EXHIBIT 10.35
REPURCHASE RIGHT
RIGHT OF FIRST REFUSAL
XXXXX'X RESTAURANTS, INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this ____ day of _________, 19__, by and
among Xxxxx'x Restaurants, Inc. (the "Corporation"), __________________, the
holder of a stock option (the "Optionee") under the Corporation's 1995 Stock
Option/Stock Issuance Plan and ______________________, the Optionee's spouse.
I. EXERCISE OF OPTION
1.1 EXERCISE. Optionee hereby purchases _______ shares
("Purchased Shares") of the Corporation's common stock ("Common Stock") pursuant
to that certain option ("Option") granted Optionee on _____________, 19___
("Grant Date") to purchase up to ____________ shares of the Common Stock ("Total
Purchasable Shares") under the Corporation's 1995 Stock Option/Stock Issuance
Plan (the "Plan") at an option price of $__________ per share ("Option Price").
1.2 PAYMENT. Concurrently with the delivery of this Agreement
to the Corporate Secretary of the Corporation, Optionee shall pay the Option
Price for the Purchased Shares in accordance with the provisions of the
agreement between the Corporation and Optionee evidencing the Option (the
"Option Agreement") and shall deliver whatever additional documents may be
required by the Option Agreement as a condition for exercise, together with a
duly-executed blank Assignment Separate from Certificate (in the form attached
hereto as Exhibit I) with respect to the Purchased Shares.
1.3 DELIVERY OF CERTIFICATES. The certificates representing
the Purchased Shares hereunder shall be held in escrow by the Corporate
Secretary of the Corporation in accordance with the provisions of Article VII.
1.4 SHAREHOLDER RIGHTS. Until such time as the Corporation
actually exercises its repurchase right, rights of first refusal or special
purchase right under this Agreement, Optionee (or any successor in interest)
shall have all the rights of a shareholder (including voting and dividend
rights) with respect to the Purchased Shares, including the Purchased Shares
held in escrow under Article VII, subject, however, to the transfer restrictions
of Article IV.
II. SECURITIES LAW COMPLIANCE
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with Participant in reliance upon Participant's representation to the Company,
which by Participant's execution of this Agreement Participant hereby confirms,
that the Shares are being acquired for investment for Participant's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that Participant has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, Participant further represents that Participant does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares. Participant represents that he has full power and
authority to enter into this Agreement.
2.2 EXEMPTION FROM REGISTRATION. The Purchased Shares have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
and are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.3 RESTRICTED SECURITIES.
A. Optionee hereby confirms that Optionee has been informed
that the Purchased Shares are restricted securities under the 1933 Act and may
not be resold or transferred unless the Purchased Shares are first registered
under the Federal securities laws or unless an exemption from such registration
is available. Accordingly, Optionee hereby acknowledges that Optionee is
prepared to hold the Purchased Shares for an indefinite period and that Optionee
is aware that Rule 144 of the Securities and Exchange Commission issued under
the 1933 Act is not presently available to exempt the sale of the Purchased
Shares from the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period
immediately following the date on which the Corporation first becomes subject
to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Purchased Shares, to the extent vested
under Article V, may be sold (without registration) pursuant to the
applicable requirements of Rule 144. If Optionee is at the time of such sale
an affiliate of the Corporation for purposes of Rule 144 or was such an
affiliate during the preceding three (3) months, then the sale must comply
with all the requirements of Rule 144 (including the volume limitation on the
number of shares sold, the broker/market-maker sale requirement and the
requisite notice to the Securities and Exchange Commission); however, the two
(2)-year holding period requirement of the Rule will not be applicable. If
Optionee is not at the time of the sale an affiliate of the Corporation nor
was such an affiliate during the preceding three
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(3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will
be applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased Shares have been held
for a period of three (3) years following the payment in cash of the Option
Price for such shares.
2.4 DISPOSITION OF SHARES. Optionee hereby agrees that
Optionee shall make no disposition of the Purchased Shares (other than a
permitted transfer under paragraph 4.1) unless and until there is compliance
with all of the following requirements:
(a) Optionee shall have notified the Corporation of the
proposed disposition and provided a summary of the terms and conditions
of the proposed disposition.
(b) Optionee shall have complied with all requirements
of this Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with
a written statement, on a form to be prepared and provided by the
Corporation at the Corporation's sole cost, that, to the best of
Optionee's knowledge and belief, (i) the proposed disposition does not
require registration of the Purchased Shares under the 1933 Act or (ii)
all appropriate action necessary for compliance with the registration
requirements of the 1933 Act or of any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
The Corporation shall NOT be required (i) to transfer on its books
any Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II NOR (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
2.5 RESTRICTIVE LEGENDS. In order to reflect the restrictions
on disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
(i) "The shares represented by this certificate have not
been registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in
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the absence of (a) an effective registration statement for the shares under
such Act, (b) a 'no action' letter of the Securities and Exchange Commission
with respect to such sale or offer, or (c) satisfactory assurances to the
Corporation that registration under such Act is not required with respect to
such sale or offer."
(ii) "The shares represented by this certificate are
unvested and accordingly may not be sold, assigned, transferred, encumbered, or
in any manner disposed of except in conformity with the terms of a written
agreement dated ____________, 19__ between the Corporation and the registered
holder of the shares (or the predecessor in interest to the shares). Such
agreement grants certain repurchase rights and rights of first refusal to the
Corporation (or its assignees) upon the sale, assignment, transfer, encumbrance
or other disposition of the Corporation's shares or upon termination of service
with the Corporation. The Corporation will upon written request furnish a copy
of such agreement to the holder hereof without charge."
(iii) "It is unlawful to consummate a sale or transfer of
this security, or any interest therein, or to receive any consideration
therefor, without the prior written consent of the Commissioner of Corporations
of the State of California, except as permitted in the Commissioner's Rules."
2.6 RECEIPT OF COMMISSIONER RULES. Optionee hereby
acknowledges receipt of a copy of Section 260.141.11 of the Rules of the
California Corporations Commissioner, a copy of which is attached as Exhibit II
to this Agreement.
III. SPECIAL TAX ELECTION
3.1 SECTION 83(b) ELECTION APPLICABLE TO THE EXERCISE OF A
NON-STATUTORY STOCK OPTION. If the Purchased Shares are unvested and are
acquired hereunder pursuant to the exercise of a NON-STATUTORY STOCK OPTION,
as specified in the Grant Notice, then the Optionee understands that under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
excess of the fair market value of the Purchased Shares on the date any
forfeiture restrictions applicable to such shares lapse over the Option Price
paid for such shares will be reportable as ordinary income on such lapse
date. For this purpose, the term "forfeiture restrictions" includes the
right of the Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right provided under Article V of this Agreement. Optionee
understands that he/she may elect under Section 83(b) of the Code to be taxed
at the time the Purchased Shares are acquired hereunder, rather than when and
as such Purchased Shares cease to be subject to such forfeiture restrictions.
Such election must be filed with the Internal Revenue Service within thirty
(30) days after the date of this Agreement. Even if the fair market value of
the Purchased Shares at the date of this Agreement equals the Option Price
paid (and thus no tax is payable), the election must be made to avoid adverse
tax consequences in the future. THE FORM FOR MAKING THIS ELECTION IS
ATTACHED AS EXHIBIT III HERETO. OPTIONEE UNDERSTANDS THAT
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FAILURE TO MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN
THE RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE
RESTRICTIONS LAPSE.
3.2 CONDITIONAL SECTION 83(b) ELECTION APPLICABLE TO THE
EXERCISE OF AN INCENTIVE STOCK OPTION. If the Purchased Shares are unvested and
are acquired hereunder pursuant to the exercise of an INCENTIVE STOCK OPTION
under the Federal tax laws, as specified in the Grant Notice, then the following
tax principles shall be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income
will be recognized at the time the Option is exercised.
B. The excess of (i) the fair market value of
the Purchased Shares on the date the Option is exercised or (if
later) on the date any forfeiture restrictions applicable to the
Purchased Shares lapse over (ii) the Option Price paid for the
Purchased Shares will be includible in the Optionee's taxable
income for alternative minimum tax purposes.
C. If the Optionee makes a disqualifying
disposition of the Purchased Shares, then the Optionee will
recognize ordinary income in the year of such disposition equal in
amount to the excess of (i) the fair market value of the Purchased
Shares on the date the Option is exercised or (if later) on the
date any forfeiture restrictions applicable to the Purchased
Shares lapse over (ii) the Option Price paid for the Purchased
Shares. Any additional gain recognized upon the disqualifying
disposition will be either short-term or long-term capital gain
depending upon the period for which the Purchased Shares are held
prior to the disposition.
D. For purposes of the foregoing, the term
"forfeiture restrictions" will include the right of the
Corporation to repurchase the Purchased Shares pursuant to the
Repurchase Right provided under Article V of this Agreement. The
term "disqualifying disposition" means any sale or other
disposition (1) of the Purchased Shares within two (2) years after
the Grant Date or within one (1) year after the execution date of
this Agreement.
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(1) Generally, a disposition of shares purchased under an incentive
stock option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
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E. In the absence of final Treasury Regulations
relating to incentive stock options, it is not certain whether the
Optionee may, in connection with the exercise of the Option for
any Purchased Shares at the time subject to forfeiture
restrictions, file a protective election under Section 83(b) of
the Code which would limit (I) the Optionee's alternative minimum
taxable income upon exercise and (II) the Optionee's ordinary
income upon a disqualifying disposition, to the excess of (i) the
fair market value of the Purchased Shares on the date the Option
is exercised over (ii) the Option Price paid for the Purchased
Shares. THE APPROPRIATE FORM FOR MAKING SUCH A PROTECTIVE
ELECTION IS ATTACHED AS EXHIBIT III TO THIS AGREEMENT AND MUST BE
FILED WITH THE INTERNAL REVENUE SERVICE WITHIN THIRTY (30) DAYS
AFTER THE DATE OF THIS AGREEMENT. HOWEVER, SUCH ELECTION IF
PROPERLY FILED WILL ONLY BE ALLOWED TO THE EXTENT THE FINAL
TREASURY REGULATIONS PERMIT SUCH A PROTECTIVE ELECTION.
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE
RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER
SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON HIS/HER BEHALF. This filing should be made by registered
or certified mail, return receipt requested, and Optionee must retain two (2)
copies of the completed form for filing with his or her State and Federal tax
returns for the current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
4.1 RESTRICTION ON TRANSFER. Optionee shall not transfer,
assign, encumber or otherwise dispose of any of the Purchased Shares which are
subject to the Corporation's Repurchase Right under Article V. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise made the subject of disposition
in contravention of the Corporation's First Refusal Right under Article VI.
Such restrictions on transfer, however, shall NOT be applicable to (i) a
gratuitous transfer of the Purchased Shares made to the Optionee's spouse or
issue, including adopted children, or to a trust for the exclusive benefit of
the Optionee or the Optionee's spouse or issue, PROVIDED AND ONLY IF the
Optionee obtains the Corporation's prior written consent to such transfer, (ii)
a transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
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4.2 TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of one of the
permitted transfers specified in paragraph 4.1 must, as a condition precedent to
the validity of such transfer, acknowledge in writing to the Corporation that
such person is bound by the provisions of this Agreement and that the
transferred shares are subject to (i) both the Corporation's Repurchase Right
and the Corporation's First Refusal Right granted hereunder and (ii) the market
stand-off provisions of paragraph 4.4, to the same extent such shares would be
so subject if retained by the Optionee.
4.3 DEFINITION OF OWNER. For purposes of Articles IV, V, VI
and VII of this Agreement, the term "Owner" shall include the Optionee and all
subsequent holders of the Purchased Shares who derive their chain of ownership
through a permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 MARKET STAND-OFF PROVISIONS.
A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Corporation or such underwriters; PROVIDED, however,
that in no event shall such period exceed one hundred-eighty (180) days. The
limitations of this paragraph 4.4 shall remain in effect for the two-year period
immediately following the effective date of the Corporation's initial public
offering and shall thereafter terminate and cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions
of this paragraph 4.4 PROVIDED AND ONLY IF the officers and directors of the
Corporation are also subject to similar arrangements.
C. In the event of any stock dividend, stock split,
recapitalization or other change affecting the Corporation's outstanding Common
Stock effected as a class without receipt of consideration, then any new,
substituted or additional securities distributed with respect to the Purchased
Shares shall be immediately subject to the provisions of this paragraph 4.4, to
the same extent the Purchased Shares are at such time covered by such
provisions.
D. In order to enforce the limitations of this paragraph 4.4,
the Corporation may impose stop-transfer instructions with respect to the
Purchased Shares until the end of the applicable stand-off period.
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V. REPURCHASE RIGHT
5.1 GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date the Optionee ceases for any reason to remain in Service or
(if later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Option Price all or (at the discretion of the
Corporation and with the consent of the Optionee) any portion of the Purchased
Shares in which the Optionee has not acquired a vested interest, if any, in
accordance with the vesting provisions of paragraph 5.3 (such shares to be
hereinafter called the "Unvested Shares"). For purposes of this Agreement, the
Optionee shall be deemed to remain in Service for so long as the Optionee
continues to render periodic services to the Corporation or any parent or
subsidiary corporation, whether as an employee, a non-employee member of the
board of directors, or an independent contractor or consultant.
5.2 EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right
shall be exercisable by written notice delivered to the Owner of the Unvested
Shares prior to the expiration of the applicable sixty (60)-day period specified
in paragraph 5.1. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. To the extent one
or more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Corporation the certificates representing the Unvested Shares to be
repurchased, each certificate to be properly endorsed for transfer. The
Corporation shall, concurrently with the receipt of such stock certificates
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), pay to Owner in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the Option Price
previously paid for the Unvested Shares which are to be repurchased.
5.3 TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
5.4 AGGREGATE VESTING LIMITATION. If the Option is exercised
in more than one increment so that the Optionee is a party to one or more other
Stock Purchase Agreements ("Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase
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Agreements shall not exceed in the aggregate the number of Purchased Shares
in which the Optionee would otherwise at the time be vested, in accordance
with the vesting provisions of paragraph 5.3, had all the Purchased Shares
been acquired exclusively under this Agreement.
5.5 FRACTIONAL SHARES. No fractional shares shall be
repurchased by the Corporation. Accordingly, should the Repurchase Right extend
to a fractional share (in accordance with the vesting provisions of paragraph
5.3) at the time the Optionee ceases Service, then such fractional share shall
be added to any fractional share in which the Optionee is at such time vested in
order to make one whole vested share no longer subject to the Repurchase Right.
5.6 ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event
of any stock dividend, stock split, recapitalization or other change affecting
the Corporation's outstanding Common Stock as a class effected without receipt
of consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares and Total Purchasable Shares hereunder
and to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such transaction upon the Corporation's
capital structure; PROVIDED, however, that the aggregate purchase price shall
remain the same.
5.7 CORPORATE TRANSACTION.
A. Immediately prior to the consummation of any of the
following shareholder-approved transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) any transaction (other than an issuance of shares by
the Corporation for cash) in or by means of which one or more persons
acting in concert acquire, in the aggregate, more than 50% of the
outstanding shares of the stock of the Corporation,
the Repurchase Right shall automatically lapse in its
entirety except to the extent the Repurchase Right is to be assigned to the
successor corporation (or its parent company) in connection with such Corporate
Transaction.
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B. To the extent the Repurchase Right remains in effect
following such Corporate Transaction, such right shall apply to the new capital
stock or other property (including cash) received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Corporation's
capital structure; PROVIDED, however, that the aggregate purchase price shall
remain the same.
C. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
VI. RIGHT OF FIRST REFUSAL
6.1 GRANT. The Corporation is hereby granted rights of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 NOTICE OF INTENDED DISPOSITION. In the event the Owner
desires to accept a bona fide third-party offer for the transfer of any or all
of the Purchased Shares (the shares subject to such offer to be hereinafter
called the "Target Shares"), Owner shall promptly (i) deliver to the Corporate
Secretary of the Corporation written notice (the "Disposition Notice") of the
terms and conditions of the offer, including the purchase price and the identity
of the third-party offeror, and (ii) provide satisfactory proof that the
disposition of the Target Shares to such third-party offeror would not be in
contravention of the provisions set forth in Articles II and IV of this
Agreement.
6.3 EXERCISE OF RIGHT. The Corporation shall, for a period of
forty-five (45) days following receipt of the Disposition Notice, have the right
to repurchase any or all of the Target Shares specified in the Disposition
Notice upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such
right shall be exercisable by delivery of written notice (the "Exercise Notice")
to Owner prior to the expiration of the forty-five (45)-day exercise period. If
such right is exercised with respect to all the Target Shares specified in the
Disposition Notice, then the Corporation (or its assignees) shall effect the
repurchase of the Target Shares, including payment of the purchase price, not
more than ten (10) business days after delivery of the Exercise Notice; and at
such time Owner shall deliver to the Corporation the
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certificates representing the Target Shares to be repurchased, each
certificate to be properly endorsed for transfer. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the
certificates for such shares shall automatically be released from escrow and
delivered to the Corporation for purchase. Should the purchase price
specified in the Disposition Notice be payable in property other than cash or
evidences of indebtedness, the Corporation (or its assignees) shall have the
right to pay the purchase price in the form of cash equal in amount to the
value of such property. If the Owner and the Corporation (or its assignees)
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an
appraiser of recognized standing selected by the Corporation (or its
assignees) within twenty (20) days after the Corporation's receipt of the
Disposition Notice, whose appraisal shall be determinative of such value.
The cost of such appraisal shall be paid entirely by the Corporation. The
closing shall then be held on the LATER of (i) the tenth business day
following delivery of the Exercise Notice or (ii) the tenth business day
after such cash valuation shall have been made.
6.4 NON-EXERCISE OF RIGHT. In the event the Exercise Notice is
not given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; PROVIDED,
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of Article II and (ii) the
market stand-off provisions of paragraph 4.4. In the event Owner does not
effect such sale or disposition of the Target Shares within the specified thirty
(30)-day period, the Corporation's First Refusal Right shall continue to be
applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
6.5 PARTIAL EXERCISE OF RIGHT. In the event the Corporation
(or its assignees) makes a timely exercise of the First Refusal Right with
respect to a portion, but not all, of the Target Shares specified in the
Disposition Notice, Owner shall have the option, exercisable by written notice
to the Corporation delivered within thirty (30) days after the date of the
Disposition Notice, to effect the sale of the Target Shares pursuant to one of
the following alternatives:
(i) to elect not to sell any shares to the Corporation
pursuant to the First Refusal Right, but to instead sell all the Target
Shares to the third-party offeror identified in the Disposition Notice,
which sale shall otherwise be
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in full compliance with the requirements of paragraph 6.4 as if the
Corporation did not offer to exercise the First Refusal Right with
respect to any of the Target Shares; or
(ii) sale to the Corporation (or its assignees) of the
portion of the Target Shares which the Corporation (or its assignees) has
elected to purchase, such sale to be effected in substantial conformity
with the provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 RECAPITALIZATION/MERGER.
(a) In the event of any stock dividend, stock split,
recapitalization or other transaction affecting the Corporation's outstanding
Common Stock as a class effected without receipt of consideration, then any new,
substituted or additional securities or other property which is by reason of
such transaction distributed with respect to the Purchased Shares shall be
immediately subject to the Corporation's First Refusal Right hereunder, but only
to the extent the Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the
Corporation is not the surviving entity,
(ii) a sale, transfer or other disposition of
all or substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation
is the surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to person or persons other
than those who held such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change
the State in which the Corporation is incorporated, or to create a
holding company structure,
the Corporation's First Refusal Right shall remain in full
force and effect and shall apply to the new capital stock or other property
received in exchange for the Purchased Shares in consummation of the transaction
but only to the extent the Purchased Shares are at the time covered by such
right.
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6.7 LAPSE. The First Refusal Right under this Article VI shall
lapse and cease to have effect upon the EARLIEST to occur of (i) the first date
on which shares of the Corporation's Common Stock are held of record by more
than five hundred (500) persons, (ii) a determination is made by the
Corporation's Board of Directors that a public market exists for the outstanding
shares of the Corporation's Common Stock, or (iii) a firm commitment
underwritten public offering pursuant to an effective registration statement
under the 1933 Act, covering the offer and sale of the Corporation's Common
Stock in the aggregate amount of at least $5,000,000. However, the market
stand-off provisions of paragraph 4.4 shall continue to remain in full force and
effect following the lapse of the First Refusal Right hereunder.
VII. ESCROW
7.1 DEPOSIT. Upon issuance, the certificates for any
Unvested Shares purchased hereunder shall be deposited in escrow with the
Corporate Secretary of the Corporation to be held in accordance with the
provisions of this Article VII. Each deposited certificate shall be
accompanied by a duly-executed Assignment Separate from Certificate in the
form of Exhibit I. The deposited certificates, together with any other
assets or securities from time to time deposited with the Corporate Secretary
pursuant to the requirements of this Agreement, shall remain in escrow until
such time or times as the certificates (or other assets and securities) are
to be released or otherwise surrendered for cancellation in accordance with
paragraph 7.3. Upon delivery of the certificates (or other assets and
securities) to the Corporate Secretary of the Corporation, the Owner shall be
issued an instrument of deposit acknowledging the number of Unvested Shares
(or other assets and securities) delivered in escrow.
7.2 RECAPITALIZATION. All regular cash dividends on the
Unvested Shares (or other securities at the time held in escrow) shall be paid
directly to the Owner and shall not be held in escrow. However, in the event of
any stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested Shares shall be immediately
delivered to the Corporate Secretary to be held in escrow under this Article
VII, but only to the extent the Unvested Shares are at the time subject to the
escrow requirements of paragraph 7.1.
7.3 RELEASE/SURRENDER. The Unvested Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms and conditions relating to their release from escrow or their
surrender to the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to exercise
the Repurchase Right under Article V with respect to any Unvested Shares,
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then the escrowed certificates for such Unvested Shares (together with
any other assets or securities issued with respect thereto) shall be
delivered to the Corporation concurrently with the payment to the Owner,
in cash or cash equivalent (including the cancellation of any purchase-
money indebtedness), of an amount equal to the aggregate Option Price for
such Unvested Shares, and the Owner shall cease to have any further
rights or claims with respect to such Unvested Shares (or other assets or
securities attributable to such Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to exercise
its First Refusal Right under Article VI with respect to any vested
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall, concurrently with the payment of
the paragraph 6.3 purchase price for such Target Shares to the Owner, be
surrendered to the Corporation, and the Owner shall cease to have any
further rights or claims with respect to such Target Shares (or other
assets or securities).
(iii) Should the Corporation (or its assignees) elect NOT to
exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Owner for
disposition in accordance with provisions of paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares (or
any other assets or securities attributable thereto) vests in accordance with
the provisions of Article V, the certificates for such vested shares (as well as
all other vested assets and securities) shall be released from escrow and
delivered to the Owner in accordance with the following schedule:
a. The initial release of vested shares (or
other vested assets and securities) from escrow shall be effected
within thirty (30) days following the expiration of the initial
twelve (12)-month period measured from the Grant Date.
b. Subsequent releases of vested shares (or
other vested assets and securities) from escrow shall be effected
at semi-annual intervals thereafter, with the first such semi-annual
release to occur eighteen (18) months after the Grant Date.
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c. Upon the Optionee's cessation of Service, any
escrowed Purchased Shares (or other assets or securities) in which
the Optionee is at the time vested shall be promptly released from
escrow.
d. Upon any earlier termination of the
Corporation's Repurchase Right in accordance with the applicable
provisions of Article V, any Purchased Shares (or other assets or
securities) at the time held in escrow hereunder shall promptly be
released to the Owner as fully-vested shares or other property.
(v) All Purchased Shares (or other assets or securities)
released from escrow in accordance with the provisions of subparagraph
(iv) above shall nevertheless remain subject to (I) the Corporation's
First Refusal Right under Article VI until such right lapses pursuant to
paragraph 6.7, (II) the market stand-off provisions of paragraph 4.4
until such provisions terminate in accordance therewith and (III) the
Special Purchase Right under Article VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
8.1 GRANT. In connection with the dissolution of the
Optionee's marriage or the legal separation of the Optionee and the Optionee's
spouse, the Corporation shall have the right (the "Special Purchase Right"),
exercisable at any time during the thirty (30)-day period following the
Corporation's receipt of the required Dissolution Notice under paragraph 8.2, to
purchase from the Optionee's spouse, in accordance with the provisions of
paragraph 8.3, all or any portion of the Purchased Shares which would otherwise
be awarded to such spouse in settlement of any community property or other
marital property rights such spouse may have in such shares.
8.2 NOTICE OF DECREE OR AGREEMENT. The Optionee shall promptly
provide the Secretary of the Corporation with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the property
rights of the Optionee and the Optionee's spouse in connection with their
marital dissolution or legal separation or (ii) the execution of any contract or
agreement relating to the distribution or division of such property rights. The
Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between the Optionee and the Optionee's
spouse which provides for the award to the spouse of one or more Purchased
Shares in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.3 EXERCISE OF SPECIAL PURCHASE RIGHT. The price at which
the Special Purchase Right shall be exercisable by the Company will be the
higher of the Option Price as set forth in Section 1.1 hereof or the fair market
value of the shares as of the date the Special
-15-
Purchase Right is exercised. The right shall be exercised by delivery of
written notice (the "Purchase Notice") to the Optionee and the Optionee's
spouse within thirty (30) days after the Corporation's receipt of the
Dissolution Notice. The Purchase Notice shall indicate the number of shares
to be purchased by the Corporation, the date such purchase is to be effected
(such date to be not less than five (5) business days, nor more than ten (10)
business days, after the date of the Purchase Notice), and the price to be
paid for such Purchased Shares. The Optionee (or the Optionee's spouse, to
the extent such spouse has physical possession of the Purchased Shares)
shall, prior to the close of business on the date specified for the purchase,
deliver to the Corporate Secretary of the Corporation the certificates
representing the shares to be purchased, each certificate to be properly
endorsed for transfer. To the extent any of the shares to be purchased by
the Corporation are at the time held in escrow under Article VII, the
certificates for such shares shall be promptly delivered out of escrow to the
Corporation. The Corporation shall, concurrently with the receipt of the
stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the price to be paid for such shares as
specified in the Purchase Notice.
If the Optionee's spouse does not agree with the Corporation's
determination of the fair market value of the shares then the spouse shall
promptly notify the Corporation in writing of such disagreement and the fair
market value of such shares shall thereupon be determined by an appraiser of
recognized standing selected by the Corporation whose appraisal shall be
determinative of such value. The cost of the appraisal shall be borne
entirely by the Corporation. The closing shall then be held on the fifth
business day following the completion of such appraisal; PROVIDED, however,
that if the appraised value is more than fifteen percent (15%) greater than
the fair market value specified for the shares in the Purchase Notice, the
Corporation shall have the right, exercisable prior to the expiration of such
five (5)-business-day period, to rescind the exercise of the Special Purchase
Right and thereby revoke its election to purchase the shares awarded to the
spouse.
8.4 LAPSE. The Special Purchase Right under this Article VIII
shall lapse and cease to have effect upon the EARLIER to occur of (i) the first
date on which the First Refusal Right under Article VI lapses or (ii) the
expiration of the thirty (30)-day exercise period specified in paragraph 8.3, to
the extent the Special Purchase Right is not timely exercised in accordance with
such paragraph.
IX. GENERAL PROVISIONS
9.1 ASSIGNMENT. The Corporation may assign its Repurchase
Right under Article V, its First Refusal Right under Article VI and/or its
Special Purchase Right under Article VIII to any person or entity selected by
the Corporation's Board of Directors, including (without limitation) one or more
shareholders of the Corporation.
If the assignee of the Repurchase Right is other than a one
hundred percent (100%) owned subsidiary corporation of the Corporation or the
parent corporation owning one
-16-
hundred percent (100%) of the Corporation, then such assignee must make a
cash payment to the Corporation, upon the assignment of the Repurchase Right,
in an amount equal to the excess (if any) of (i) the fair market value of the
Unvested Shares at the time subject to the assigned Repurchase Right over
(ii) the aggregate repurchase price payable for the Unvested Shares
thereunder.
9.2 DEFINITIONS. For purposes of this Agreement, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a parent corporation of the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
(ii) Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a subsidiary of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
9.3 NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
Agreement or in the Plan shall confer upon the Optionee any right to continue in
the Service of the Corporation (or any parent or subsidiary corporation of the
Corporation employing or retaining Optionee) for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any parent or subsidiary corporation of the Corporation employing or
retaining Optionee) or the Optionee, which rights are hereby expressly reserved
by each, to terminate the Optionee's Service at any time for any reason
whatsoever, with or without cause.
9.4 NOTICES. Any notice required in connection with (i) the
Repurchase Right, the Special Purchase Right or the First Refusal Right or (ii)
the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
-17-
9.5 NO WAIVER. The failure of the Corporation (or its
assignees) in any instance to exercise the Repurchase Right granted under
Article V, or the failure of the Corporation (or its assignees) in any
instance to exercise the First Refusal Right granted under Article VI, or the
failure of the Corporation (or its assignees) in any instance to exercise the
Special Purchase Right granted under Article VIII shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other
agreement between the Corporation and the Optionee or the Optionee's spouse.
No waiver of any breach or condition of this Agreement shall be deemed to be
a waiver of any other or subsequent breach or condition, whether of like or
different nature.
9.6 CANCELLATION OF SHARES. If the Corporation (or its
assignees) shall make available, at the time and place and in the amount and
form provided in this Agreement, the consideration for the Purchased Shares
to be repurchased in accordance with the provisions of this Agreement, then
from and after such time, the person from whom such shares are to be
repurchased shall no longer have any rights as a holder of such shares (other
than the right to receive payment of such consideration in accordance with
this Agreement), and such shares shall be deemed purchased in accordance with
the applicable provisions hereof and the Corporation (or its assignees) shall
be deemed the owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this Agreement.
X. MISCELLANEOUS PROVISIONS
10.1 OPTIONEE UNDERTAKING. Optionee hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may in its judgment deem necessary or advisable in order to carry
out or effect one or more of the obligations or restrictions imposed on
either the Optionee or the Purchased Shares pursuant to the express
provisions of this Agreement.
10.2 AGREEMENT IS ENTIRE CONTRACT. This Agreement
constitutes the entire contract between the parties hereto with regard to the
subject matter hereof. This Agreement is made pursuant to the provisions of
the Plan and shall in all respects be construed in conformity with the
express terms and provisions of the Plan.
10.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such
laws are applied to contracts entered into and performed in such State
without resort to that State's conflict-of-laws rules.
10.4 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
-18-
10.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Corporation and its
successors and assigns and the Optionee and the Optionee's legal
representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person shall have become a party to
this Agreement and have agreed in writing to join herein and be bound by the
terms and conditions hereof.
10.6 POWER OF ATTORNEY. Optionee's spouse hereby appoints
Optionee his or her true and lawful attorney in fact, for him or her and in his
or her name, place and xxxxx, and for his or her use and benefit, to agree to
any amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
[Remainder of This Page Intentionally Left Blank]
-19-
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
Xxxxx'x Restaurants, Inc.
By:
--------------------------------
Title:
-----------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
Optionee (*)
Address:
------------------------------------
------------------------------------
The undersigned spouse of Optionee has read and hereby approves
the foregoing Stock Purchase Agreement. In consideration of the
Corporation's granting the Optionee the right to acquire the Purchased Shares
in accordance with the terms of such Agreement, the undersigned hereby agrees
to be irrevocably bound by all the terms and provisions of such Agreement,
including (specifically) the right of the Corporation (or its assignees) to
purchase any and all interest or right the undersigned may otherwise have in
such shares pursuant to community property laws or other marital property
rights.
------------------------------------
Optionee's Spouse
Address:
------------------------------------
------------------------------------
-------------------------
(*) I have executed the Section 83(b) election that was attached hereto as an
Exhibit. As set forth in Article III, I understand that I, and not the
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
-20-
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _________________________ hereby sell(s),
assign(s) and transfer(s) unto Xxxxx'x Restaurants, Inc. (the "Corporation"),
_____________________ (________) shares of the Common Stock of the Corporation
standing in his\her name on the books of the Corporation represented by
Certificate No. _________________ and do hereby irrevocably constitute and
appoint __________________________________ as Attorney to transfer the said
stock on the books of the Corporation with full power of substitution in
the premises.
Dated: ___________________________
Signature
---------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
EXHIBIT II
SECTION 260.141.11
TITLE 10, CALIFORNIA ADMINISTRATIVE CODE
260.141.11 Restriction on Transfer. (a) The issuer of any
security upon which a restriction on transfer has been imposed pursuant to
Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to
be delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
EXHIBIT II-1
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or Subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.
(c) The certificates representing all such securities subject
to such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently stamped or
printed thereon in capital letters of not less than 10-point size, reading as
follows:
EXHIBIT II-2
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
EXHIBIT II-3
EXHIBIT III
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: _________________________________________________________
Address: ______________________________________________________
Taxpayer Ident. No.: __________________________________________
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Xxxxx'x Restaurants, Inc.
(3) The property was issued on __________________, 19__.
(4) The taxable year in which the election is being made is the calendar year
19__.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of annual
and monthly installments over a four (4) year period ending on ________
___________________________________.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will never
lapse) is $______ per share.
(7) The amount paid for such property is $______ per share.
(8) A copy of this statement was furnished to Xxxxx'x Restaurants, Inc. for
whom taxpayer rendered the service underlying the transfer of property.
(9) This statement is executed as of: _________________, 19__.
----------------------------------- ------------------------------------
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Restricted Stock Issuance
Agreement.
III-1
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON
EXERCISE OF AN INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative
minimum taxable income attributable to the purchased shares measured by the
amount by which the fair market value of such shares at the time of their
transfer to the Taxpayer exceeds the purchase price paid for the shares. In the
absence of this election, such alternative minimum taxable income would be
measured by the spread between the fair market value of the purchased shares and
the purchase price which exists on the various lapse dates in effect for the
forfeiture restrictions applicable to such shares. The election is to be
effective to the full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from
income any excess of the fair market value of the purchased shares over the
amount paid for such shares. Accordingly, this election is also intended to be
effective in the event there is a "disqualifying disposition" of the shares,
within the meaning of Section 421(b) of the Code, which would otherwise render
the provisions of Section 83(a) of the Code applicable at that time.
Consequently, the Taxpayer hereby elects to have the amount of disqualifying
disposition income measured by the excess of the fair market value of the
purchased shares on the date of transfer to the Taxpayer over the amount paid
for such shares. Since Section 421(a) presently applies to the shares which are
the subject of this Section 83(b) election, no taxable income is actually
recognized for regular tax purposes at this time, and no income taxes are
payable, by the Taxpayer as a result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
NOTE: PAGE 2 SHOULD BE ATTACHED ONLY IF YOU ARE EXERCISING AN
INCENTIVE STOCK OPTION.
