DIRECTOR’S ANNUAL RESTRICTED STOCK GRANT
Exhibit
10.5
DIRECTOR’S
ANNUAL RESTRICTED STOCK GRANT
________,
______
Mr.
____________________
_______________________
_______________________
Re: Stock Award
Dear Mr.
_________________:
As
consideration for your valuable services as a Non-Employee Director of Xxxxxxx
Industries, Inc. (the "Company"), and per the Stock Awards section of the
amended 1987 Stock Option Plan, you are hereby granted a Stock Award for
_________ shares of the Company's Common Stock, fully paid and non-assessable
(the "Shares"). Concurrently with this letter, the Company has
registered a certificate for the Shares in your name and will deposit the
certificate with the Company. You shall have all of the rights of a
shareholder with respect to the Shares, including the right to vote and to
receive all dividends or other distributions paid or made with respect to the
Shares. However, at any and all times prior to ____________,
________, the Shares (and any securities of the Company which may be issued with
respect to such Shares by virtue of any stock split, combination, stock dividend
or recapitalization) shall be subject to the following
restrictions:
(i) Unless
and until the date of a Change in Control, your death, Disability or Retirement,
the Shares shall not be sold, exchanged, assigned, transferred or otherwise
disposed of.
For these
purposes a "Change in Control" shall have the meaning set forth in Exhibit A
attached hereto.
"Disability"
shall have the meaning ascribed to such term in Section 105(d) of the Internal
Revenue Code of 1986, or any successor provision.
"Retirement"
shall mean retirement from the Board at any time at or after age 65, or
retirement at any time with the consent of the Board.
(ii) In
the event of your termination from the Board of Directors by the Company for any
reason other than your death, Disability or Retirement, including resignation or
discharge with or without cause, all of the Shares then subject to above
restrictions shall be forfeited, and transferred to the Company without
consideration to you, your executor, administrator, personal representative or
heirs (the "Representative").
In the
event of the occurrence of any event listed in paragraph (i) or the lapse of
time, the restrictions shall lapse and have no further force or effect and
certificates representing Shares as to which the restrictions have lapsed, shall
be delivered by the Company to you or your Representative.
The grant has
been reported to the SEC on a
Form 4. I have enclosed a copy for your records.
Finally,
you should be aware that the grant of a Stock Award will require you to recognize additional
compensation income for federal income tax purposes since the Award is
being granted in connection with your performance of services for the
Company. However, since the shares which have been issued in
connection with your Stock Award are non-transferable and subject to forfeiture
in the event of your termination as director (other than as a result of your
death, Disability, or Retirement), your recognition of income will
be deferred until the first date upon which the shares are either freely
transferable or are no longer subject to forfeiture. Specifically,
you will not recognize any income in connection with your Stock Award until the
restriction period lapses on ___________, ______, or, if earlier, upon a Change
in Control or your termination of employment as a result of your death,
Disability, or Retirement (the “compensation event”). The amount of
income will equal the fair market value of the Award shares at the time of the
compensation event; appreciation subsequent to the compensation event will be
eligible for capital gain treatment when the Award shares are ultimately
disposed of. Note that you will not be treated as the tax owner of
the Award shares prior to the compensation event. As a result, any
dividends which are paid with respect to such shares prior to the compensation
event will be taxable to you as additional compensation income.
Notwithstanding the above, you
may make
an election under
Section 83(b) to be taxed in the year the Award shares are issued, _____ instead
of _____. If the election is made, you will recognize ordinary
compensation income in the year of issuance in an amount equal to the fair
market value of the Award shares ($XXXXXXX) on the date of granting, __________,
______; future appreciation will be eligible for capital gain treatment when the
shares are ultimately disposed of. The Section 83(b) election must be
made within 30 days after granting of the Award shares, which is ___________,
_____. If you make this election, no additional tax
consequences will arise as the restrictions lapse. However, if you
make this election and subsequently forfeit the Award shares, you will not be
entitled to recoup any taxes paid in connection with such election. I
have enclosed a sample letter to the IRS and the Form of Election to use if you
chose to make the election. This must be done before
______________, _____. YOU SHOULD CONSULT WITH YOUR PERSONAL TAX
ADVISOR REGARDING WHETHER OR NOT A SECTION 83(b) ELECTION SHOULD BE
MADE.
Please
contact me with any questions you may have regarding the award and to arrange
for further documentation of your award.
Sincerely,
____________________
Title
____________________
Enclosures
EXHIBIT A
A "Change in Control" shall be
deemed to have occurred if (i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act), other than the Company or an
employee benefit plan sponsored by the Company, becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more (or if
a person is permitted to own a higher percentage under the Company’s Rights
Agreement, dated March 21, 2006, amended on May 18, 2007, and subsequently
amended on March 10, 2008, as the same may be amended from time to time, such
higher percentage as to such person) of the combined voting power of the
Company’s then outstanding securities ordinarily having the right to vote at
elections of directors (excluding an acquisition of such securities directly
from the Company), (ii) during any period of two consecutive years individuals
who at the beginning of the two-year period were members of the Board cease for
any reason to constitute at least a majority of the Board (individuals with such
two years of service being the “Continuing Directors”), (iii)
there shall be consummated (A) any consolidation, merger, or reorganization of
the Company in which the Company is not the surviving or continuing corporation
or pursuant to which shares of Common Stock would be converted into or exchanged
for cash, securities, or other property, other than a consolidation, merger, or
reorganization of the Company in which the holders of capital stock of all
classes of the Company (including Common Stock) immediately prior to the
transaction have, directly or indirectly, an ownership interest in securities
representing a majority of the combined voting power of the outstanding voting
securities of the surviving entity immediately after the transaction, or (B) any
sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, other than any such transaction with entities in which the holders of
the Company’s then outstanding capital stock of all classes, directly or
indirectly, have an ownership interest in securities representing a majority of
the combined voting power of the outstanding voting securities of such entities
immediately after the transaction, (iv) a change occurs of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A, promulgated under the Exchange Act or any successor disclosure
item, or (v) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; provided, however, that any
occurrence described in (i) through (iv) approved by the affirmative vote of a
majority of the Continuing Directors, shall not constitute a Change in Control
to the extent so provided by the affirmative vote of a majority of those
Continuing Directors.
