EXHIBIT 10.34
XXXXX'X RESTAURANTS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board of Directors of the Corporation has adopted the Xxxxx'x
Restaurants Inc. 1995 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and
this Agreement is executed pursuant to and is intended to carry out the
purposes of the Plan.
AGREEMENT
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement, the Corporation hereby grants to Optionee, as of
the grant date (the "Grant Date") specified in the accompanying Notice of
Grant of Stock Option (the "Grant Notice"), a stock option to purchase up to
that number of shares of the Corporation's Common Stock (the "Option Shares")
as is specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term at the option price per share (the
"Option Price") specified in the Grant Notice.
2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business
on the expiration date (the "Expiration Date") specified in the Grant Notice,
unless sooner terminated in accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised,
during Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
in part at any time prior to the time the Plan is approved by the
Corporation's shareholders in accordance with Paragraph 17. Provided such
shareholder approval is obtained, this option shall thereupon become
exercisable for the Option Shares in one or more installments as is specified
in the Grant Notice. As the option becomes exercisable in one or more
installments, the installments shall accumulate and the option shall remain
exercisable for such installments until the Expiration Date or the sooner
termination of the option term under Paragraph 5 or Paragraph 6 of this
Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term
specified in Paragraph 2 shall terminate (and this option shall cease to be
exercisable) prior to the Expiration Date should any of the following
provisions become applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced
to a three (3)-month period commencing with the date of such cessation of
Service, but in no event shall this option be exercisable at any time
after the Expiration Date. Upon the expiration of such three (3)-month
period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the law of descent and distribution shall
have the right to exercise this option. Such right shall lapse and this
option shall cease to be exercisable upon the EARLIER of (A) the
expiration of the twelve (12) month period measured from the date of
Optionee's death or (B) the Expiration Date. Upon the expiration of
such twelve (12) month period or (if earlier) upon the Expiration Date,
this option shall terminate and cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding,
then the Optionee shall have a period of twelve (12) months (commencing
with the date of such cessation of Service) during which to exercise
this option, but in no event shall this option be exercisable at any
time after the Expiration Date. Optionee shall be deemed to be
permanently disabled if Optionee is unable to engage in any substantial
gainful activity for the Corporation or the parent or subsidiary
corporation retaining his/her services by reason of any medically
determinable physical or mental impairment, which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. Upon the
expiration of such limited period of exercisability or (if earlier) upon
the Expiration Date, this option shall terminate and cease to be
outstanding.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may be exercised for
any or all of the Option Shares for which this option is, at the time of
the Optionee's cessation of Service, exercisable in accordance with the
exercise schedule specified in the Grant Notice and the provisions of
Paragraph 6 of this Agreement.
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(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. 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.
B. The Optionee shall be deemed to be an EMPLOYEE of the Corporation
and to continue in the Corporation's employ for so long as the Optionee
remains in the employ of the Corporation or one or more of its parent or
subsidiary corporations, subject to the control and direction of the employer
entity as to both the work to be performed and the manner and method of
performance.
C. A corporation shall be considered to be a SUBSIDIARY corporation
of the Corporation if it is a member of an unbroken chain of corporations
beginning with the Corporation, provided each such corporation in the chain
(other than the last corporation) owns, at the time of determination, stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
D. A corporation shall be considered to be a PARENT corporation of
the Corporation if it is a member of an unbroken chain ending with the
Corporation, provided each such corporation in the chain (other than the
Corporation) owns, at the time of determination, stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
6. SPECIAL TERMINATION OF OPTION.
A. This Option, to the extent not previously exercised, shall
terminate and cease to be exercisable upon the consummation of one or more of
the following shareholder-approved transactions (a "Corporate Transaction")
unless this Option is expressly assumed by the successor corporation or
parent thereof:
(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
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(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.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number
and class of securities available for issuance under the Plan on both an
aggregate and per Optionee basis following the consummation of such Corporate
Transaction and (ii) the exercise price payable per share under each
outstanding option, PROVIDED the aggregate exercise price payable for such
securities 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.
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate
adjustments shall be made to (i) the total number of Option Shares subject to
this option, (ii) the number of Option Shares for which this option is to be
exercisable from and after each installment date specified in the Grant
Notice and (iii) the Option Price payable per share in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder,
provided that no adjustment shall be made to the option or the shares
available under any option in connection with any exchange of common stock
issued to investors for Series A Preferred stock.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding,
then this option shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply and pertain to the number and class of
securities which would have been issuable to the Optionee in the consummation
of such Corporate Transaction had the option been exercised immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be made
to the Option Price payable per share, PROVIDED the aggregate Option Price
payable hereunder shall remain the same.
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8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions: (i) Execute and deliver to the Secretary of the Corporation a stock
purchase agreement (the "Purchase Agreement") in substantially the form of
EXHIBIT B to the Grant Notice; (ii) pay the aggregate Option Price for the
purchased shares in one or more forms approved under the Plan; and (iii) furnish
to the Corporation appropriate documentation that the person or persons
exercising the option, if other than Optionee, have the right to exercise this
option.
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at fair market value on the
Exercise Date; or
(ii) through a special sale and remittance procedure pursuant to which
the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate Option Price
payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation by
reason of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to effect the sale transaction.
C. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the Nasdaq National Market,
the fair market value shall be the closing selling price of one share of
Common
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Stock on the date in question, as such price is reported by the
National Association of Securities Dealers through its Nasdaq National
Market system or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the closing
selling price on the last preceding date for which such quotation exists
shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing
selling price per share of Common Stock on the date in question on the
stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
fair market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market, or
if the Plan Administrator determines that the value determined pursuant to
subparagraphs (i) and (ii) above does not accurately reflect the fair
market value of the Common Stock, then such fair market value shall be
determined in accordance with Section 260.140.50 of Title 10 of the
California Code of Regulations.
D. As soon after the Exercise Date as practical, the Corporation
shall mail or deliver to Optionee or to the other person or persons exercising
this option a certificate or certificates representing the shares so purchased
and paid for, with the appropriate legends affixed thereto.
E. In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of Option Shares
upon such exercise shall be subject to compliance by the Corporation and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the
Corporation's Common Stock may be listed at the time of such exercise and
issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the
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Corporation in order for it to comply with the applicable requirements of
Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
12. LIABILITY OF CORPORATION.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
14. LOANS. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect
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to any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL. The grant of this option is subject to
approval of the Plan by the Corporation's shareholders within twelve (12) months
after the adoption of the Plan by the Board of Directors. NOTWITHSTANDING ANY
PROVISION OF THIS AGREEMENT TO THE CONTRARY, THIS OPTION MAY NOT BE EXERCISED IN
WHOLE OR IN PART UNTIL SUCH SHAREHOLDER APPROVAL IS OBTAINED. In the event that
such shareholder approval is not obtained, then this option shall thereupon
terminate in its entirety and the Optionee shall have no further rights to
acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
the event this option is designated an incentive stock option in the Grant
Notice, the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee ceases to be an Employee for any reason other
than death or permanent disability (as defined in Paragraph 5) or (ii) more than
one (1) year after the date the Optionee ceases to be an Employee by reason of
permanent disability.
B. Should this option be designated as immediately exercisable in
the Grant Notice, then this option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments
in the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to
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the extent) the aggregate fair market value (determined at the Grant Date) of
the Corporation's Common Stock for which such installment first becomes
exercisable hereunder will, when added to the aggregate fair market value
(determined as of the respective date or dates of grant) of the Corporation's
Common Stock for which one or more other incentive stock options granted to
the Optionee prior to the Grant Date (whether under the Plan or any other
option plan of the Corporation or any parent or subsidiary corporation) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate.
19. WITHHOLDING. Optionee hereby agrees to make appropriate
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
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