EXHIBIT 3
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement (the "Agreement") is made and
entered into effective as of the 22nd day of July, 2002, by and between XXXXXX'X
RESTAURANTS, INC., a Delaware corporation (herein called the "Company"), and
XXXXXX X. XXXXXXXX (herein called the "Employee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company, has resolved that the
interests of the Company will be advanced by encouraging and enabling certain of
its key employees and certain key employees of its subsidiaries (which
subsidiaries are hereinafter referred to collectively as the "Operating
Company") who are mainly responsible for the management, growth and protection
of the Company and the Operating Company to acquire proprietary shares in the
Company, thus providing them with a more direct concern in the welfare of the
Company and the Operating Company and assuring a closer identification of their
interests with those of the Company and the Operating Company; and
WHEREAS, the Board of Directors ("Board") believes that the acquisition of
such an interest in the Company will stimulate the endeavors of such employees
on behalf of the Company or the Operating Company and strengthen their desire to
remain with the Company or the Operating Company; and
WHEREAS, the individual above named is one of such employees.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the parties hereto
agree as follows:
1. Company hereby grants to the Employee as a matter of separate inducement
and agreement in connection with his employment by the Company or Operating
Company, and not in lieu of any salary or other compensation for his services,
the right and option to purchase, at the time and on the terms and conditions
hereinafter set forth, 300,000 shares of the presently authorized Common Stock
of the Company at the purchase price of eighteen and no/100 dollars ($18.00) per
share, subject, however, to the Company's election provided in Paragraph 5(b) to
pay to Employee the Cash Equivalent Value of such shares.
2. The option provided for in this Agreement shall be subject to such
administrative rules as may be promulgated by the compensation committee of the
Company's Board of Directors (the "Committee") and communicated to the Employee
in writing. The Committee shall have the discretion to interpret the terms of
this Agreement; any such interpretation that is not clearly erroneous shall be
binding on all parties interested herein.
3. This option shall continue for ten (10) years from the date hereof,
except and to the extent that such term may be reduced as provided in Paragraphs
6, 7, 8, 9 ,13, 14 and 15 hereof; provided, however, that if any termination
date provided for herein shall fall on a Saturday, Sunday or legal holiday, then
such termination date shall be deemed to be the first normal business day of the
Company, at its office specified in Paragraph 19 hereof, before such Saturday,
Sunday or legal holiday. Notwithstanding the foregoing, if the closing price of
the Company's Common Stock increases by more than forty percent
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(40%) above the xxxxx xxxxx of $18.00 per share at anytime after the date
hereof, all options issued hereunder pursuant to this option agreement shall
automatically vest and be immediately exercisable.
4. Except as otherwise provided herein, this option shall be exercisable
not later than ten (10) years from the date hereof, and only to the extent of
shares that have vested in accordance with the following schedule:
Portion of Shares That is Vested
Vesting On and After Such Vesting Date and
Date of Grant Before Next Vesting Date
July 22, 2003 20%
July 22, 2004 40%
July 22, 2005 60%
July 22, 2006 80%
July 22, 2007 100%
The Employee's right to exercise the option granted hereunder accrues only in
accordance with the preceding sentence and, except as otherwise provided herein,
only to the extent that he remains in the continuous employ of the Company or
Operating Company. This option shall be exercisable during the lifetime of the
Employee only by him. In no event may the Employee or any person exercising this
option pursuant to Paragraph 8 hereof exercise this option (before or after any
adjustment or substitution pursuant to Paragraph 13, 14 or 21 hereof) for a
fraction of a share.
5. The option granted hereby shall be exercisable upon and subject to the
following terms and conditions:
(a) The option granted hereby may be exercised by delivering to the
Secretary of the Company from time to time within the time limits specified
in Paragraph 4 hereof a written notice specifying the number of vested
shares the Employee then desires to purchase.
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(b) Upon receipt of Employee's written notice of exercise, the Company
may, at its option, (i) allow the Employee to consummate the purchase of
the number of shares indicated in the notice of exercise in accordance with
the terms of this Agreement or (ii) in the alternative, pay to the Employee
the Cash Equivalent Value of such shares. The Company shall give written
notice (the "Notice of Election") to the Employee (or his executor,
administrator or legal representative) of the Company's election of clause
(i) or clause (ii) within forty-five (45) days after receipt of the
Employee's notice of exercise. If the Company fails to give its Notice of
Election within the period specified in this Paragraph 5(b), it will be
deemed to have elected to allow the Employee to consummate the purchase of
shares.
(c) In the event that the Company elects to proceed under clause (ii)
of Paragraph 5(b) and pay the Cash Equivalent Value, payment shall be due
on the fifteenth (15th) business day following the date of the Company's
Notice of Election. The Cash Equivalent Value shall be paid to the Employee
by check.
(d) In the event that the Company elects to proceed under the clause
(i) of Paragraph 5(b) and allow the Employee to purchase the number of
shares indicated in his notice of exercise, the Employee shall, within
fifteen (15) business days following the Company's Notice of Election,
deliver to the Secretary of the Company a cashier's check payable in
United States currency (unless a personal check shall be acceptable to such
offer) to the order of the Company for an amount equal to the option price
for such number of shares; or, with the prior consent of the Board of
Directors of the Company, and upon receipt of all regulatory approvals,
certificates for Common Stock of the Company, valued at the Fair Market
Value (as hereinafter defined) of such Common Stock on the date of exercise
of this option, as payment of all or any portion of the option price for
such number
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of shares. The check or, if applicable, the certificates shall be
accompanied by such other instruments or agreements duly signed by the
Employee as in the opinion of counsel for the Company may be necessary or
advisable in order that the issuance of such number of shares comply with
applicable rules and regulations under the Securities Act of 1933, as
amended (the "Act"), any appropriate state securities laws or any
requirement of any national securities exchange on which such stock may be
trade. As soon as practicable after any such exercise of the option in
whole or in part by the Employee, the Company will deliver to the Employee
a certificate for the number of shares with respect to which the option
shall have been so exercised, issued in the Employee's name. Such stock
certificate shall carry such appropriate legend, and such written
instructions shall be given to the Company's Transfer Agent, as may be
deemed necessary or advisable by counsel to the Company to satisfy the
requirements of the Act or any state securities laws.
(e) As used in this Agreement, the following terms shall have the
respective meaning indicated below:
(i) The per share Cash Equivalent Value shall mean the amount, if
any, by which the per share Fair Market Value as of the date of the
Employee's notice of exercise of this option, exceeds the purchase
price set forth in Paragraph 1 of this Agreement.
(ii) Fair Market Value shall mean, as of a particular date, (i)
if the shares of Common Stock are listed on a national securities
exchange, the closing sales price per share of Common Stock on the
consolidated transaction reporting system for the principal securities
exchange for the Common Stock on that date, or, if there shall have
been no such sale so reported on that date, on the last preceding date
on which such a sale was so reported, (ii) if the shares of Common
Stock are not so listed but are quoted
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on the Nasdaq National Market System, the closing sales price per
share of Common Stock on the Nasdaq National Market System on that
date, or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so reported,
(iii) if the Common Stock is not so listed or quoted, the mean between
the closing bid and asked price on that date, or, if there are no
quotations available for such date, on the last preceding date on
which such quotations shall be available, as reported by Nasdaq, or,
if not reported by Nasdaq, by the National Quotation Bureau, Inc., or
(iv) if none of the above is applicable, such amount as may be
determined by the Board (acting on the advise of an Independent Third
Party, should the Board elect in its sole discretion to utilize an
Independent Third Party for this purpose), in good faith, to be the
fair market value per share of Common Stock. "Independent Third Party"
means an individual or entity independent of the Company having
experience in providing investment banking or similar appraisal or
valuation services and with expertise generally in the valuation of
securities or other property for purposes of this Agreement. The Board
may utilize one or more Independent Third Parties.
6. In the event the employment of the Employee is terminated for any reason
other than Disability (as defined below), death or for cause (as determined by
the Committee in its sole and absolute discretion), then the Employee shall have
the right at any time within one (1) month after the termination of such
employment or, if shorter, during the unexpired term of this option, to exercise
this option for the full number of shares or any portion thereof, except as to
the issuance of fractional shares, but only to the extent this option was
otherwise exercisable in accordance with Paragraph 4 hereof on the date of such
cessation of employment; subject, however, to the Company's election provided in
Paragraph 5(b) to pay to Employee the Cash Equivalent Value of such shares.
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7. In the event the employment of Employee is terminated by reason of
Disability, then the Employee shall have the right at any time within six (6)
months after the termination of such employment or, if shorter, during the
unexpired term of this option, to exercise this option for the full number of
shares or any portion thereof, except as to the issuance of fractional shares
(whether or not then exercisable in accordance with Paragraph 4 hereof);
subject, however, to the Company's election provided in Paragraph 5(b) to pay to
Employee the Cash Equivalent Value of such shares. "Disability" shall mean the
Participant is qualified for long-term disability benefits under the Company's
or Subsidiary's disability plan or insurance policy; or, if no such plan or
policy is then in existence or if the Participant is not eligible to participate
in such plan or policy, that the Participant, because of ill health, physical or
mental disability or any other reason beyond his or her control, is unable to
perform his or her duties of employment for a period of not less than twelve
(12) continuous months, as determined in the sole and absolute discretion of the
Committee.
8. In the event of the death of the Employee while in the employ of the
Company or Operating Company, this option may be exercised for the full number
of shares, or any portion thereof, except as to the issuance of fractional
shares (whether or not then exercisable in accordance with Paragraph 4 hereof),
at any time within six (6) months from the date of death of the Employee or
within the unexpired term of this option, whichever is shorter, by the person or
persons to whom the Employee's rights under this option shall pass by the
Employee's will or by the laws of descent and distribution, whichever is
applicable; subject, however, to the Company's election provided in Paragraph
5(b) to pay to Employee the Cash Equivalent Value of such shares.
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9. In the event the employment of Employee is terminated for cause (which
determination shall be made in the sole and absolute discretion of the
Committee), this option shall automatically terminate as of the date of such
cessation of employment.
10. Shares to be issued on the exercise of this option shall be shares
previously issued and re-acquired by the Company.
11. The Company shall not be required to issue or deliver any certificates
for shares purchased upon the exercise of this option prior to: (i) the
obtaining of any approval from any governmental agency which the Company shall,
in its sole discretion, determine to be necessary or advisable; (ii) the
completion of any registration or other qualification of such shares under any
state or federal law or ruling or regulation of any governmental body which the
Company shall, in its sole discretion, determine to be necessary or advisable;
and (iii) the determination by the Committee that Employee has tendered to the
Company any federal, state or local tax owed by Employee as a result of
exercising this option when the Company has a legal liability to satisfy such
tax. In addition, if shares reserved for issuance upon the exercise of this
option shall not then be registered under the Act, the Company may, upon
Employee's exercise of this option, require Employee or his permitted transferee
to represent in writing that the shares being acquired are for investment and
not with a view to distribution, and may xxxx the certificate for the shares
with a legend restricting transfer and may issue stop transfer orders relating
to such certificate to the Company's transfer agent.
12. In connection with the exercise of the option by the Employee and, as a
condition to the Company's obligation to deliver shares upon exercise of the
option, the Employee shall make arrangements satisfactory to the Committee to
insure that the amount of the federal withholding tax, if any, required to be
withheld with respect to
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delivery of the shares is made available by the Employee for timely payment of
the tax by the Company to the United States Government.
13. In the event that, prior to the delivery of all the shares in respect
to which this option is granted, there shall be any change in the outstanding
Common Stock of the Company, through reorganization, recapitalization,
reclassification, stock dividend, stock split, amendment to the Company's
Certificate of Incorporation or reverse stock split, an appropriate and
proportionate adjustment shall be made in the number and/or kind of securities
allocated to the option hereby granted, without change in the aggregate purchase
price applicable to the unexercised portion of the option, but with a
corresponding adjustment in the number and price for each shares or other unit
of any security covered by the option. Such adjustments shall be made by the
Committee, whose determination in the matter shall be conclusive and binding on
the Company, the Employee and the Employee's legal representative.
14. In the event that, prior to the delivery of all the shares in respect
to which this option is granted, a Change of Control (as defined below) of the
Company shall occur:
(a) If provision be made in writing in connection with a Change of
Control, conversion or exchange of the Common Stock under outstanding and
unexercised stock options for securities of another corporation, then the
Committee shall adjust the shares under such outstanding and unexercised
stock options in a manner not inconsistent with the provisions of such plan
or agreement for the adjustment, change, conversion or exchange of such
Common Stock and such options, and immediately upon such Change of Control,
all outstanding and unexercised stock options shall become fully vested and
immediately exercisable.
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(b) In the event provision is not made in connection with a Change of
Control for the change, conversion or exchange of the Common Stock under
outstanding and unexercised stock options for securities of another
corporation, then immediately upon such Change of Control all stock options
shall become fully vested and immediately exercisable, however, each
outstanding and unexercised stock option shall terminate as of a date to be
fixed by the Board; provided, however, that not less than thirty (30) days
written notice of the date so fixed shall be given to Employee, wherein
Employee shall have the right during such period to exercise the stock
options. At the end of such period, all outstanding and unexercised stock
options shall terminate and be of no other force or effect.
(c) All adjustments under this Section 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 on the Company, the
Employee and the Employee's legal representatives.
(d) "Change of Control" shall mean (i) the occurrence of an event of a
nature that would be required to be reported in response to Item 1 or Item
2 of a Form 8-K Current Report of the Company promulgated pursuant to
Sections 13 and 15(d) of the Securities Exchange Act of 1934 (the "1934
Act"); provided that, without limitation, such a Change in Control shall be
deemed to have occurred if (a) any "person," as such term is used in
Sections 13(d) and 14(d) of the 1934 Act (other than the Company, any
person on the Board at the time of the Date of Grant, any trustee or other
fiduciary holding securities under any employee benefit plan of the
Company, or any company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of
stock of the Company), is or becomes the "beneficial
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owner" (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of securities of the Company representing fifty percent (50%)
or more of the combined voting power of the Company's then outstanding
securities or (b) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board cease for any
reason to constitute at least a majority thereof, unless the election by
the Board or the nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the two-year period
or whose election or nomination for election was previously so approved;
(ii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting
power of the voting securities of the surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a
merger or consolidation effected to implement a reorganization or
recapitalization of the Company, or a similar transaction (collectively, a
"Reorganization"), in which no "person" acquires more than twenty percent
(20%) of the combined voting power of the Company's then outstanding
securities shall not constitute a Change in Control of the Company; or
(iii) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
15. In the event that, prior to delivery of all the shares in respect to
which this option is granted, there shall be a dissolution or liquidation of the
Company, each outstanding and unexercised stock option granted hereunder shall
terminate as of a date
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to be fixed by the Board; provided, however, that not less than thirty (30) days
written notice of the date so fixed shall be given to Employee and Employee
shall be fully vested in and shall have the right during such period to exercise
the option, even though such option would not otherwise be exercisable under the
option vesting schedule. At the end of such period, all outstanding and
unexercised options shall terminate and be of no other effect.
16. Neither the Employee nor his legal representative shall be or have any
of the rights or privileges of a shareholder of the Company in respect to any of
the shares issuable upon the exercise of this option unless and until
certificates representing such shares shall have been issued and delivered to
the Employee.
17. Neither the granting of this option, the exercise of any part hereof,
nor any provision of this Agreement shall constitute or be evidence of any
understanding, express or implied, on the part of the Company or the Operating
Company to employ the Employee for any specified period.
18. Except as otherwise herein provided, this option and the rights and
privileges conferred hereby may not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise), other than
by will or the laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of this option or any right or
privilege conferred hereby, contrary to the provisions hereof, this option and
the rights and privileges conferred hereby shall immediately become null and
void.
19. The Committee shall have authority to make reasonable constructions of
this option and to correct any defect or supply any omission or reconcile any
inconsistency in
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this option, and to prescribe reasonable rules and regulations relating to the
administration of this option.
20. Any notice relating to this Agreement shall be in writing and delivered
in person or by registered mail to the Company at the Company's main office,
0000 Xxxx Xxxx Xxxxx, Xxxxxxx, XX 00000, or to such other address as may be
hereafter specified by the Company, to the attention of its Secretary. All
notices to the Employee or other person or persons then entitled to exercise the
option shall be delivered to the Employee or such other person or persons at the
Employee's address specified below.
21. In the event that, prior to the delivery of all of the shares in
respect to which this option is granted, there shall be a merger or
consolidation of the Company in which the Company is the surviving corporation
and, if as a result thereof, outstanding shares of Common Stock of the Company
are changed, converted or exchanged, then there shall be substituted for each
share of stock subject to the option granted hereby the number, kind or amount
of shares of stock or other securities or cash, property, rights or obligations
into which the outstanding shares of Common Stock of the Company shall be so
changed, converted or exchanged as a result of such merger or consolidation. In
the case of any such substitution or adjustment as provided in this paragraph,
the option price referred to in this Agreement for the shares covered hereby
shall be the option price for the shares or other securities or cash, property,
rights or obligations which shall have been substituted for the shares covered
hereby or to which such shares shall have been adjusted. Any adjustment or
substitutions pursuant to this paragraph shall be made by the Committee, whose
determination in the matter shall be conclusive and binding on the Company, the
Employee and his legal representatives.
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22. The Employee agrees that, as partial consideration for the granting of
this option, he will keep confidential all information and knowledge which he
has relating to the manner, the terms and conditions, and the amount of the
grant made to the Employee under this Agreement; provided, however, that such
information may be given in confidence to the Employee's spouse or to a
financial institution to the extent that such information is necessary in order
to secure a loan.
23. Any payment or any issuance or transfer of shares of the Common Stock
to the Employee or his legal representative, heir, legatee or distributee, in
accordance with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such persons hereunder. The Board may require the
Employee, legal representative, heir, legatee or distributee, as a condition
precedent to such payment, to execute a release and receipt therefor in such
form as it shall determine.
24. This option is not intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), and shall be so construed.
25. The validity, construction and effect of the Agreement shall be
determined in accordance with the laws of the State of Delaware. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under this Agreement, if the issuance
thereof would constitute a violation by the Employee or the Company of any
provisions of any law or regulation of any governmental authority or any
national securities exchange or inter-dealer quotation system or other forum in
which such shares of Common Stock are quoted or traded (including without
limitation Xxxxxxx 00 xx xxx 0000 Xxx); and, as a condition of any sale or
issuance of shares of Common Stock under this Agreement, the Committee may
require such
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agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such law or regulation. The grant and
exercise of this option and the obligation of the Company to sell and deliver
shares of Common Stock, shall be subject to all applicable federal and state
laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required.
26. Proceeds from the sale of Common Stock pursuant to the exercise of this
option shall constitute general funds of the Company.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
its name by its President and its corporate seal to be hereunto affixed and
attested by its Secretary on the date and year first above written, and the
Employee has hereunto set his hand on the day and year specified above.
XXXXXX'X RESTAURANTS, INC.
ATTEST:
/s/ Xxxxxx X. Xxxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------- -------------------------------
Xxxxxx X. Xxxxxxxxxx, Secretary Xxxxxx X. Xxxxxxxx, President
(SEAL)
/s/ Xxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxx Xxxxxxx
(Xx X.X. Xxx xxxxxx)
--------------------------------
Xxxx, Xxxxx and Zip Code
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