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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
November 26, 1996, by and between Xxxxxxx Xxxxx (the "Executive") and Xxxx
Industries, Inc., a California corporation (the "Company"), 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 Executive Vice President,
Vice President--Sales/Marketing and Chief Operating Officer of Milgray
Electronics, Inc., a New York corporation ("Milgray");
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 Company
(the "Merger");
C. The Company wishes to ensure the continued services of
Executive after the Merger by having him serve as Executive Vice
President--Electronics Distribution Group of the Company and President of
Milgray; and
D. Executive is willing to accept employment by the Company and
Milgray 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 President of Milgray and Executive Vice
President--Electronics Distribution Group of Xxxx performing the functions of
principal executive officer in charge of a significant segment of the Company's
business - i.e., the business presently being conducted by Milgray, such
employment to commence on the effective date of the Merger. Executive shall
report to the President of the Company, and subject to the directions of the
Board of Directors of Milgray and/or the President of the Company, shall have
general supervision, direction and control of the business, officers and
employees of Milgray and its subsidiaries; provided, however, that Executive
shall not be required to undertake duties not commensurate with his position as
President of Milgray and Executive Vice President--Electronics Distribution
Group of Xxxx. Notwithstanding anything contained in the preceding sentence,
Executive acknowledges that, following the Merger, the Company plans to
investigate combining its existing
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distribution business, or segments thereof, with those of Milgray, 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 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 with responsibilities similar to those of Executive.
Any such change in responsibility will not constitute a breach of this Agreement
by the Company. During the term of this Agreement, Executive shall devote his
full business time and attention to the business of the Company and Milgray 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 Milgray.
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 sixty 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 five (5) 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 $400,000 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 of the Company
shall be $135,000. For the initial year of this Agreement, such bonus shall be
prorated from the Effective Date and
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the bonus for any other partial year shall be similarly prorated. Any such bonus
earned by Executive shall be paid 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 will the
guaranteed minimum bonus be paid later than 30 days after the end of the
Company's fiscal year, with the remainder, if any, to be paid within 90 days
after the end of the Company's fiscal year).
3.3 Additional Benefits
Executive shall be entitled to participate in all of the Company's
employee benefit plans as listed in the Company's employee handbook, as the same
may change from time to time, and, in addition, to participate on the same terms
as senior Company executives in any benefit plans available to members of the
Company's management (whether or not listed in the employee handbook). Among
other things, Executive shall be entitled to participate in the Company's Health
Care Benefits Program, 401(k) Plan, Stock Purchase Plan, Stock Option Plan,
Short-term and Long-term Disability Programs and the Company'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
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, the Company
shall grant to Executive options to acquire 25,000 shares of Company's common
stock at an exercise price equal to the closing price on the Effective Date. The
options shall vest in 10%, 20%, 30% and 40% increments, respectively, on the
first, second, third and fourth anniversaries of this Agreement. In addition,
all of the options will vest if (i) the Company terminates this agreement other
than for Cause (as defined in Section 6.2) or (ii) the Executive terminates this
Agreement 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 Company's stock option programs, although Executive understands that any
grants under such programs are completely discretionary with the Compensation
Committee of the Company'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 and Milgray, 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 and
Milgray's business.
5. INDEMNIFICATION
Executive shall be indemnified by 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
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
payable 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 two
years, and elected to receive his remaining three 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 two-thirds of the amount he
received as
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severance (3 years severance pay lump-sum, 1 year of which was "earned" by not
competing, with the portion relating to the remaining 2 years 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:
Xxxxxxx Xxxxx
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, 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.
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IN WITNESS THEREOF, the parties hereto have executed this
Agreement as of the date first above written.
XXXX INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxxxxx
----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
XXXXXXX XXXXX
/s/ Xxxxxxx Xxxxx
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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 Xxxxxxx Xxxxx (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 25,000 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 25,000 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
---- ----------- -----------
10% 10%
20% 30%
30% 60%
40% 100%
Subject to earlier termination under Section 5 hereof, at any time after the 4th
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,
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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 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.
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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" 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
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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.
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:
(a) if to the Company: Xxxx Industries, Inc.
00000 Xxx Xxxxxxx Xxxxxxxxx
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00
Xxx Xxxxxxx, XX 00000-0000
Attention: President
(b) if to Participant: Xxxxxxx Xxxxx
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, 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
-----------
------------------------------
Xxxxxxx Xxxxx
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 Xxxx Industries, Inc., a California corporation (the "Corporation"), and
Xxxxxxx Xxxxx (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.
20
(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.
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:
----------------------- -------------------
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