievement of financial and other goals established from time to time by the
Company, provided that the minimum bonus for each fiscal year shall be $75,000
(the "Minimum Bonus"). For the initial year of this Agreement, such bonus shall
be prorated from the Effective Date and the bonus for any partial year shall be
similarly prorated. The incentive bonus shall be paid as follows: (i) the
Minimum Bonus shall be paid in four equal quarterly installments within 30 days
following the end of each calendar quarter, and (ii) if the
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annual incentive bonus earned by Executive for any year shall exceed the Minimum
Bonus paid for such year, such excess shall be paid to Executive at the same
time that annual incentive bonuses for the Company's other senior executive
officers are paid in accordance with the Company's policies as in effect from
time to time (but in no event later than 60 days following the date of payment
of the last quarterly installment of Minimum Bonus).
3.3 Additional Benefits
Executive shall be entitled to participate in all of Guarantor's
employee benefit plans as listed in the Guarantor's employee handbook, as the
same may change from time to time, and, in addition, to participate on the same
terms as senior Guarantor executives in any benefit plans available to members
of the Guarantor's management (whether or not listed in the employee handbook).
Among other things, Executive shall be entitled to participate in the
Guarantor's Health Care Benefits Program, 401(k) Plan, Stock Purchase Plan,
Stock Option Plan, Short-term and Long-term Disability Programs and the
Guarantor's Executive Medical Plan, which provides coverage for all medical
expenses not otherwise covered by the basic policy, up to $25,000. If any
health, medical or disability plan or program existing at the time of
commencement of Executive's employment pursuant to this Agreement is terminated
or the benefits thereunder reduced, the Company or Guarantor shall provide
Executive with benefits similar to those in existence at the time of
commencement of Executive's employment hereunder.
3.4 Stock Options
(A) As an additional element of compensation to Executive in
consideration of the services to be rendered hereunder, Guarantor shall grant to
Executive options to acquire 10,000 shares of Guarantor's common stock at an
exercise price equal to the closing price on the Effective Date. The options
shall vest in 25%, 25% and 50% increments, respectively, on the first, second
and third anniversaries of this Agreement. In addition, all of the options will
vest if the Company terminates this Agreement other than for Cause (as defined
in Section 6.2) or if the Executive quits for Good Reason (as defined in Section
6.3(B)). The options shall remain exercisable for a period of five (5) years
from the date of grant. The specific terms of the above-referenced option shall
be as set forth in a separate option agreement in the form annexed hereto as
Exhibit 3.4.
(B) Executive shall be entitled to participate in the Guarantor's stock
option programs, although Executive understands that any grants under such
programs are completely discretionary with the Compensation Committee of the
Guarantor's Board of Directors.
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3.5 Reimbursements
Executive shall be entitled to reimbursement for all amounts reasonably
expended on behalf of the Company, subject to verification similar to that
required of and provided by the Company's other senior executives.
3.6 Deductions
The Company shall deduct from Executive's gross compensation
appropriate amounts for standard employee deductions (e.g., income tax
withholding, social security and state disability insurance) and any other
amounts authorized for deduction by Executive.
3.7 Disability
Except in the case of Executive's Total Disability (as defined in
Section 6.4), Executive's full compensation and benefits under this Agreement
shall be continued during any period when he is absent or unable to perform his
duties due to illness, disability or other incapacity; and Executive's inability
to perform his duties by reason of the foregoing shall not constitute a failure
to perform his obligations under this Agreement and shall not be deemed a
default by Executive hereunder. The consequences of Executive's Total Disability
is covered in Section 7.2 of this Agreement.
4. VACATION
Executive shall be entitled to four weeks of vacation in each
twelve-month period; provided, however, that no more than six weeks may be taken
during any eighteen-month period. Such vacation will accrue on a pro rata basis
from the date employment commences under this Agreement. At the end of his
employment hereunder, Executive shall be paid for any accrued but unused
vacation time. Executive agrees that he will coordinate his vacation plans and
schedules in order to prevent any undue disruption of the Company's business.
5. INDEMNIFICATION
Executive shall be indemnified by Guarantor and the Company to the
full extent permitted by law in respect of his actions as an officer or
director of the Company and shall be provided with such liability insurance
coverage in this connection as is provided to other Company executives. In
addition, the Company and Guarantor shall enter into an Indemnification
Agreement with Executive in the form attached as Exhibit 5.
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6. TERMINATION OF EMPLOYMENT
Employment shall terminate upon the occurrence of any of the following
events:
6.1 Mutual Agreement
Whenever the Company and Executive mutually agree in writing to
termination;
6.2 Termination for Cause
At any time for Cause. For purposes of this Agreement, "Cause" shall
mean (i) material breach by Executive of this Agreement or material failure by
Executive to perform his duties under this Agreement (other than by reason of
Executive's Total Disability) followed by (a) written notice from the Company to
Executive specifying such material failure or such material breach, plus (b)
Executive not having cured the breach within thirty days of actual receipt of
notice or, if the breach is not capable of cure within thirty days, Executive
not having taken reasonable steps toward curing such material failure or
material breach within thirty days of his actual receipt of such notice and
diligently continuing to cure such material breach as expeditiously as
practicable, or (ii) conviction of Executive by, or a plea of guilty in, a court
of competent jurisdiction of a felony or other major crime (a plea of nolo
contendere shall be deemed a conviction).
6.3 Termination without Cause by the Company or for Good
Reason by Executive
(A) By the Company. Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate
Executive's employment with the Company and Milgray without Cause at any time,
and upon such termination Executive shall have the rights to receive the amounts
described in Section 7.1 and Executive shall be fully vested in all options
granted to him under this Agreement.
(B) By Executive. If the Company materially
breaches any of its obligations, or any material violation by the Company of
Executive's rights, under this Agreement followed by (i) written notice from
Executive specifying such material breach or violation, plus (ii) the Company
not having cured the breach within thirty days of actual receipt of notice or,
if the breach is not capable of cure within thirty days, the Company not having
taken reasonable steps toward curing such material breach or failure within
thirty days of actual receipt of such notice and diligently continuing to cure
such material breach as expeditiously as practicable (the foregoing being
referred to as "Good Reason"), Executive will have the right at Executive's
election to terminate his employment hereunder by sending notice to the Company
of his election to so terminate. Termination pursuant to this subsection will be
effective from and after the effective date of Executive's notice to the Company
terminating Executive's employment as aforesaid. Upon any such termination,
Executive shall have the rights to receive the amounts
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described in Section 7.1 and Executive shall be fully vested in all options
granted to him under this Agreement.
6.4 Death/Disability
The death or Total Disability of Executive. For the purposes of this
Agreement, "Total Disability" shall mean the inability of Executive due to
illness or other incapacity to perform his duties hereunder in a normal manner
for a period of six months (whether or not consecutive) during any consecutive
eighteen-month period. If there shall be a Total Disability involving Executive,
his employment may be terminated by written notice by the Company to Executive.
In the event of Executive's death during the term of this Agreement, the persons
designated by Executive (or if Executive does not make such a designation, then
Executive's estate) shall be entitled to receive his Base Salary plus guaranteed
bonus provided for Executive in this Agreement for a period of twelve months
following Executive's death (regardless of the time of such death).
6.5 Voluntary Termination
Executive may terminate his employment under this Agreement at any time
upon thirty days written notice.
7. CONSEQUENCES OF TERMINATION OF EMPLOYMENT
7.1 Termination by the Company other than for Cause or
Termination by Executive for Good Reason. If the Company terminates Executive's
employment other than for Cause or if Executive, for Good Reason terminates his
employment, Executive shall be entitled to receive from the Company (at
Executive's election which must be exercised within 30 days of termination),
either (i) within twenty days of such election, a lump sum payment in an amount
equal to the sum of his Base Salary (plus guaranteed bonus) payments to which
Executive would be entitled under this Agreement as a full-time employee of the
Company for the balance of Executive's term of employment under this Agreement
(from the date of termination); such lump sum payment discounted to present
value using the interest rate offered at the date of termination by The Chase
Manhattan Bank, N.A., on a certificate of deposit for a period of time equal to
the remaining term of this Agreement at the date of termination and subject to
the noncompetition covenant for the then balance of the Term as set forth in
Section 8.1; or (ii) receive all Base Salary plus guaranteed bonus payments for
the remaining term of this Agreement; provided, however, that should Executive
elect to become employed by a competitor of the Company after termination
(whether as an officer, director, employee, consultant or otherwise), the
Company may offset against the amounts it owes Executive all compensation
derived from such competitive employment. Executive agrees to notify the Company
within five (5) business days of being employed by a competitor of the Company
and to provide the Company with such documentation as the Company may reasonably
request (including, but not limited to, copies of his Forms W-2) in order to
enable the Company to verify the amount of Executive's compensation from any
competitor.
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7.2 Termination by the Company because of Executive's
Total Disability. If the Company terminates Executive's employment hereunder
because of Executive's Total Disability, Executive shall be entitled to receive
from the Company for the full balance of the Term of this Agreement regular
bi-weekly payments equal to 75% of Executive's regular bi-weekly Base Salary
payment plus guaranteed bonus. This amount shall be reduced by all benefits
provided to Executive under any Company disability plan or plans. Executive
agrees to participate in such plan(s) to as full an extent and amount as
permitted under such plans.
7.3 Voluntary Termination by Executive or Termination by
the Company for Cause.
If Executive voluntarily terminates his employment hereunder (other
than for Good Reason or Total Disability) or if the Company terminates
Executive's employment for Cause, Executive shall not be entitled to any further
compensation following such termination. The Company shall not be entitled to
recover any damages or other amount from Executive by reason of any such
termination.
8. RESTRICTIVE COVENANTS
8.1 Covenant Not to Compete.
During Executive's employment with the Company, Executive shall not,
directly or indirectly, be engaged in the distribution or sale of any products
that are directly competitive with products presently distributed or sold by the
Company or any of its subsidiaries within the geographical area in which the
Company or any of its subsidiaries conducts its business (except for passive
investments by Executive of up to 5% of the outstanding stock of a publicly-held
company engaged in any such activities). Following termination of Executive's
employment with the Company, both in the case of voluntary termination by
Executive (whether or not for Good Reason) or in the case of termination by the
Company (whether or not for Cause), there shall be no restrictions on
Executive's employment by another entity (whether or not competitive with the
Company) unless Executive shall have elected the compensation option set forth
in Section 7.1(i), in which case the restrictions set forth in the first
sentence of this Section 8.1 (except as provided in the last sentence of this
Section 8.1) shall continue to apply for the balance of the term of this
Agreement as of the date of termination; provided, however, that if Executive
elects the option set forth in Section 7.1(i) and then determines at a
subsequent date that he wishes to take actions that would otherwise violate such
restrictions, Executive will be relieved from such restrictions if he repays to
the Company, in advance of taking such actions, a pro rata portion of the
payments he received pursuant to that election (based on the length of the time
remaining on the non-competition covenant at that time in comparison to the
total remaining term of the non-competition covenant at the time of
termination). For example, if Executive were terminated without Cause after one
year, and elected to receive his remaining two years of pay under this Agreement
in a lump sum, and one year later wanted to work for a competitor, the Executive
could do so if he repaid the Company one-half of the amount he received as
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severance (2 years severance pay lump-sum, 1 year of which was "earned" by not
competing, with the portion relating to the remaining 1 year to be repaid to the
Company in exchange for a release from the non-compete). The Company may, at any
time and from time to time, attach an annex to this Agreement specifying
specific jurisdictions in which the covenant not-to-compete set forth in this
Section 8.1 is applicable. Notwithstanding anything to the contrary contained in
the second sentence of this Section 8.1, Executive shall not be restricted from
employment by a manufacturer or manufacturer's sales representative which
manufactures and/or sells any products referred to in the first sentence of this
Section 8.1 or from the sale of any of such products in connection with such
employment.
8.2 Nondisclosure and Nonsolicitation. Both during and
after Executive's employment with the Company, Executive shall keep secret all
material confidential matters of the Company not in the public domain and will
not disclose them to anyone outside of the Company. Further, after termination
Executive will not seek to hire Company employees.
9. MISCELLANEOUS
9.1 Arbitration
All disputes, controversies or claims arising out of or in respect of
this Agreement (or its validity, interpretation or enforcement), the employment
relationship or the subject matter hereof shall be submitted to binding
arbitration taking place in the State of New York before a single arbitrator in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. Expenses of the arbitration
shall be apportioned between the parties by the arbitrator on the basis of
relative fault.
9.2 Legal Fees
The Company shall pay all legal fees incurred by Executive arising out
of the Company's failing to make any payment or withholding any employee
benefits under this Agreement or contesting the validity, enforceability or
interpretation of this Agreement in the event it is determined that (i) such
action was not justified under this Agreement or (ii) if it is determined that
both the Company and the Executive acted in violation of this Agreement, the
Company's actions constituted a more serious violation than did the Executive's
actions. Determination as to Executive's entitlement to legal fees pursuant to
this Agreement may be made by the arbitrator if arbitration is sought or by
independent legal counsel acceptable to both parties.
9.3 No Third-Party Beneficiaries
This Agreement shall not confer any rights or remedies upon any person
other than the parties and their respective successors and permitted assigns.
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9.4 Entire Agreement
This Agreement (including the documents referred to herein) constitutes
the entire agreement between the parties and supersedes any prior
understandings, agreements, or representations between the parties, written or
oral, to the extent they have related in any way to the subject matter hereof.
9.5 Succession and Assignment
This Agreement shall be binding upon and inure to the benefit of the
parties named herein and their respective successors and permitted assigns. No
party may assign either this Agreement or any of his or its rights, interests,
or obligations hereunder without the prior written approval of the other.
9.6 Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument.
9.7 Headings
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.8 Notices
All notices, requests, demands, claims, and other communications
required or permitted hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
IF TO THE COMPANY:
Xxxx Industries, Inc.
00000 Xxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: President
IF TO EXECUTIVE:
Xxxxx Xxxxxx X'Xxxxxxx
00 Xxxxx Xxx
Xx. Xxxxx, Xxx Xxxx 00000
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Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving notice in the
manner herein set forth.
9.9 Governing Law
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without giving effect to any
choice or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
9.10 Amendments and Waivers
No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by the Company and Executive. No waiver
by any party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
9.11 Severability
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other jurisdiction.
9.12 Guarantee
Guarantor unconditionally guarantees all of the Company's obligations
hereunder. Guarantor agrees that Executive may proceed directly against
Guarantor in the event of the Company's failure to perform all of its
obligations hereunder and shall not be obligated to exhaust his remedies against
the Company.
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IN WITNESS THEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MILGRAY ELECTRONICS, INC.
By: /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: Executive Vice President
XXXX INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
/s/ Xxxxx Xxxxxx X'Xxxxxxx
-------------------------------------
Xxxxx Xxxxxx X'Xxxxxxx
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EXHIBIT 3.4
FORM OF STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement ("Agreement") is made as of this
_________ day of _______________, 199_, between Xxxx Industries, Inc., a
California corporation (the "Company"), and Xxxxx Xxxxxx X'Xxxxxxx (the
"Participant").
R E C I T A L S
1. The Board of Directors of the Company and its shareholders
have adopted the 1990 Stock Option Plan as of October 29, 1990 and the 1994
Stock Option Plan as of November 1, 1994 (the "Plans"). Capitalized terms used
but not defined herein shall have the meanings ascribed thereto in the Plans.
2. The Plans provide for the selling or granting to selected
executive and other key employees, and other persons furnishing services to the
Company or any subsidiary of the Company, as the Compensation Committee (the
"Committee") may from time to time determine, of Restricted Stock or options to
purchase shares of Common Stock of the Company.
3. Pursuant to the Plans, the Committee has determined that it is
to the advantage and best interest of the Company and its stockholders to grant
an Incentive Stock Option to the Participant covering 10,000 shares of the
Company's Common Stock as an inducement to remain in the service of the Company
and as an incentive for increased effort during such service, and has approved
the execution of this Incentive Stock Option Agreement between the Company and
the Participant.
4. The Option granted hereby is intended to qualify as an
incentive stock option under Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code").
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option. The Company grants to the Participant
the right and option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate 10,000 shares of Common
Stock at the purchase price of $___________ per share, exercisable in
installment periods in accordance with the provisions of this Agreement during a
period expiring on the 5th anniversary of the date of this Agreement (the
"Expiration Date") or earlier in accordance with Section 5 hereof; provided,
however, if the Participant does not in any given installment period purchase
all of the shares that the Participant is entitled to purchase in such
installment period, then
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the Participant's right to purchase any shares not purchased in such installment
period shall continue until the Expiration Date or sooner termination of the
Participant's option.
2. Vesting. This Option shall vest and become exercisable in the
percentages and on the dates set forth below:
Percentage Cumulative
Initially Percentage
Date Exercisable Exercisable
---- ----------- -----------
25% 25%
25% 50%
50% 100%
Subject to earlier termination under Section 5 hereof, at any time after the 3rd
anniversary date of this Agreement, but no later than the Expiration Date, the
Participant may purchase all or any part of the shares subject to this Option
which the Participant theretofore failed to purchase. In each case, the number
of shares which may be purchased shall be calculated to the nearest full share.
Notwithstanding the foregoing vesting schedule, but subject to Section
5 hereof, this Option shall become immediately exercisable in full, if (i) the
Company terminates Participant's employment agreement (the "Employment
Agreement") dated as of ____________, 1996 other than for Cause (as defined in
the Employment Agreement) or (ii) Participant terminates the Employment
Agreement for Good Reason (as defined in the Employment Agreement).
3. Manner of Exercise. Each exercise of this Option shall be by
means of a written notice of exercise delivered to the Company, specifying the
number of shares to be purchased and accompanied by payment to the Company of
the full purchase price of the shares to be purchased either (i) in cash or by
certified or cashier's check payable to the order of the Company, or (ii) by
delivery of shares of Common Stock already owned by, and in the possession of,
the Participant. Shares of Common Stock used to satisfy any portion of the
exercise price of this Option shall be valued at their fair market value
determined (in accordance with Section 4 below) as of the close of the business
day immediately preceding the date of exercise. This Option may not be exercised
for a fraction of a share and no partial exercise of this Option may be for less
than (i) one hundred (100) shares or (ii) the total number of shares then
eligible for exercise if less than one hundred (100) shares.
This Option may be exercised (i) during the lifetime of the
Participant, only by the Participant or, in the event a conservator, guardian or
legal representative is appointed during the Participant's lifetime to handle
the affairs of the Participant, by such conservator, guardian or legal
representative; and (ii) after the Participant's death, by his or her transferee
by will or the laws of descent or distribution, and not otherwise, regardless of
any community property interest therein of the spouse of the Participant or
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such spouse's successors in interest. If the spouse of the Participant shall
have acquired a community property interest in this Option, the Participant, or
the Participant's permitted successors in interest, may exercise the Option on
behalf of the spouse of the Participant or such spouse's successors in interest.
Except in the event of the Participant's death or permanent disability,
the Option may not be exercised prior to the date six months from the date
hereof.
4. Fair Market Value of Common Stock. The fair market value of a
share of Company Common Stock shall be determined for purposes of this Agreement
by reference to the closing price on the New York Stock Exchange (or other
principal stock exchange on which such shares are then listed) or, if such
shares are not then listed on such exchange (or other principal stock exchange),
by reference to the closing price (if a National Market Issue) or the mean
between the bid and asked price (if other over-the-counter issue) of a share as
supplied by the National Association of Securities Dealers through NASDAQ (or
its successor in function), in each case as reported by The Wall Street Journal,
for the date on which the option is granted or exercised, or if such date is not
a business day, for the business day immediately preceding such date (or, if for
any reason no such price is available, in such other manner as the Committee may
deem appropriate to reflect the then fair market value thereof).
5. Cessation of Services, Death or Permanent Disability. If a
Participant ceases to be employed by the Company or one of its subsidiaries for
any reason other than the Participant's death or permanent disability (within
the meaning of Section 22(e)(3) of the Code), the Participant's Option shall be
exercisable for a period of three (3) months after the date the Participant
ceases to be an employee of the Company or such subsidiary (unless by its terms
it sooner expires) to the extent exercisable on the date of such cessation of
employment and shall thereafter expire and be void and of no further force or
effect. A leave of absence approved in writing by the Committee shall not be
deemed a termination of employment for the purposes of this paragraph 5, but no
Option may be exercised during any such leave of absence, except during the
first three (3) months thereof.
If the Participant dies or becomes permanently disabled while employed
by the Company or one of its subsidiaries, the Participant's Option shall expire
one (1) year after the date of such death or permanent disability unless by its
terms it sooner expires. During such period after death, such Option may, to the
extent that it remained unexercised (but exercisable by the Participant
according to such Option's terms) on the date of such death, be exercised by the
person or persons to whom the Participant's rights under the Option shall pass
by the Participant's will or by the laws of descent and distribution.
6. Shares to be Issued in Compliance with Federal Securities Laws
and Exchange Rules. No shares issuable upon the exercise of this Option shall be
issued and delivered unless and until there shall have been full compliance with
all applicable requirements of the Securities Act of 1933, as amended, and all
applicable state securities or "Blue Sky"
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laws (whether by registration or qualification or satisfaction of exemption
conditions), all applicable listing requirements of any principal securities
exchange on which shares of the same class are then listed and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery. The Company shall use its best efforts and take all
necessary or appropriate actions to assure that such full compliance on the part
of the Company is made.
7. Withholding of Taxes. If the Participant or the Participant's
permitted successors in interest disposes of shares of Common Stock acquired
pursuant to the exercise of this Option within two years after the date of this
Agreement or within one year after exercise of this Option, the Company may
deduct and withhold from the wages, salary, bonus and other compensation paid by
the Company to the Participant the requisite tax upon the amount of taxable
income, if any, recognized by the Participant in connection with the exercise in
whole or in part of this Option or the sale of Common Stock issued to the
Participant upon exercises hereof, all taxes as may be required from time to
time under federal or state tax laws and regulations. This withholding of tax
shall be made from the Company's concurrent or next payment of wages, salary,
bonus or other compensation to the Participant or by payment to the Company by
the Participant of required withholding tax, as the Committee may determine.
8. Adjustments for Reorganizations, Stock Splits, etc. If the
outstanding shares of the Common Stock of the Company are increased, decreased,
changed into or exchanged for a different number or kind of shares or securities
of the Company through reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar transaction, an
appropriate and proportionate adjustment shall be made in the maximum number and
kind of shares or securities receivable upon the exercise of this Option,
without change in the aggregate purchase price applicable to the unexercised
portion of this Option but with a corresponding adjustment in the price for each
share or other unit of any security covered by this Option.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon the sale of substantially all the property of the Company, the Committee
shall provide in writing for appropriate satisfaction of this Option by one or
more of the following alternatives to be made in connection with such
transaction: (i) the immediate exercisability of this Option (provided that this
Option was granted more than six months before such transaction) notwithstanding
the provisions of Section 3 hereof, except that this Option may not be exercised
for a fraction of a share and no partial exercise of this Option may be for less
than (a) one hundred (100) shares or (b) the total number of shares then
eligible for exercise if less than one hundred (100) shares; (ii) the assumption
of this Option or the substitution therefore of a new option covering the stock
of a successor corporation, with appropriate adjustments as to number and kind
of shares and prices; (iii) the continuance of the Plan by such successor
corporation in which event this Option shall remain in full effect under the
terms so provided; or (iv) the payment of an amount in cash or stock, or any
combination thereof, in lieu of and in complete satisfaction of this Option.
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Adjustments under this paragraph 8 shall be made by the Committee,
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of stock
shall be issued under the Plan on any such adjustment.
9. Participation by Participant in Other Company Plans. Nothing
herein contained shall affect the right of the Participant to participate in and
receive benefits under and in accordance with the then current provisions of any
pension, insurance, profit sharing or other employee welfare plan or program of
the Company or of any subsidiary of the Company.
10. No Rights as a Shareholder Until Issuance of Stock
Certificate. Neither the Participant nor any other person legally entitled to
exercise this Option shall be entitled to any of the rights or privileges of a
shareholder of the Company in respect of any shares issuable upon any exercise
of this Option unless and until a certificate or certificates representing such
shares shall have been actually issued and delivered to the Participant.
11. Not an Employment or Service Contract. Nothing contained
herein shall be construed as agreement by the Company, express or implied, to
employ Participant or contract for Participant's services, to restrict the
Company's right to discharge Participant or cease contracting for Participant's
services or to modify, extend or otherwise affect in any manner whatsoever the
terms of any employment agreement or contract for services which may exist
between the Participant and the Company.
12. Agreement Subject to Plan. The Option hereby granted is
subject to, and the Company and the Participant agree to be bound by, all of the
terms and conditions of the Plan, as the same shall be amended from time to time
in accordance with the terms thereof, but no such amendment shall adversely
affect the Participant's rights under this Option without the prior written
consent of the Participant.
13. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
14. Notices. Any notice or other paper or payment required to be
given or sent pursuant to the terms of this Agreement shall be sufficiently
given or served hereunder to any party when transmitted by registered or
certified mail, postage prepaid, addressed to the party to be served as follows:
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(a) if to the Company: Xxxx Industries, Inc.
00000 Xxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000-0000
Attention: President
(b) if to Participant: Xxxxx Xxxxxx X'Xxxxxxx
00 Xxxxx Xxx
Xx. Xxxxx, Xxx Xxxx 00000
Any party, by written notice, may designate another address for notices to be
sent from time to time.
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15. Execution. This Option has been granted, executed and
delivered the day and year first above written at Los Angeles, California, and
the interpretation, performance and enforcement of this Agreement shall be
governed by the laws of the State of California.
COMPANY
XXXX INDUSTRIES, INC.
BY:
-------------------------------------
PARTICIPANT
----------------------------------------
NAME: Xxxxx Xxxxxx X'Xxxxxxx
By his or her signature below, the spouse of the Participant agrees to
be bound by all of the terms and conditions of the foregoing Agreement.
----------------------------------------
NAME:
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EXHIBIT 5
FORM OF INDEMNIFICATION AGREEMENT
INDEMNITY AGREEMENT
This Agreement is made as of the _____ day of __________, 1996, by and
between Milgray Electronics, Inc., a New York corporation (the "Corporation"),
Xxxx Industries, Inc., a California corporation (the "Guarantor"), and Xxxxx
Xxxxxx X'Xxxxxxx (the "Indemnitee"), a Director and/or Officer of the
Corporation.
WHEREAS, it is essential to the Corporation to retain and
attract as Directors and Officers the most capable persons available, and
WHEREAS, the substantial increase in corporate litigation subjects
Directors and Officers to expensive litigation risks at the same time that the
availability of Directors' and Officers' liability insurance has been severely
limited, and
WHEREAS, it is now and has always been the express policy of the
Corporation to indemnify its Directors and Officers so as to provide them with
the maximum possible protection permitted by law, and
WHEREAS, the Corporation does not regard the protection available to
Indemnitee as adequate in the present circumstances, and realizes that
Indemnitee may not be willing to serve as a Director or Officer without adequate
protection, and the Corporation desires Indemnitee to serve in such capacity;
NOW, THEREFORE, in consideration of Indemnitee's service as a Director
or Officer after the date hereof the parties agree as follows:
1. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened,
pending or completed action, suit or proceeding, whether brought by or
in the right of the Corporation or otherwise and whether of a civil,
criminal, administrative or investigative nature.
(b) The term "Expenses" shall include, but is not limited to,
expenses of investigations, judicial or administrative proceedings or
appeals, damages, judgments, fines, amounts paid in settlement by or on
behalf of Indemnitee, attorneys' fees and disbursements and any
expenses of establishing a right to indemnification under this
Agreement.
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(c) The terms "Director" and "Officer" shall include
Indemnitee's service at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise as well as a Director and/or Officer
of the Corporation.
2. Indemnity of Director or Officer. Subject only to the
limitations set forth in Section 3, Corporation will pay on behalf of the
Indemnitee all Expenses actually and reasonably incurred by Indemnitee because
of any claim or claims made against him in a Proceeding by reason of the fact
that he is or was a Director and/or Officer.
3. Limitations on Indemnity. Corporation shall not be
obligated under this Agreement to make any payment of Expenses to the Indemnitee
(a) which payment it is prohibited by applicable
law from paying as indemnity;
(b) for which payment is actually made to the Indemnitee
under an insurance policy, except in respect of any excess beyond the
amount of payment under such insurance;
(c) for which payment the Indemnitee is indemnified by
Corporation otherwise than pursuant to this Agreement and payment is
actually made to the Indemnitee except in respect of any excess beyond
the amount of the payment under such indemnification;
(d) resulting from a claim decided in a Proceeding
adversely to the Indemnitee based upon or attributable to the
Indemnitee gaining in fact any personal profit or advantage to which he
was not legally entitled;
(e) resulting from a claim decided in a Proceeding
adversely to the Indemnitee for an accounting of profits made from the
purchase or sale by the Indemnitee of securities of Corporation within
the meaning of Section 16(b) or 16(c) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any state
statutory law or common law; or
(f) brought about or contributed to by the dishonesty of
the Indemnitee seeking payment hereunder; however, notwithstanding the
foregoing, the Indemnitee shall be indemnified under this Agreement as
to any claims upon which suit may be brought against him by reason of
any alleged dishonesty on his part, unless it shall be decided in a
Proceeding that he committed (i) acts of active and deliberate
dishonesty (ii) with actual dishonest purpose and intent, and (iii)
which acts were material to the cause of action so adjudicated.
For purposes of Sections 3 and 4, the phrase "decided in a Proceeding"
shall mean a decision by a court, arbitrator(s), hearing officer or other
judicial agent having the
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requisite legal authority to make such a decision, which decision has become
final and from which no appeal or other review proceeding is permissible.
4. Advance Payment of Costs. Expenses incurred by Indemnitee in
defending a claim against him in a Proceeding shall be paid by the Corporation
as incurred and in advance of the final disposition of such Proceeding;
provided, however, that Expenses of defense need not be paid as incurred and in
advance where the judicial agent of first impression has decided the Indemnitee
is not entitled to be indemnified pursuant to this Agreement or otherwise.
Indemnitee hereby agrees and undertakes to repay such amounts advanced if it
shall be decided in a Proceeding that he is not entitled to be indemnified by
the Corporation pursuant to this Agreement or otherwise.
5. Enforcement. If a claim under this Agreement is not paid by
Corporation, or on its behalf, within thirty days after a written claim has been
received by Corporation, the Indemnitee may at any time thereafter bring suit
against Corporation to recover the unpaid amount of the claim and if successful
in whole or in part, the Indemnitee shall be entitled to be paid also the
Expenses of prosecuting such claim.
6. Subrogation. In the event of payment under this Agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable Corporation effectively to bring
suit to enforce such rights. Notwithstanding the foregoing, if any of the
provisions hereof would impair or jeopardize Indemnitee's coverage under the
Corporation's Directors' and Officers' Liability Policy, such provisions shall
be ineffective and shall be deemed deleted from this Agreement.
7. Notice. The Indemnitee, as a condition precedent to his right
to be indemnified under this Agreement, shall give to Corporation notice in
writing as soon as practicable of any claim made against him for which indemnity
will or could be sought under this Agreement. Notice to Corporation shall be
given at its principal office and shall be directed to the President (or such
other address as Corporation shall designate in writing to the Indemnitee);
notice shall be deemed received if sent by prepaid mail properly addressed, the
date of such notice being the date postmarked. In addition, the Indemnitee shall
give Corporation such information and cooperation as it may reasonably require.
8. Saving Clause. If this Agreement or any portion thereof shall
be invalidated on any ground by any court of competent jurisdiction, the
Corporation shall nevertheless indemnify Indemnitee to the full extent permitted
by any applicable portion of this Agreement that shall not have been invalidated
or by any other applicable law.
9. Indemnification Hereunder Not Exclusive. Nothing herein shall
be deemed to diminish or otherwise restrict the Indemnitee's right to
indemnification under any provision of the Articles of Incorporation or Bylaws
of the Corporation or under California law.
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10. Applicable Law. This Agreement shall be governed by and
construed in accordance with California law.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
12. Successors and Assigns. This Agreement shall be binding upon
the Corporation and its successors and assigns.
13. Continuation of Indemnification. The indemnification under
this Agreement shall continue as to Indemnitee even though he may have ceased to
be a Director and/or Officer and shall inure to the benefit of the heirs and
personal representatives of Indemnitee.
14. Coverage of Indemnification. The indemnification under this
Agreement shall cover Indemnitee's service as a Director and/or Officer prior to
or after the date of the Agreement.
15. Guaranty. Guarantor unconditionally guarantees all of the
Corporation's obligations hereunder. Guarantor agrees that Indemnitee may
proceed directly against Guarantor in the event of the Corporation's failure to
perform all of its obligations hereunder and shall not be obligated to exhaust
his remedies against the Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the day and year first above written.
INDEMNITEE CORPORATION
By:_______________________________ By:_____________________________________
GUARANTOR
By:_____________________________________
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