EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement") is made and executed
this 25th day of March,1999, by and between SETECH, Inc., a Delaware
corporation (the "Company") and Xxxxxx X.Xxxxx, an individual and resident
of Brentwood, Tennessee ("Executive").
IN CONSIDERATION of the mutual undertakings of the parties set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive
hereby agree as follows:
1. Employment. The Company hereby employs Executive, and Executive
hereby accepts employment with the Company, on the terms and conditions
hereinafter set forth.
2. Term. The initial term of this Agreement shall commence and
shall be effective as of March 25, 1999 (the "Effective Date") and shall
extend from that date for a period of five years, unless earlier terminated
as provided in this Agreement (the "Initial Employment Term"). The Initial
Employment Term shall automatically be extended for successive one year
periods (the Initial Employment Term and all extensions thereafter shall
sometimes hereinafter be referred to as the "Employment Term") unless on or
before a date that is 90 days prior to the expiration of the Employment Term
either the Company or Executive shall have given written notice to the other
of its or his intention not to further extend the Employment Term, in which
case in this Agreement shall expire and terminate at the end of the initial
or extended Employment Term.
3. Nature of Duties and Responsibilities. During the Employment
Term, Executive shall be employed by the Company as its Chief Operating
Officer and shall have such duties, powers and authority as generally inure
to those offices. Executive shall have the principal authority and
responsibility for managing the day-to-day business and affairs of the
Company. Executive shall report to and take direction from the Chief
Executive Officer of the Company and its Board of Directors.
4. Extent of Services. Executive shall devote his full time,
attention, skills and energies during the Employment Term to the business of
the Company. During the Employment Term, Executive shall not be engaged in
any other business activity that conflicts with or detracts from his duty to
the Company or with the business of the Company, whether or not such business
activity is pursued for gain, profit or other pecuniary advantage.
Notwithstanding the foregoing, Executive may, at his option, devote
reasonable time and attention to civic, charitable or social organizations as
he deems appropriate. Furthermore, Executive may provide consulting services
not in excess of 10 hours per calendar year to MSC Direct Industrial Company,
Inc., through April 30, 2002, so long as such does not conflict with the
remaining material terms of this agreement.
5. Location--Travel. The permanent place of employment of
Executive shall be the corporate headquarters of the Company located in the
greater Nashville, Tennessee area. Executive shall not be required to
relocate his place of employment at any time during the Employment Term
without his prior consent, which consent may be withheld by Executive for any
reason he deems appropriate. Executive will be required to conduct extensive
domestic and international travel in the course of the performance of his
duties on behalf of the Company. All travel arrangements shall be either
provided by or arranged through the Company. Domestic air travel shall be
via coach class on the best fare basis available; international air travel
shall be via business class. Executive may upgrade to First Class at his
sole cost and expense. All travel related awards (i.e. "frequent flyer" or
similar award programs) shall be the sole property of the Executive. Hotel
accommodations shall be business class or the equivalent. All out-of-pocket
travel expenditures shall be promptly reimbursed to the Executive in
conformity with the Company's standard policy for reimbursements to officers
upon submission of vouchers prepared in accordance with applicable
regulations of the Internal Revenue Service
6. Compensation.
(a) For all services rendered by Executive under this Agreement, the
Company shall compensate Executive at the annual base rate of Two Hundred
Sixty Two Thousand Dollars ($262,000.00) ("Executive's Base Salary").
(b) Executive's Base Salary may be adjusted upward for each year of
the Employment Term after the first year by an amount determined by the
Company's Board of Directors in its sole discretion. Executive is not
entitled to any guaranteed annual increase in Executive's Base Salary.
(c) During the Employment Term, Executive shall be eligible for and
shall participate in any bonus program, plan or arrangement (whether formal
or informal) generally adopted or made available by the Company with respect
to its officers or senior management personnel, and the participation by
Executive in any such program, plan or arrangement shall be upon terms and
conditions (including without limitation the computation of amounts)
substantially similar to those applicable to any other participant in such
programs, plan or arrangement; provided, that the Company may specify or
require performance criteria unique to Executive. Nothing in this Section
6(c) shall be construed so as to require the Company to adopt any bonus
program, plan or arrangement.
(d) The Company shall continue to pay Executive his compensation
during any period of physical or mental incapacity or disability, but shall
not be obligated to pay Executive any compensation for any continuous period
of physical or mental incapacity or disability after the 180th day of such
period.
(e) During the Employment Term, the Company shall pay the reasonable
expenses incurred by Executive (based on business development objectives and
within limits that may be established by the Company's Board of Directors) in
the performance of his duties under this Agreement (or shall reimburse
Executive on account of such expenses paid directly by Executive) promptly
upon the submission to the Company by Executive of appropriate vouchers
prepared in accordance with applicable regulations of the Internal Revenue
Service
7. Company Loan
(a) To induce Executive to accept employment with the Company and to
enter into this Agreement, the Company shall, on the Effective Date, make a
loan to Executive in the principal amount of $460,000.00 (the "Loan"). The
indebtedness of Executive to the Company shall be evidenced by the Promissory
Note attached hereto as Exhibit A (the "Note"), which Loan shall be secured
by a security interest evidenced by a Security Agreement in the form attached
hereto as Exhibit B and as described in Section 9 hereof, and the execution
and delivery of the Note, Security Agreement and the Assignment (as defined
in Section 8(b)) by Executive is a condition precedent to the obligation of
the Company to make the Loan. The Loan shall be repaid by Executive as
provided in the Note and as further provided in this Agreement.
(b) Provided that Executive is employed by the Company and this
Agreement remains in effect on each such date, the Company shall, on each of
the first through sixtieth months from the Effective Date, forgive and
release Executive from the obligation to pay to the Company the installment
of principal and all accrued interest due to the Company on such date under
the terms of the Note. It is the intention of the Company that, in the event
Executive remains continuously employed by the Company during the Initial
Employment Term, Executive will have no obligation to the Company to repay
any part of the Loan.
(c) In the event that the employment of Executive is terminated by
the Company without cause as provided in Section 14(b) or in the event of
termination for disability as provided in Section 14(d), the entire
indebtedness of Executive to the Company in connection with the Loan shall
automatically be released and discharged as of the effective date of
termination and Executive shall thereafter have no further liability or
obligation under the terms of the Note.
(d) The Company and the Executive recognize that the forgiveness of
indebtedness provided in Sections 7(b) and 7(C) will constitute ordinary
income taxable to Executive, and Executive shall be responsible for the
payment of all taxes associated therewith.
(e) In the event that: (i) Executive voluntarily resigns prior to
the expiration of the Initial Employment Term as provided in Section 14(e);
(ii) the employment of Executive is terminated by the Company for cause as
provided in Section 14(a); (iii) Executive dies; or (iv) Executive is
terminated pursuant to Section 14(d), all outstanding indebtedness of
Executive to the Company under the terms of the Note shall be accelerated and
shall immediately become due and payable in full.
8. Life Insurance
(a) Until the expiration or termination of the Initial
Employment Term the Company shall purchase and maintain one or more life
insurance policies on the life of Executive in an aggregate face amount of
$500,000.00. The insurance policies shall be put in force on or before the
Effective Date. The Company shall be the sole owner of all such policies. The
premium cost of such policies paid by the Company shall be regarded for tax
purposes as a benefit of employment to Executive. Executive may from time to
time designate the death beneficiary or beneficiaries of the policies, and at
the conclusion of the Initial Employment Term, the Company shall assign its
ownership as directed by Executive. The obligations of the Company under this
Section 8(a) shall be limited to the timely payment of all premium payments
required of it and the payment by the insurers of the death benefits
contemplated hereunder shall be at all times be subject to the terms,
conditions, restrictions and limitations set forth in each insurance policy
purchased by the Company or as otherwise provided by the Employee Retirement
Income Security Act of 1976 or similar law.
(b) On or before the Effective Date, Executive and his
beneficiaries shall execute one or more assignments of life insurance
proceeds (collectively, the "Assignment"), in form and substance satisfactory
to the Company, to secure the obligations of Executive to repay the Loan as
provided under the terms of the Note and this Agreement.
9. Security For Loan. The Loan shall be fully secured by the
Assignment and by the Security Agreement, which shall grant a security
interest to the Company on all of the Options and Stock described in Section
11(b) hereof, and all provisions of the perfection of the security interest
must be satisfactory in all respects to the Company and its counsel.
10. Vacation. Executive shall be entitled to four weeks of paid
vacation during each year of the Employment Term. Vacation not used during
any year of the Employment Term may not be carried forward to a subsequent
year.
11. Stock Options.
(a) On the Effective Date, but subject to the prior
compliance by Executive with the provisions of Section 11(b), Executive shall
be granted an option to purchase 135,000 shares of $.01 par value voting
common stock (the "Stock") of the Company (the "Option") pursuant to the
terms, conditions and restrictions of the Company's Incentive Stock Option
Plan, a copy of which has been provided to Executive prior to the execution
of this Agreement. The Option shall be further subject to the terms and
conditions of a separate Option Agreement between the Company and Executive,
effective as of the Effective Date, and such Option Agreement shall contain
the terms and conditions set forth in Exhibit C hereto.
(b) On or before the Effective Date, Executive shall
execute and deliver to the Company the Security Agreement hereinabove
described, under the terms of which Executive shall pledge and grant to the
Company a security interest in the Option and all shares of the Company's
stock acquired pursuant to the exercise of the Option to secure the
obligations of Executive to repay the Loan as provided under the terms of the
Note and this Agreement.
(c) After the first annual anniversary of the Effective
Date, but not before, Executive shall become eligible to participate in each
stock option or stock award plan or program then or thereafter maintained by
the Company, and Executive shall thereafter participate in each such plan or
program to the extent, and upon such terms and conditions, as are generally
applicable to other key management personnel of the Company.
12. Other Benefits. In addition to the benefits described herein,
Executive shall be entitled to and eligible for group medical and disability
insurance coverage and any other fringe benefits that may from time to time
be available to other salaried employees and senior executives of the
Company. Executive may participate in any pension, profit sharing or other
employee benefit plan of the Company or in which the Company participates.
Any and all such benefits provided in this Section 12 shall terminate on the
expiration or earlier termination of this Agreement, except as otherwise
required by law or provided in this Agreement.
13. Tax Withholding. With respect to all forms of compensation
and benefits to be provided by the Company to Executive under the terms of
this Agreement, the Company shall be entitled to deduct and withhold from
Executive all income, employment, payroll and other taxes and similar amounts
required by applicable law, rule or regulation of any appropriate governmental
authority.
14. Termination.
(a) Termination for Cause. Prior to the end of the
Initial Employment Term or extended term of this Agreement, the Company may
terminate this Agreement for cause, as provided below. In such event, the
Company shall pay to Executive all accrued but unpaid compensation (excluding
any bonus) earned to the effective date of termination, and the Company shall
thereafter have no further liability hereunder to Executive. The Company may
terminate Executive for cause without notice in the event that Executive
(i) has committed any act of misconduct or dishonesty that materially relates
to the business of the Company; (ii) is either convicted of any felony (as
defined by the Laws of the State of Tennessee) or is convicted of any other
crime the conviction of which would in any way materially affect the
Executive's ability to perform his duties; (iii) breaches any provision of
this Agreement, or any representation or warranty of Executive as is set
forth in Section 19 is not true; (iv) fails to reasonably and timely follow
the instructions provided to Executive by the board of Directors or the Chief
Executive Officer of the Company; (v) fails to materially comply with any
established policy or procedure of the Company (including those dealing with
sexual harassment); (vi) or is repeatedly absent from his duties without
authorization.
(b) Termination Without Cause. Prior to the end of the
stated or extended term of this Agreement, the Company may terminate this
Agreement, other than as provided in Section 14(a), upon 10 days prior
written notice to Executive. In such event, the Company shall pay to
Executive (i) all accrued but unpaid compensation (including any bonus
previously declared or determined) earned to the effective date of
termination, plus (ii) the payment to Executive of the Executive's Base
Salary (as existed as of the date of termination) for the remainder of the
Initial Employment Term, payable monthly.
(c) Death of Executive. In the event Executive's death
occurs during the Initial Employment Term or extended term of this Agreement,
the Company shall pay to the estate of Executive all accrued but unpaid
compensation (including any bonus previously declared or determined) earned
to the date of death.
(d) Disability of Executive. In the event that Executive has
been at any time unable due to any physical or mental illness, injury or
condition to adequately perform the essential functions of the duties
required of him under the terms of this Agreement for a consecutive period of
more than 180 days, the Company may terminate this Agreement, in which case
the Company shall pay to Executive or his legal guardian all accrued but
unpaid compensation (including any bonus previously declared or determined)
earned to the date of such termination. Any determination regarding the
ability of Executive to adequately perform the essential functions of the
duties required of him shall be made by a single physician having particular
expertise with respect to the specific condition or conditions affecting
Executive, and such physician shall be selected by Executive from a list of
three such physicians compiled by the Company.
(e) Voluntary Resignation. Executive may, upon 30 days
prior written notice to the Company, voluntarily resign and thereby terminate
this Agreement at any time prior to the expiration of the stated or extended
term of this Agreement. In such event, the Company shall pay to Executive all
accrued but unpaid compensation (excluding any bonus) earned to the effective
date of resignation.
(f) Effect of Termination. Other than as expressly provided
in this Agreement, all forms of compensation and benefits provided to
Executive herein shall terminate on the expiration or earlier termination of
the Employment Term.
15. Restrictive Covenant.
(a) Executive hereby agrees to a minimum period for the
Restrictive Covenant as is hereinafter described of seven (7) years from the
date hereof. Executive hereby covenants and agrees that for such period and
for the duration of the Employment Term and for a period of two years
following his termination of employment for any reason (whether during the
Initial Employment Term or thereafter), Executive shall not, directly or
indirectly anywhere in the world: (i) own, manage, operate, control, be
employed by, consult with, advise, provide financial assistance to,
participate in or be connected in any manner with the operation, ownership,
management or control of any enterprise that, either directly or through one
or more affiliated entities, provides products or services which compete with
those of the Company, including but limited to integrated supply services to
any manufacturing operation at any location throughout the world; (ii) make
any attempt to solicit the integrated supply business of any customer of the
Company (other than on behalf of the Company), or make any attempt to
discourage any customer of the Company from doing business with the Company;
or (iii) induce or encourage any employee of the Company to leave the employ
of the Company. Notwithstanding the foregoing, Executive may own, directly or
indirectly, solely as an investment, securities of any publicly-traded
corporation or other business entity, provided that Executive does not own,
directly or indirectly, more than one percent of any class of voting
securities of any such corporation or other business entity which has as its
business integrated supply services or other businesses then being conducted
by the Company. The foregoing covenants and agreements of Executive are
referred to herein as the "Restrictive Covenant."
(b) The Company may further extend the non-compete period
herein provided for a period of up to two (2) additional years by the payment
to Executive of the an amount equivalent to the Executive's Base Salary
received by him during his last full year of employment prior to termination,
to be paid annually for each of such two annual periods on a monthly basis
(less all applicable withholding taxes). Upon the Company's discontinuance
of such payments, the non-compete provisions hereof for such extended period
shall automatically terminate.
(c) Executive has carefully read and considered the provisions
of the Restrictive Covenant and, having done so, agrees that the restrictions
set forth in this Section 15, including without limitation the time period of
restriction and the geographic area of restriction set forth above, are fair
and reasonable and are reasonably required for the protection of the
legitimate business and economic interests of the Company.
(d) Executive acknowledges that the Company's business is and
will be built upon the confidence of those with whom it conducts business and
that Executive will gain acquaintances and develop relationships by using the
good will of the Company. Executive also acknowledges that the Company's
business is and will be built upon the success of the Company in research,
development and marketing, and through the development of certain business
methods and trade secrets, and that Executive's position will give him
confidential knowledge of all aspects of the Company's business and internal
operations. In addition, Executive acknowledges that the Company's dealings
through Executive will give Executive confidential knowledge that should not
be divulged or used for his own benefit. Executive recognizes and agrees that
his violation of any provision of the Restrictive Covenant will cause
irreparable harm to the Company.
(e) In the event that, notwithstanding the foregoing, any of
the provisions of this Section 15 or any parts hereof shall be held to be
invalid or unenforceable, the remaining provisions or parts hereof shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable portions or parts had not been included herein. In the event
that any provision of this Section 15 relating to the time period and/or the
area of restriction and/or related aspects shall be declared by a court of
competent jurisdiction to exceed the maximum restrictiveness such court deems
reasonable and enforceable, the time period and/or area of restriction and/or
related aspects deemed reasonable and enforceable by such court shall become
and thereafter be the maximum restrictions in such regard, and the provisions
of the Restrictive Covenant shall remain enforceable to the fullest extent
deemed reasonable by such court.
16. Nondisclosure.
(a) Executive acknowledges that he will hold a position of
special trust and confidence with the Company, and from time to time
Executive will have access to trade secrets, confidential knowledge, data or
other proprietary information of the Company whether or not developed,
discovered or conceived by Executive (collectively, "Confidential
Information"). By way of illustration, but not limitation, Confidential
Information shall include, whether verbal or written, all customer lists,
prospective customer lists, trade secrets, databases, processes, business
methods, procedures, policies, specifications, operations criteria, computer
programs, business data disclosed to the Company by or for the benefit of the
Company's customers, marketing and business plans, budgets, unpublished
financial statements, licenses, information relating to the Company's
business contracts (including without limitation contracts with customers and
service providers), marketing strategies, and any other secret or
confidential matter relating or pertaining to the products, personnel,
services, sales or other business of the Company. Confidential Information
shall not include any of the foregoing information that is generally known by
the public.
(b) Executive covenants and agrees that he has a fiduciary
duty to the Company, and that during the Employment Term and at all times
thereafter, he will (i) hold the Confidential Information in strictest
confidence, (ii) not disclose any Confidential Information to any person,
firm, corporation or other entity, and (iii) not use Confidential Information
for his own personal benefit or for any other purpose not expressly
authorized by the Company. Executive also covenants and agrees that upon
request he shall return all business records in his possession or control
that in any way relate to the Company or the Confidential Information.
(c) Executive acknowledges that the provisions of this
Section 16 are an integral part of this Agreement and that the Company would
not agree to employ Executive but for the agreements of Executive set forth
herein. Executive acknowledges and agrees that all of the Confidential
Information described herein is valuable to the Company and, as a matter of
contract, should be protected as provided herein, notwithstanding the manner
in which any such Confidential Information might be regarded or protected
under general principles of law. Executive further acknowledges that any
unauthorized use of the Confidential Information by Executive, or any
disclosure of the same to any third party, would be wrongful and would cause
irreparable harm to the Company.
17. Remedies. Executive agrees that in the event of any conduct
by Executive violating any provision of Section 15 or 16, the Company shall
be entitled, if it so elects, to institute and prosecute proceedings in any
court of competent jurisdiction, either at law or in equity, to obtain
damages for such conduct, to enforce specific performance of such provision,
to enjoin Executive from such conduct, to obtain an accounting and repayment
of all profits, compensation, commissions, remuneration or other benefits
that Executive directly or indirectly has realized and/or may realize as a
result of, growing out of, or in connection with any such violation, or to
obtain any other relief, or any combination of the foregoing, that the
Company may elect to pursue. In the event of the necessity of litigation to
enforce the provisions of Sections 15 and 16 hereof, the parties hereto agree
that the party which substantially prevails in such litigation shall be
entitled to have all of its costs of such litigation, to include its
reasonable attorneys' fees, reimbursed to it by order of the court in
addition to all other remedies to which it would otherwise be entitled.
18. Ownership of Work Product. Executive covenants and agrees
that all work product created by Executive during the course of Executive's
relationship with the Company, including without limitation all inventions,
creations, discoveries, business methods, business procedures, trade secrets,
writings, designs, illustrations, software and computer programming, shall be
work for hire prepared by Executive within the scope of Executive's
employment by the Company. The Company shall exclusively own all of the
rights comprised in any patent, trademark or copyright arising from such work
product. Without limiting the foregoing, Executive hereby assigns to the
Company all of Executive's worldwide right, title and interest in and to any
work product hereafter created by Executive at any time while employed by the
Company. Executive covenants, agrees, represents and warrants that any work
product created by Executive shall be original to Executive and that the use
by the Company thereof will not violate the rights of any other person or
entity.
19. Representations of Executive. Executive represents and
warrants to the Company as follows:
(a) Executive has the power and authority to enter into
this Agreement and to perform the duties and responsibilities required of him
herein without the consent or approval of any other person;
(b) With the exception of a limited non-competition
agreement with MSC Industrial Direct Company, Inc. (a copy of which has been
provided to the Company), Executive is not presently a party to, the subject
of or otherwise bound or affected by any contract, agreement, understanding,
arrangement or policy that contains or includes any restriction or other
provision regarding the ability or inability of Executive to engage in any
form of employment or business activity or to use or disclose any information
known to Executive;
(c) Neither the execution and delivery of this Agreement
by Executive nor the performance by Executive of the duties and
responsibilities required of him herein will conflict with or result in a
breach of, the terms, conditions or provisions of, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, any contract, agreement or other instrument to which
Executive is a party or by which he may be bound or affected;
(d) All of the information, responses and disclosures set
forth in the Directors' and Officers' Questionnaire completed and submitted
by Executive to the Company, a copy of which is attached as Exhibit D hereto,
are true, correct and complete in all respects, and there are no facts,
events, occurrences, circumstances or additional information known to
Executive that should be disclosed so as to make any of such information,
responses or disclosures not incomplete or misleading.
(e) This Agreement constitutes the legal, valid and
binding obligation of Executive enforceable in accordance with its terms.
20. Waiver of Breach. The waiver by either party of a breach
of any provisions of this Agreement by either party shall not operate or be
construed as a waiver of any subsequent breach by either party.
21. Successors. This Agreement shall be binding upon and inure
to the benefit of the heirs, successors and permitted assigns of the parties
hereto. This Agreement may not be assigned by Executive or by the Company
without the prior written consent of the other, except that the Company may
assign this Agreement to any business entity that acquires the Company or its
business operations and thereafter conducts the business of the Company.
22. Construction. This Agreement shall be construed under and
enforced in accordance with the internal laws of the State of Tennessee.
23. Venue. The parties agree that the exclusive venue for any
litigation arising hereunder shall be Davidson County, Tennessee.
24. Advice of Counsel. Executive agrees that he has participated
in the negotiation and drafting of this Agreement, and the fact that the
initial draft hereof has been prepared by Company's counsel shall not cause
any provision hereof to be construed against the Company by reason of such
fact. Executive has had the advice of his own independent counsel, and fully
understands the provisions hereof, including the fact that this Agreement
contains a provision relating to the waiver of a trial by jury.
25. Entire Agreement. This Agreement is the entire agreement of the
parties and supersedes all prior agreements and understandings, written or
oral. This Agreement shall not be amended or modified except in writing
executed by both parties.
26. Notice. For the purposes of this Agreement, notices shall be
deemed given by personal delivery or when mailed by United States certified
or registered mail, return receipt requested, postage prepaid, addressed in
the case of the Company to its principal executive office; or in the case of
Executive to the address shown on the signature page of this Agreement.
Either party may change such address by giving the other party notice of such
change in the aforesaid manner, except that notices of changes of address
shall only be effective upon receipt.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SETECH, INC
By:______________________________________
Xxxxxx X. Xxxxxxxx,
Chief Executive Office
EXECUTIVE
_________________________________________
Xxxxxx X. Xxxxx
000 Xxxxxx Xxxx
Xxxxxxxxx XX 00000
EXHIBIT A
PROMISSORY NOTE
March 25, 1999 $460,000.00
FOR VALUE RECEIVED, XXXXXX X. XXXXX (the "Borrower"), promises and agrees to
pay to the order of SETECH, INC., a Delaware corporation, its successors,
assigns or any subsequent holder of this Promissory Note (the "Lender") at
Lender's offices in Tennessee, or at such other place as may be designated in
writing by Lender, in lawful money of the United States of America in
immediately available funds, the principal sum of Four Hundred Sixty Thousand
($460,000.00), together with interest thereon and other amounts due as
provided below.
This Note is issued pursuant to that certain Executive Employment Agreement
dated as of March 25, 1999 by and between Borrower and Lender (as it may be
modified, amended or restated from time to time, the "Employment Agreement").
Any term not otherwise defined in this Note shall have the same meaning as in
the Employment Agreement. Reference is made to the Employment Agreement,
which, among other things, provides for forgiveness of certain debt evidenced
hereby in certain circumstances and upon certain terms and conditions.
All advances hereunder shall bear interest from the date of such advance
until such amount is due and payable (whether on any payment date, at the
Maturity Date, by acceleration, or otherwise), at a rate of interest equal to
(4.72%) per annum. Interest for each year shall be computed on the basis of
a year of 365 days for the actual number of days elapsed.
This Note shall be repaid as follows: Beginning on April 30, 1999 and
continuing thereafter on the last business day of each consecutive calendar
month through the Maturity Date (hereafter defined) (each such last business
day in a month being referred to herein as a "Payment Date"), Borrower shall
pay to Lender principal payments of $7,666.67 each, plus all then-accrued
interest under this Note, and on March 25, 2004 (the "Maturity Date"),
Borrower shall pay to Lender all remaining outstanding principal, plus any
and all accrued and unpaid interest and all other amounts due hereunder.
Provided, however, that if on any Payment Date the Employment Agreement is
then in effect and all terms, conditions and obligations described in the
Employment Agreement have been fulfilled by Executive, and if Executive is
then living and is employed by the Lender on such Payment Date and has not
given notice of Executive's intended cessation of employment with Lender,
then on such Payment Date, Lender shall forgive the scheduled principal
payment to be made on such Payment Date, together with the interest due on
such date for the immediately-preceding month. Said forgiveness must be
evidenced by a writing satisfactory to Lender. Additionally, in the event
the Employment Agreement is terminated by the Company pursuant to Section
14(b), the indebtedness hereby evidenced shall be deemed forgiven as of the
date of termination thereunder.
This Note is secured by, among other things, the collateral and property
described in that certain Security Agreement executed by Borrower in favor of
Lender, dated as of even date herewith (herein, as it may be amended and/or
restated from time to time, referred to as the "Security Agreement"), and
that certain Assignment of Life Insurance Policy as Collateral executed by
Borrower in favor of Lender, dated as of even date herewith (as it may be
amended from time to time, referred to as the "Insurance Assignment") (the
Security Agreement and the Insurance Assignment are referred to collectively,
jointly, severally and individually herein as the "Security Agreements"), and
other documents and items related thereto. All above-referenced documents are
collectively referred to as Collateral Documents.
Lender and Borrower intend to conform strictly to applicable usury laws as
presently in effect. Accordingly, Borrower and Lender agree that,
notwithstanding anything to the contrary herein or in any agreement executed
in connection with or as security for this Note, the sum of all consideration
that constitutes interest under applicable law which is contracted for,
charged, or received hereunder shall under no circumstance, including without
limitation any circumstance in which the Note has been accelerated or
prepaid, exceed the maximum lawful rate of interest permitted by applicable
law. Any excess interest shall be credited on this Note or, if this Note
shall have been paid in full, refunded to Borrower, by the holder hereof.
Borrower shall pay a late charge equal to five percent (5%) of any payments
of principal and/or interest that are paid after the due date thereof, to
cover the extra expenses involved in handling delinquent payments (the "Late
Charge"); provided that in no event shall the Late Charge result in the
payment of interest in excess of the maximum rate or interest permitted by
applicable law.
Following the occurrence of any Event of Default (as defined below), whether
or not any notice of such default has been delivered, principal and unpaid
interest shall bear interest (both before and after judgment) until paid at a
rate of interest equal to the higher or greater of: (a) the Applicable
Formula Rate (as defined in Tennessee Code Annotated 47-14-102(2)); or (b)
such other lawful rate of interest permitted to be charged by other
applicable laws or regulations, as amended or enacted from time to time
(the "Default Interest").
All amounts received for payment under this Note shall at the option of
Lender be applied first to any unpaid expenses due Lender under this Note or
the Employment Agreement or under any other documents evidencing or securing
the obligations of Borrower to Lender, then to the unpaid Late Charge, then
to the unpaid Default Interest, then to all other accrued but unpaid interest
due under this Note and finally to the reduction of outstanding principal due
under this Note.
Time is of the essence of this Note.
In the event that any of the following occurs (any of the following events
being an "Event of Default" hereunder): (i) there occurs any breach of any
promise, representation, warranty, agreement or covenant made in, or should
any other breach, default or Event of Default occur under, this Note or the
Employment Agreement, or either of the Security Agreements, and/or any of the
other Collateral Documents, as any of the foregoing may from time to time be
amended, modified, extended, renewed, increased, decreased and/or restated,
and all changes in form thereof; or (ii) the Employment Agreement is
terminated prior to the end of the Initial Employment Term for any reason
other than by virtue of the Company's action under Section 15(b); or (iii)
Borrower breaches any promise made in this Note or in the Employment
Agreement or either of the Security Agreements; or (iv) any bankruptcy case,
assignment for the benefit of creditors, receivership or other state, federal
or foreign insolvency proceeding is commenced with respect to the Borrower or
any guarantor of this Note. Upon the occurrence of an Event of Default under
Section (iv) above, the entire indebtedness evidenced hereby shall
automatically be immediately due and payable, without notice, and upon the
occurrence of any other Event of Default, at the option of Lender, the entire
indebtedness evidenced hereby shall become due, payable and collectible then
or thereafter, without notice, as Lender may elect, regardless of the
Maturity Date.
Borrower waives presentment for payment, protest, notice of protest, notice
of nonpayment of this Note, demand and all legal diligence in enforcing
collection, and any discharge or defenses based on suretyship or impairment
of collateral; and hereby expressly consents to (i) any and all delays,
extensions, renewals or other modifications of this Note or any waivers of
any term hereof, (ii) any release, substitution or exchange of any security
for the payment hereof, (iii) any failure to act on the part of Lender, and
(iv) any indulgence shown by Lender from time to time (without notice or
further assent from any of the Obligors) and hereby agree that no such
action, failure to act or failure to exercise any right or remedy by Lender
shall in any way affect or impair the obligations of the Borrower.
Borrower irrevocably consents to the service of process of any such courts in
any such action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, return receipt requested, to Borrower at
the address opposite its signature below or to such other address as Borrower
may have furnished to Lender in writing, and agrees that such service shall
become effective thirty (30) days after such mailing. However, nothing
herein shall affect the right of Lender or Borrower to serve process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against Lender or Borrower in any other jurisdiction.
EACH OF LENDER AND BORROWER HEREBY KNOWINGLY, WILLINGLY AND IRREVOCABLY
WAIVES ITS RIGHTS TO DEMAND A JURY TRIAL IN ANY ACTION OR PROCEEDING
INVOLVING THIS NOTE, ANY DOCUMENTS EXECUTED OR DELIVERED IN CONNECTION
HEREWITH INCLUDING WITHOUT LIMITATION THE EMPLOYMENT AGREEMENT AND/OR ANY OF
THE COLLATERAL DOCUMENTS OR ANY RELATIONSHIP BETWEEN BORROWER AND LENDER.
BORROWER AGREES THAT LENDER MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS
PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF BORROWER'S EXPRESS WAIVER OF
ITS RIGHT TO TRIAL BY JURY.
In any action to enforce this Note, Borrower hereby irrevocably and
unconditionally waives any and all rights under the laws of any state to
claim or recover any special, exemplary, punitive, consequential or other
damages other than actual direct damages.
Borrower shall pay, on demand, all costs and expenses (including court costs,
attorneys' fees and expenses) incurred by Lender in attempting to enforce or
collect this Note, protect or enforce its rights under this Note, the
Employment Agreement, or any of the other Collateral Documents, or protect or
collect on any security for the payment of this Note.
This Note has been executed and delivered in, and shall be governed by and
construed according to the laws of the State of Tennessee except to the
extent pre-empted by applicable laws of the United States of America. If any
provision of this Note should for any reason be invalid or unenforceable, the
remaining provisions hereof shall remain in full force and effect.
This Note may not be changed, extended or terminated except in writing signed
by Borrower and Lender. No waiver of any term or provision hereof shall be
valid unless in writing signed by Lender.
Executed as of the 25th day of March, 1999.
BORROWER'S ADDRESS
_____________________________ _______________________
Xxxxxx X. Xxxxx
EXHIBIT B
SECURITY AGREEMENT
1. Secured Debt. XXXXXX X. XXXXX ("Pledgor") hereby pledges and
grants a security interest in the collateral described below
("Collateral") to SETECH, INC. ("Lender"), to secure payment of the
following indebtedness, all whether now existing or hereafter arising
(the "Secured Debt"): (a) all indebtedness and obligations of Pledgor to
Lender evidenced by that certain Promissory Note dated as of March 25, 1999,
in the maximum principal amount of $460,000 executed by Borrower payable
to the order of Lender (together with all amendments, modifications,
extensions, replacements and substitutions thereto or therefor, the
"Note"); (b) all amounts now or in the future advanced to or for the account
of, or on behalf of, Borrower for the purposes of protecting the Collateral;
and(c) all costs and expenses incurred by Lender in collecting, enforcing or
protecting its rights with respect to the Collateral or the indebtedness
secured by the Collateral, including, but not limited to, reasonable
attorneys' fees.
2. Collateral. The Collateral consists of (a) all of Pledgor's
right,title and interest in and to all stock, securities and investment
property acquired by Pledgor, or as to which Pledgor has rights to acquire,
pursuant to Section 11 of the Employment Agreement (as such term is defined
in Section 7 (a) hereof), including without limitation any and all stock
acquired by Pledgor in connection with any of the provisions in Sections 11
(a), (b) or (c) of the Employment Agreement, and including without limitation
the 135,000 shares of common stock of Lender described in Section 11 (a) of
said Employment Agreement, and all stock, options associated therewith, and
all other rights, investment property, dividends, proceeds, amounts
and property in connection therewith, now existing and/or hereafter
acquired or arising in connection with any of the foregoing; and
(b) all of Pledgor's rights, title and interest in and to all life
insurance policies purchased with funds of the Lender insuring the life
of the Pledgor, including without limitation the life insurance policy
or policies described on Exhibit A hereto, and all proceeds thereof.
The Collateral includes without limitation (i) all instruments,
security entitlements, certificated securities, uncertificated securities,
securities accounts, financial assets, and other investment property,
as well as all cash, monies, credits and deposit accounts that may at any
time now or hereafter directly or indirectly be evidenced by, form a part of
or arise from any of the foregoing; (ii) all interest and amounts earned on
and/or arising in connection with the foregoing and all stock rights, rights
to subscribe, dividends, stock dividends, liquidating dividends, new
securities, and other property to which Pledgor may become entitled by
reason of the ownership of any of the foregoing; (iii) all insurance policy
proceeds; and (iv) all substitutes for and replacements and proceeds of the
foregoing.
3. Representations. Pledgor warrants and represents that:
(a) Pledgor is the sole and exclusive owner of the Collateral, free of any
lien, claim, encumbrance or restriction of any kind, other than the lien and
security interest in favor of Lender evidenced hereby; (b) Pledgor has the
right and capacity to pledge the Collateral and execute this Agreement;
(c) none of the Collateral constitutes "control stock" within the meaning of
applicable securities laws; (d) the address set forth below Pledgor's
signature hereto is Pledgor's residence; and (e) Pledgor will not use any
of the proceeds of the Secured Debt to purchase or carry margin stock, within
the meaning of Regulation U of the Federal Reserve Board. Pledgor waives any
rights of first refusal or other restrictions on the sale or transfer of the
Collateral.
4. No Liens or Sale; Trading Privileges. Pledgor agrees that, as
long as any Secured Debt remains outstanding, unless Pledgor shall have
received the prior express written consent of Lender, Pledgor shall not sell
or offer to sell or otherwise transfer, dispose of or encumber the
Collateral, or any interest therein. If Lender does consent (which Lender
is not obligated to do) to any dispositions of Collateral by Pledgor, Pledgor
agrees to simultaneously pay to Lender all income, employment, payroll and
other taxes and similar amounts required to be withheld by the Company from
Pledgor due to the forgiveness by Lender of certain indebtedness owed by
Pledgor to Lender, in connection with the Secured Debt.
5. Perfection. Upon Lender's request, and at Pledgor's sole expense,
Pledgor shall promptly execute, deliver and record any documents, instruments,
agreements and amendments, and take all such further action, as Lender may
reasonably deem desirable in obtaining the full benefits of this Agreement,
including financing statements or amendments under the Uniform Commercial
Code, all in form and substance satisfactory to Lender. Pledgor authorizes
Lender to file any such financing statement without the signature of Pledgor,
or with a copy or telecopy of Pledgor's signature, to the extent permitted
by applicable law, or to execute any financing statement or amendment
thereof on behalf of Pledgor as Pledgor's attorney-in-fact. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any promissory note or other instrument or any certificated
security that is not held by Lender, such note, instrument or certificate
shall be immediately pledged and delivered to Lender hereunder, duly endorsed
in a manner satisfactory to Lender. Pledgor will promptly notify Lender of
any change in Pledgor's name or address, and will cooperate in ensuring that
any action necessary or advisable to continue the perfection of the security
interests granted hereunder has been duly taken. Without limiting the
foregoing, the following items (all in form and substance satisfactory to
Lender) must be provided by Pledgor upon execution of this Agreement: UCC-1
financing statements describing the Collateral, executed by Pledgor and in
form appropriate to be filed in all applicable UCC filing offices as
designated by Lender.
6. Receipt of Collateral. Pledgor agrees to promptly exercise all
stock options available to Pledgor at the times such are exercisable, and
hereby authorizes and directs the Lender to have all shares that will be
issued as a result of Pledgor's stock options in the Lender certificated and
immediately delivered to the Lender, and Pledgor hereby pledges to Lender and
grants to Lender a lien and security interest therein under the terms and
subject to the defaults and remedies and other provisions of this Agreement,
and agrees to immediately furnish Lender on request of Lender stock powers
signed in blank and in form and substance satisfactory to Lender as Lender
may direct. Lender is hereby authorized and appointed as Pledgor's attorney-
in-fact to sign in Pledgor's name any stock powers related to the Collateral
as Lender may require. Any portions of the Collateral received by Pledgor in
violation of this Agreement shall remain subject to Lender's security
interest and lien hereunder, shall be immediately delivered to Lender, in the
same form as received except for any necessary endorsements, and pending such
delivery shall be held in trust for Lender by Pledgor and kept separate from
Pledgor's other assets.
7. Default. Any of the following events or conditions shall
constitute an "Event of Default" hereunder: (a) the Executive Employment
Agreement between Pledgor and Lender, dated as of even date herewith (the
"Employment Agreement"), is terminated prior to the end of the initial
Employment Term (as such term is defined in the Employment Agreement) for any
reason other than by virtue of the Company's action under Section 14(b) of
the Employment Agreement; or (b) Pledgor breaches any promise made in, or any
other breach, default or Event of Default occurs under, the Note or this
Pledge Agreement or the Executive Employment Agreement; or (c) any bankruptcy
case, assignment for the benefit of creditors, receivership or other state,
federal or foreign insolvency proceeding is commenced with respect to the
Pledgor; or (d) Pledgor is not employed with Lender at any time, or Pledgor
dies or becomes legally incompetent.
8. Remedies. Upon an Event of Default, Lender may declare the
entire principal amount of all the Secured Debt then outstanding, including
interest accrued thereon, to be immediately due and payable, without
presentment, demand, protest, notice of protest, or dishonor or other notice
of default of any kind, all of which Pledgor hereby expressly waives, and
Lender shall have and may exercise any or all of the rights and remedies of a
secured party under the Uniform Commercial Code as adopted in the State of
Tennessee (the "Code"), and as otherwise agreed herein or under any other
applicable law or any other agreement, including, without limitation, (a) the
right to immediately liquidate any and all Collateral; (b) the right to
transfer the Collateral to Lender or Lender's account, and/or to sell the
Collateral, all without notice of default first being given to Pledgor and
without the consent of Pledgor. Lender may apply the proceeds of the
Collateral toward payment of any costs and expenses and reasonable attorneys'
fees and legal expenses thereby incurred by Lender and toward payment of the
Secured Debt in such order or manner as Lender may elect. Pledgor agrees to
pay to Lender all expenses and charges (including reasonable attorneys' fees
and other legal fees and expenses) that Lender may incur in enforcing or
protecting its rights hereunder or with respect to the Secured Debt.
Without limiting the generality of the foregoing, it is expressly agreed that,
upon the occurrence of an Event of Default, Lender may take any or all of the
following actions: (x) cause the Collateral to be transferred to its name or
to the name of its nominee or nominees and thereafter to exercise with respect
to the Collateral all the rights, powers, and remedies of any owner;
(y) collect by legal proceedings or otherwise all dividends, interest,
principal payments, and other sums now or hereafter payable on account of the
Collateral and to hold the same as collateral, or apply the same to any of
the Indebtedness, with the manner and distribution of the application to be
in the sole discretion of Lender; (z) enter into any extension,
subordination, reorganization, deposit, merger, or consolidation agreement,
or any other agreement relating to or affecting the Collateral, and, in
connection therewith, deposit or surrender control of such Collateral, and/or
accept other property in exchange therefor and hold or apply such property or
money so received in accordance with the provisions of this Agreement. This
Agreement constitutes a stock power and/or bond transfer power, which is
hereby granted in favor of Lender, and Pledgor authorizes any and all
registrars, transfer agents, and issuer's officials to transfer any securities
and investment property included in the Collateral to the name of Lender or
its designee.
Pledgor acknowledges that no notice of sale will be required if the
Collateral is of a type customarily sold in recognized markets. Pledgor
agrees that, if any notice of sale or other disposition of the Collateral is
required by law, such notice shall be deemed reasonable notice of sale and
shall fully satisfy any requirement of giving of notice if it is mailed,
postage prepaid, or sent by telecopy, to Pledgor at least ten (10) days
before the time of the proposed sale or disposition.
Nothing contained herein shall be deemed to limit, delay or impair
Lender's right to immediately liquidate any Collateral, regardless of maturity
of any of the Collateral, following the occurrence of an Event of Default.
9. Impact of Regulations. Pledgor acknowledges that compliance with
the Securities Act of 1933 and the rules and regulations thereunder and any
relevant state securities laws and other applicable laws may impose
limitations on the right of Lender to sell or otherwise dispose of
securities included in the Collateral. For this reason, Pledgor hereby
authorizes Lender to sell any securities included in the Collateral in such
manner and to such persons as would, in the judgment of Lender, help to
ensure that the transfer of such securities will be given prompt and
effective approval by any relevant regulatory authorities and will not
require any of the securities to be registered or qualified under any
applicable securities laws. Pledgor understands that a sale under the
foregoing circumstances may yield a substantially lower price for such
Collateral than would otherwise be obtainable if the same were registered and
sold in the open market, and Pledgor shall not attempt to hold Lender
responsible for selling any of the Collateral at an inadequate price even if
Lender accepts the first offer received or if only one possible purchaser
appears or bids at any such sale. If Lender shall sell any securities
included in the Collateral at such sale, Lender shall have the right to rely
upon the advice and opinion of any qualified appraiser or investment banker
as to the commercially reasonable price obtainable on the sale thereof but
shall not be obligated to obtain such advice or opinion. Pledgor hereby
assigns to Lender any registration rights or similar rights Pledgor may have
from time to time with respect to any of the Collateral.
10. Lender's Limited Duties. Lender shall be under no duty to pursue
collection of any amount due on or under any of the Collateral, to realize on
Collateral, to collect principal, interest or dividends, to keep the same
insured, to make any presentments, demands or notices of protest in
connection with any of the Collateral, to monitor or act upon the maturity of
any of the Collateral, to avoid or prevent any early withdrawal penalties or
other penalties, or to preserve any rights against prior parties to any
instruments, contracts or securities included in the Collateral. Without
limiting the generality of the foregoing, Lender's duty with respect to the
Collateral shall be solely to use reasonable care in the custody and
preservation of any physical Collateral in Lender's possession, and Lender
shall be in no way liable to or responsible for any diminution in the value
of, or reduction in the proceeds realized from, the Collateral from any cause
whatsoever.
11. Miscellaneous. The captions herein are for convenience only,
and shall not limit or otherwise affect any of the terms hereof. All
references to any number or gender shall include all others, and all
references to documents and agreements shall also refer to amendments thereof.
The obligations of Pledgor are joint and several if more than one Pledgor
signs this Agreement. The provisions of this Agreement are intended to be
severable. All notices, requests, consents and other communications hereunder
shall be in writing, sent by first class registered or certified mail,
postage prepaid, by facsimile transmission, or by overnight second-day express
courier service of a nationally-recognized company, to the parties at their
respective addresses set forth at the beginning of this Agreement (and with
regard to Lender, to the attention of Xxxxxx Xxxxxxxx), or at such other
address as either party may designate by written notice to the other party in
accordance herewith. Pledgor's rights and obligation hereunder may not be
assigned or delegated. This Agreement is binding on the parties and their
respective heirs, successors and assigns. This Agreement contains the entire
agreement between Lender and Pledgor and supersedes all prior agreements and
understandings relating to the subject matter hereof. This Agreement may not
be changed or terminated orally, but may only be changed by an agreement in
writing signed by the party or parties against whom enforcement of any waiver,
change, modification, extension, discharge or termination is sought.
This Agreement is executed as of the ______ day of _____________________, 1999.
LENDER: PLEDGOR:
SETECH, INC.
By:
XXXXXX X. XXXXX
Title:
EXHIBIT A
Description Of Life Insurance Policies: [$500,000 life insurance policy with
standard terms]
EXHIBIT C
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
OPTION AGREEMENT
THIS OPTION AGREEMENT is made and entered into as of the 25th day of March,
1999 by and between SETECH, Inc. (the "Corporation") and Xxxxxx X. Xxxxx
("Employee").
RECITALS:
A. The Corporation has adopted the SETECH, Inc. Incentive Stock
Option Plan (the "Plan") to facilitate the attraction and retention of
employees with outstanding ability and to provide additional compensation to
certain of those employees through the granting of stock options.
B. Employee is currently an employee of the Corporation.
C. The Committee established under the terms of the Plan to
administer the Plan has designated Employee as a Participant under the Plan to
receive the award described in this Option Agreement.
D. Employee desires to accept such award and to be bound by the
provisions of the Plan and the terms of this Option Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the promises and covenants set forth
herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows
1. Definitions. Unless otherwise defined in this Option
Agreement, capitalized terms used herein shall have the same meanings given
them in the Plan.
2. Incentive Stock Option Granted. The Corporation hereby
grants to Employee as a matter of separate inducement and agreement in
connection with his employment by the Corporation, and not in lieu of any
salary or other compensation for his services, the right and Option to purchase,
when and on the terms and conditions hereinafter set forth, all or any part of
an aggregate of 135,000 shares of Stock (the "Optioned Stock"), at the Option
Price of $3.70 per share. The Option granted under this Section 2 is an
Incentive Stock Option.
3. Effect of Plan. The Option granted hereunder is issued
pursuant to the Plan (attached hereto as Exhibit A) and is subject to all terms
and conditions thereof and, accordingly, said Plan is incorporated herein by
reference as fully as if copied herein verbatim. In the event of any conflict
between this Option Agreement and the Plan, the provisions of the Plan shall
control.
4. Terms Regarding Exercise of Option. The following provisions,
in addition to those set forth in the Plan, apply to the Option granted under
this Option Agreement:
(a) The Option Period with respect to the Option shall begin
on March 25, 2000 with respect to one-third (1/3) of the Optioned Stock, and
thereafter on March 25, 2001, and March 25, 2002 the Option shall commence for
an additional one-third (1/3) of the Optioned Stock. The Option shall run for a
period of ten (10) years from the date it commences with respect to that
portion of the Optioned Stock available for acquisition by Employee.
Employee may exercise the Incentive Stock Option with respect to those
shares of Stock available to him in accordance with the foregoing time periods
at any time during the applicable Option Period, unless the Option has
terminated pursuant to the terms of the Plan or this Option Agreement.
(b) The Option, to the extent not previously exercised,
shall terminate upon the earliest to occur of:
(i) the expiration of the Option Period;
(ii) the expiration of one year after Employee ceases to be an
employee of the Corporation or a Subsidiary due to Disability;
(iii) the expiration of one year after Employee ceases to be
an employee of the Corporation or a Subsidiary due to the death of Employee; or
(iv) the expiration of three months after the date on which
Employee ceases to be an employee of the Corporation or a Subsidiary for any
reason other than Disability or death.
(c) During the lifetime of Employee, the Option granted
hereunder shall be exercisable only by Employee. In the event of the death of
Employee at any time during which he would have been entitled to exercise any
part of the Option granted hereunder, the Option granted to Employee may be
exercised only
(i) by the person or person to whom Employee's rights
under this Option Agreement shall pass by Employee's will or by the laws of
descent and distribution, and
(ii) if and to the extent that Employee was entitled to
exercise the Option granted hereunder at the date of his death.
(d) The Option granted hereunder shall be exercisable by the
giving of written notice of exercise to the Corporation, specifying the number
of shares to be purchased and accompanying such notice with payment of the full
Option Price therefore and any amounts payable under Section 9 of this Option
Agreement.
5. Nature of Stock Issued. Stock to be issued upon the
exercise of the Option may, at the election of the Corporation, be either
authorized and unissued Stock or Stock previously issued and reacquired by
the Corporation.
6. General Restrictions. Employee agrees for himself and his
legal representatives, as a condition of the exercise of the Option granted
hereunder, to execute any documents, make any representations, agree to
restrictions on stock transferability and take any actions which in the opinion
of legal counsel to the Corporation are required by any applicable law, ruling
or regulation with respect to any award hereunder, the exercise thereof or the
sale or transfer of any Stock received pursuant to this Option Agreement.
7. Method of Payment. Payment to exercise any part of the
Option granted hereunder shall normally be made by Employee in cash, in full, at
the time of exercise. The Committee, in its sole discretion, may allow payment
to be made in an equivalent value of already-owned Stock, or in any combination
of cash and Stock.
8. Retention of Stock. Employee is prohibited from disposing
of any Stock acquired pursuant to the exercise of the Option granted
hereunder at any time within a one-year period beginning on the date such
Stock is transferred to him, unless such disposition is made under
circumstances described by Section 422(c)(3) of the Code. All certificates
of Stock issued to the Employee in accordance with this Option Agreement
which are attributable to the exercise of any part of the Option granted
hereunder shall bear a legend prohibiting the sale, assignment, transfer
or pledge of such Stock at any time within the aforementioned one-year period.
9. Withholding. Whenever Employee shall recognize
compensation income as a result of the grant or exercise of any part of the
Option granted hereunder, he shall remit in cash to the Corporation or
appropriate Subsidiary the minimum amount of federal and state income and
employment tax withholding which the Corporation or Subsidiary is required to
remit to the Internal Revenue Service or applicable state department of revenue
in accordance with the then current provisions of the Code or applicable state
law. The full amount of such withholding shall be paid by Employee
simultaneously with the exercise of the Option or upon the occurrence of any
other event which results in the recognition of compensation income by Employee.
The failure by Employee to remit the full amount of withholding due may, in the
discretion of the Committee, result in the forfeiture of the related benefit or
award notwithstanding any other provision of this Option Agreement.
10. Effect of Option Agreement. This Option Agreement does not
constitute an employment contract or any promise or assurance of continued
employment. Nothing herein shall be deemed to limit or restrict the right of
the Corporation or any Subsidiary to terminate Employee's employment at any
time for any reason whatsoever.
11. Adjustments. In the event that prior to the delivery
by the Corporation of all the Stock in respect of which the Option is hereby
granted there shall be any change in the outstanding Stock by reason of a
share dividend, merger, consolidation, stock split, combination or exchange
of shares,without the payment of any compensation for such change, either in
money,services or property, the number of shares deliverable upon the
exercise of the Option granted hereunder and the Option Price shall be
proportionately adjusted (but without regard to fractions) by the Committee,
whose determination in each such case shall be conclusive and binding on the
Corporation and Employee and his legal representatives.
12. Rights of Employee. Neither Employee nor his legal
representatives shall be or have any of the rights or privileges of a
shareholder of the Corporation in respect of any of the Stock issuable upon
the exercise of the Option granted hereunder unless and until certificates
representing such shares shall have been issued and delivered.
13. Compliance With Securities Laws. Notwithstanding any
provision of this Option Agreement to the contrary, no part of the Option
granted hereunder shall be exercisable unless and until the Corporation
has duly registered the underlying Stock with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. At no time
shall the Corporation have any obligation to file a registration statement
under the Securities Act of 1933 or otherwise register such Stock, and in the
vent no registration statement is filed or becomes effective Employee shall
have no rights or recourse against the Corporation. Notwithstanding the
foregoing, the Option may be exercised without the required registration if
in the opinion of the Corporation's counsel such registration is not
necessary.
Certificates of Stock issued upon exercise of the Option granted
hereunder may bear a legend restricting the sale, assignment, transfer or
pledge of such Stock to the extent deemed necessary by the Committee to
comply with any applicable federal or state securities laws, and such
restrictions shall be binding upon Employee.
14. Authority of Board and Committee. The Board of Directors
of the Corporation or its Committee shall have the authority to make
reasonable constructions of this Option Agreement and to correct any defect
or supply any omission or reconcile any inconsistency in this Option
Agreement,and to prescribe reasonable rules and regulations relating to the
administration of this Option Agreement and other Options or awards granted
under the same Plan under which the present Option is granted.
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the day and year first above written.
ATTEST: SETECH, Inc.
By:
Title:
EMPLOYEE
Xxxxxx X. Xxxxx
SETECH, Inc.
DIRECTORS' AND OFFICERS' QUESTIONNAIRE
Name:
Date:
Xxxxxx, Xxxxxxxx & Xxxxxxx, PLC
Suite 1900
000 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Ladies and Gentlemen:
The following information is furnished to you for use in
connection with a Registration Statement (the "Registration Statement")
proposed to be filed by SETECH, Inc. (the "Company") with the
Securities and Exchange Commission (the "SEC") pursuant to the
Securities Act of 1933, as amended, covering a public offering of
Common Stock of the Company. I will promptly notify you of any changes
in such information which may occur subsequent hereto and prior to the
effective date of the Registration Statement. I understand and agree
that this questionnaire, as completed by me and my further
communications regarding the matters contemplated herein will be relied
upon by you, the Company, the Representatives of the Underwriter and
Underwriter's Counsel in connection with the preparation of the
Registration Statement.
"Last fiscal year' refers to the Company's fiscal year ended June
30, 1997. "Current fiscal year" refers to the Company's fiscal year
ending June 30, 1998. The "Proposed Effective Date" has not yet been
determined.
The "Company's Auditor" is the firm of Xxxxxx Xxxxxxxx, LLP. The
"Representative of the Underwriters" has not yet been determined. The
"Underwriter's Counsel" has not yet been determined.
THE DEFINITIONS OF CERTAIN OTHER TERMS USED IN THIS QUESTIONNAIRE
ARE SET FORTH AT THE END OF THIS QUESTIONNAIRE.
1. Business Experience.
(a) My principal occupations and employment during the last
five years are described below. I have included all positions
(including directorships) with the Company.
Time Period Name and Principal
(Mo/Yr) Business of Corporation Nature of My
From To or Organization Position Responsib-
bilities
(b) I am presently a director of the following public
companies1:
Company Name Location Term of Office
(c) If I am a director, executive officer or nominee to become
a director of the Company, I consent /do not consent to being
named in the Registration Statement as such and, if a nominee to become
a director, to serve as a director if elected.
2. Personal Information.
(a) Date of Birth:
(b) Degrees held:
Field of Year College Awarding
Degree Study Awarded Degree
3. Family Relationships.
(a) Described below are all family relationships (see
definition) I have had or currently have with any director or officer
(or nominee for director or officer) of the Company:
(b) I am /am not married.
The names of my spouse and children, if any:
Spouse
Children
4. Arrangements for Selection.
All arrangements (see definition) or understandings I have
entered into with any persons pursuant to which I have been selected as
an officer or director of the Company, are described below:
5. No Adverse Interest.
All interests I or my associates (see definition) have or will
have that are adverse to Company interests in any pending or
contemplated legal proceeding or government investigation to which the
Company is or will be a party (or to which its property may be subject)
are described below:
6. Promoters.
(a) I could /could not be considered a "founder" of
the
Company.
(b) If I could be considered a "founder" of the Company, I
did /did not receive (or purchase) ten percent (10%) or more of
the Company shares outstanding at the time of founding.
7. Legal Proceedings; Investigations.
All legal proceedings or government investigations pending or
contemplated to which the Company is or would be a party (or to which
its property may be subject) are described below:
8. 5% Shareholders.
To the best of my knowledge, all persons (including myself and
my associates and including corporations, partnerships, trusts,
associations and other such groups) who own beneficially (see
definition) more than 5% of any class of the Company's stock are
described below:
Name of Class of Shares Holder of
Beneficial Beneficially Voting or
Owner Owned Investment Power
9. Voting Arrangements.
All voting trusts or similar agreements or arrangements (see
definition) under which more than 5% of the Company's outstanding
Common Stock is hold or to be hold are described below:
Voting Rights and Other Powers
Names and Addresses of Voting Trustees Under Trust, Agreement or
Arrangement
10. Change in Control.
All arrangements (see definition), including any pledge by any
person of Securities of the Company, the operations of which may at a
subsequent date result in a change in control (see definition) of the
Company, are described below:
11. Share Ownership.
(a) Information as to my beneficial (see definition) stock
ownership of Company stock is furnished on the following page. I have
included all shares which are (i) registered in my name, including
shares registered in my name as trustee, executor, custodian, pledgee,
agent or nominee, either alone or with others, (ii) owned beneficially
by me or any associate (see definition) of mine, (iii) registered in
the name of a nominee or in street name, including any such shares held
for the account of any of the above or (iv) held for my account under
any other arrangement (see definition).
I have indicated in the Remarks column whether I have sole or
shared voting or investment power with respect to any such securities,
and in what capacity (i.e. individual, general partner, trustee) I have
such power or powers.
If I wish to disclaim beneficial ownership of any shares listed,
I have so indicated by writing the word "Disclaim" in the Remarks
column below; and I understand that such shares will be shown
separately from my beneficial holdings and an appropriate disclaimer
set forth.
If any co-trustee, etc., acting with me is an officer or director
of the Company, I have set forth his name in the Remarks column.
If any of the shares listed are subject to any claim, encumbrance,
pledge or lien, I have so indicated in the Remarks column.
Class Number of Registered in Beneficially Remarks Shares
and Series Shares in the Name of Owned by Voted
_____ _________ __________ ________ ________ _________
_____ _________ __________ ________ ________ _________
_____ _________ __________ ________ ________ __________
_____ _________ __________ ________ ________ __________
_____ _________ __________ ________ ________ __________
_____ _________ __________ ________ ________ __________
(b) All rights I have to acquire (through exercise of warrants or
options, conversion of Preferred Stock, or otherwise), at any time within
sixty days of the Proposed Effective Date, beneficial ownership of shares of
Common Stock or Preferred Stock of the Company are described below:
Type(s) of securities obtainable through such right(s):
shares through the exercise of any option, warrant or right
(description of such option, warrant or right:
shares pursuant to the power to revoke a trust,
discretionary account similar arrangement, and/or;
shares through other means (description of such means:)
).
12. Remuneration.
(a) Salary and Bonus. The amount of cash remuneration (including
salary, bonuses, deferred compensation, fees, commissions and directors'
fees) paid or accrued to me by the Company (or by third parties engaged in
transactions with the Company where the primary purpose was to furnish
remuneration to me for services rendered to the Company) during the Company's
last fiscal year is furnished below:
Accrued But Capacity in
Description Paid2 Not Yet Paid3 Which Received
Salary ______ ______ ______
Fees (other than ______ ______ ______
directors' fees)
Directors' fees ______ ______ ______
Commissions ______ ______ ______
Bonuses ______ ______ ______
Other Arrangements ______ ______ ______
TOTAL ______ ______ __
(b) Described below are all significant changes since the end of the last
fiscal year in cash or other compensation that I am receiving or am to
receive as well as all changes since such date regarding stock options, etc.
described above.
(c) Described below are all arrangements, standard or otherwise,
pursuant to which I am compensated for all services as a director, including
all additional amounts payable for Committee participation or special
assignments:
(d) Described below are all compensatory plans or arrangements,
including payments received from the Company for the Company's last fiscal
year, or the period since the end of the last fiscal year, if (i) such plans
or arrangements result or will result from my resignation, retirement or any
other termination of my employment with the Company or from a change in
control of the Company or a change in my responsibilities after such a change
in control, and (ii) the amount involved, including all periodic payments or
installments, exceeds $60,000.
(e) Securities or Property. Information regarding all stock (or
other property) of the Company acquired by me during the Company's last three
fiscal years and the period since the end of the last fiscal year, excluding
stock issued upon exercise of options (see definition) is furnished below:
Nature of Date of Acquisition Fair Market Spread
Transaction4 Event Price (A) Price (B B)-(A)
f) Pension and Retirement. Information regarding all contributions,
payments or accruals for my account by the Company under any retirement plan,
annuity, employment contract deferral, deferred compensation plan or similar
arrangement (other than contributions to plans for which specific allocations
for specific individuals are not made) during the Company's last fiscal year
is furnished below:
Estimated Annual
Identification of "Plan" Benefits Upon
(See Definition) Amount Retirement
(g) Life Insurance. Information regarding all premiums paid by the
Company on all life insurance policies, where the Company is not the sole
beneficiary, during the Company's last fiscal year is furnished below:
Insured Beneficiary Amount
(h) Health Insurance. Information regarding all premiums or other
costs paid by the Company under health insurance or medical reimbursement
plans, other than non-discriminatory group plans, during the Company's last
fiscal year is furnished below:
Description Amount
(i) Contributions to Plans. Information regarding all contributions
made for my account by the Company to any stock purchase, profit-sharing,
thrift or similar plan during the Company's last fiscal year is furnished
below:
Description Amount
(j) Personal Benefits. Personal benefits furnished to me during the
Company's last fiscal year from the Company, directly or through third
parties, are described below. I have included personal benefits such as
paymentsmade by the Company for (i) home repairs and improvements, (ii)
housing and other living expenses provided at my principal and/or vacation
residences, (iii) personal travel expenses, (iv) personal entertainment and
related expenses, (v) medical expenses, and (vi) legal, accounting and other
professional fees for matters unrelated to the Company's business. I have
also described all instances in which I have had the personal use of the
property of the Company, such as Company automobiles, planes, yachts,
apartments, hunting lodges or Company vacation houses or the use by me of
corporate staff for personal purposes:
Description Dollar Amount, if applicable
(k) Future Remuneration. I have briefly described below all
remuneration payments proposed to be made to me in the future pursuant to all
existing plans (see definition) or arrangements (see definition), except for
those previously reported above. As to defined benefit or actuarial plans, I
have indicated the estimated annual benefits payable to me upon retirement.
Description
(l) Third Party Transactions. Information regarding all
transactions between the Company and third parties, where the primary purpose
of such transactions are to furnish remuneration to me, is provided below:
13. Stock Options and Warrants.
(a) Grants. Information regarding all stock options (see definition)
granted to me by the Company during the last three fiscal years and the period
since the end of the last fiscal year is provided below.
Date of Type of Number of Exercise Date of Arrangement Identity
Grant 5 Stock Shares Price Expiration Name of Plan of Current
Holder
(b) Exercises. Information regarding all stock options exorcised by
me during the last three fiscal years and the period since the end of the
last fiscal year is provided below:
Date of Type of Number of Price Per Fair Market Value on
Exercise Stock Shares Share Date of Exercise
Purchased
14. Indebtedness to the Company
Information regarding all indebtedness I or any of my associates (see
definition) have incurred to the Company during the Company's last three
fiscal years and the period since the end of the last fiscal year (except for
amounts due for purchases subject to usual trade terms, for ordinary travel
and expense advances and for other transactions in the ordinary course of
business) is provided below:
(a) The largest total of indebtedness at any time during such
period:
(b) The nature of the indebtedness and of the transaction in which
it was incurred:
(c) The amount thereof outstanding as of the end of the Company's
last fiscal year:
15. Transactions with the Company.
Information regarding all material (see definition) interests of mine or
my associates in any actual or proposed transaction during the last three
fiscal years to which the Company was or is to be a party, is provided below.
However, no such transaction need be described if:
(a) the amount involved (including all periodic installments in the
case of any lease or other agreement provided for periodic payments or
installments and including the value of all transactions In a series of
similar transactions) does not exceed $60,000;
(b) the rates or charges involved in the transaction are fixed by law
or governmental authority or determined by competitive bids;
(c) the services involved are as a bank depository of funds, transfer
agent, registrar, trustee under a trust indenture or other similar service;
(d) my interest arises solely from my ownership of securities of the
Company and I received no extra or special benefit not shared on a pro rata
basis by all other holders of securities in the same class;
(e) my interest in the corporation that is a party to the
transaction is solely as a director; or
(f) my interest arose solely as an officer and/or director of the
Company (e.g., my compensation arrangement with the Company).
Description:
16. Indemnification.
Information regarding all manners of insurance or indemnification of any
director or officer of the Company against any liability which he may incur
in his capacity as such, other than pursuant to a statutory provision or
bylaw, is provided below:
17. Identity of Associates.
Information regarding my associates (see definition) is provided below:
Name Form (Partnership, Nature Principal Place
of Associate Corporation, etc) Associate's Business of Business
18. Present and Prior Legal Proceedings and Investigations.
(a) Respondent. Except as described below, the following statements
are accurate with respect to me as to the past five years:
(i) No petition under the federal bankruptcy laws or any state
insolvency law has been filed by or against, and no receiver, fiscal agent or
similar officer has been appointed by a court for the business or property of
(i) myself, (ii) any partnership in which I was a general partner at or
within two years before the time of such filing, or (iii) any corporation or
business association of which I was an executive officer at or within two
years before the time of such filing;
(ii) I have not been convicted in a criminal proceeding (excluding
traffic violations and other minor offenses), nor am I the subject of any
criminal proceeding which is presently pending;
(iii) I have not been the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any court, permanently or
temporarily enjoining me from or otherwise limiting me, in the following
activities:
(A) Acting as a futures commission merchant, introducing
broker, commodities trading advisor, community pool operator, floor broker,
leverage transaction merchant, any other person or activity regulated by the
Commodity Futures Trading Commission, or an associated person (see
definitions attached) of any of the foregoing, or as an investment advisor,
underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any conduct or
practice in connection with such activity;
(B) Engaging in any type of business practice; or
(C) Engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal commodities laws;
(iv) I have not been the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or
state authority barring, suspending or otherwise limiting for more than 60
days my right to engage in any activity described under subsection (3) above
or to be associated with persons engaged in any such activity.
(v) I have not been found by a court in a civil action or by
the Securities and Exchange Commission to have violated any federal or state
securities law except where the judgment in such civil action or the finding
by the Commission has been subsequently reversed, suspended or vacated; nor
am I subject to any current investigation by the Securities and Exchange
Commission.
(vi) I have not been found by a court in a civil action or by
the Commodities Futures Trading Commission to have violated any federal
commodities law, except in a judgment in such civil action or finding by the
Commodities Futures Trading Commission which has been subsequently reversed,
suspended or vacated; nor am I subject to any current investigation regarding
any alleged violation of any federal commodities law.
The above statements are accurate.
The above statements are not accurate.
Description:
(b) Promoters and Control Persons. If I am a promoter or
control person (see definitions), to the best of my knowledge, the statements
set forth in paragraphs (a)(i) through (a)(vi) of this question are also
accurate with respect to any other promoters or control persons of the
Company as to the past five years.
The above statements are accurate.
The above statements are not accurate.
Description:
19. Board of Directors and Committees of Board of Directors.
(a) I am /am not a director.
(b) During the last fiscal year I attended meetings of the Board
of Directors, of a total of meetings held.
(c) I am aware of the existence of the following Committees of the
Board of Directors of the Company:
(d) I am a member of the following committees of the Board of
Directors of the Company:
20. Foreign Corrupt Practices Act.
Information regarding any of the following activities or types of
conduct that I have knowledge of or reason to believe have been or may have
been engaged in, either directly or indirectly6, at any time since January 1,
1995, is given below:
(a) The payment of any money or gift of, or promise to give,
anything of value to government officials or their relatives, or any other
payments to such persons, whether or not legal, to obtain or retain business
or to receive favorable treatment with regard to business.
(b) The payment of any money or gift of, or promise to give,
anything of value to government officials, or to relatives of such persons,
or any other payments to such persons or their relatives, whether or not
legal, to obtain or retain business or to receive favorable treatment with
regard to business.
(c) Any contributions in any form, whether or not legal, made to any
political party, political candidate or holder of governmental office.
(d) Any bank accounts, funds or pools of funds created or maintained
without being reflected on the corporate books of account, or as to which the
receipts and disbursements therefrom have not been reflected on such books.
(e) Any receipts or disbursements of any form, the actual nature of
which has been "disguised" or intentionally misrecorded on the corporate
books of account.
(f) Any fees paid in any form to consultants or commercial agents
which exceeded the reasonable value of the services purported to have been
rendered.
for the purposes of enabling them to expend time or to make contributions or
payments of the kind or for the purpose referred to in subparts (a)-(f) above.
21. Reports or Studies on Company.
Any engineering, management or similar report or memorandum relating to
broad aspects of the business, operations or products of the Company which
has been prepared within the last twelve months for or by the Company, any
holder of more than 5% of the Company's Common Stock, or any underwriter or
any report or memorandum other than the Registration Statement which has been
prepared for external use by the Company in connection with the proposed
offering is described below:
22. Certain Business Relationships.
(a) Described below is any service by me as an executive officer
for, or director of, or ownership by me in excess of a ten percent (10%)
equity interest in, any business or professional entity:
(1) that has made during any of the Company's last three fiscal
years, or proposes to make during the Company's current fiscal year, payments
to the Company for property or services in excess of five percent (5%) of (i)
the Company's consolidated gross revenues for any of its last three fiscal
years, or (ii) the other entity's consolidated gross revenues for any of its
last three fiscal years;
(2) to which the Company has made during any of the Company's
last three fiscal years, or proposes to make during the Company's current
fiscal year payments for property or services In-excess of five percent (5%)
of (i) the Company's consolidated gross revenues for any of its last three
fiscal years, or (ii) the other entity's consolidated gross revenues for any
of its last three fiscal years;
(3) to which the Company was indebted at the end of any of the
Company's last three fiscal years in an aggregate amount in excess of five
percent (5%) of the Company's total consolidated assets at the end of such
fiscal year;
(4) Any other relationships between myself and the Company
that are substantially similar in nature and scope to those relationships
listed in paragraphs (1 ) and (3).
Description:
(b) If I am a director, I have described below any partner or
executive officer positions I have held with any investment banking firm
which has performed or may perform services for the Company.
23. Affiliation with Accountants and Counsel.
Described below is any interest, affiliation or Connection I have with
the firm of Xxxxxx Xxxxxxxx & Xxxxxxx, PLC; Xxxxxx Xxxxxxxx, LLP; or the
Underwriter's Legal Counsel; or any other law firm or accounting firm that
has been retained by the Company during the last three fiscal years or is
proposed to be retained by the Company:
24. Transactions with Underwriter.
Described below is any material relationship (see definition) I or my
associates (see definition) have or have had with the Representative of the
Underwriter or with any other investment firm.
25. NASD Matters.
(a) Described below is all information I know of pertaining to
underwriting compensation and arrangements or any dealings between any
underwriter or related person (see definition), member (see definition) of
the National Association of Securities Dealers, Inc. ("NASD") or person
associated with a member (see definition) and the Company or any controlling
shareholder thereof since the beginning of the Company's last fiscal year,
other than information relating to the proposed Underwriting Agreement.
(b) I am a member (see definition) of the NASD, a controlling
shareholder of a member, a person associated with a member (see definition)
or an underwriter or related person (see definition) with respect to the
proposed offering.
True.
Description:
False. If False is checked, skip to question (f).
(c) Information as to all purchases and acquisitions (including
contracts to purchase or to acquire) of securities of the Company or any
subsidiary of the Company by me during the last eighteen months, as well as
to all proposed purchases and acquisitions which are to be consummated in
whole or in part within the next twelve months, is set forth below.
Seller or Amount and Price or Other Date
Prospective Nature of Consideration
Seller Securities
(d) Information as to all sales and dispositions (including
contracts to sell or to dispose) of securities of the Company or any
subsidiary of the Company during the last eighteen months by me to any
member (see definition) of the NASD or any person associated with a member
(see definition) or any underwriter or related person (see definition) with
respect to the proposed public offering, as well as to all proposed sales
and dispositions by me which are to be consummated in whole or in part within
forth below.
Buyer Amount and
Prospective Nature of Price and Other Date
Buyer Securities Consideration
(e) If I have had during the last eighteen months, or am to have
within the next twelve months, any transaction of the character referred to
in either Item 27(c) or 27(d) above, I have described briefly below the
relationship, affiliation or association of both me and, if known, the other
party or parties to any such transaction with an underwriter or others "in
the stream of distribution" with respect to the proposed offering. In any
case, where the purchaser (whether me or any such party) is known by me to be
a member of a "private investment group," such as a hedge fund or other group
of purchasers, I have furnished, if known, the names of all persons
comprising the "group" and their "association with" or "relationship to" any
broker-dealer:
(f) To be answered only by 5% stockholders who are not individual
investors. Except as described below, I do not know of any director, officer
or holder of 5% of any class of securities of the entity on behalf of which I
am completing this Questionnaire who is (i) a member of the NASD, (iii) a
controlling shareholder of a member of the NASD, (iii) associated or
affiliated with member of the NASD or (iv) associated or affiliated with any
underwriter or financial or legal advisor involved in the Company's proposed
offering.
True.
False.
Description:
26. Arrangements Regarding Sale of Securities.
(a) To the best of my knowledge, there is no arrangement made or to
be made by any person, or any transaction already effected:
(i) to limit or restrict the sale of the Common Stock during
the period of the offering of the Common Stock registered on the Registration
Statement;
(ii) to stabilize the market for the Common Stock;
(iii) to withhold commissions or otherwise to hold each
underwriter or dealer responsible for the distribution of his participation
in the offering;
(iv) to allocate the Common Stock of the Company to be registered
to me or any of my associates or to any officer, director, principal
stockholder, employee or customer of the Company; or
v) to pay any finder's fee or similar compensation.
True.
False.
Description:
(b) To the best of my knowledge, I know of no plan of distribution
of the Common Stock proposed to be registered otherwise than through an
underwriter.
True.
False.
Description:
27. Contracts with the Company.
Described below are all contracts with the Company or in which the
Company has a beneficial interest, or to which the Company has succeeded by
assumption or assignment, to which I am or any of my associates is a party,
which are to be performed in whole or in part at or after the date of the
proposed filing of the Registration Statement, or which were made not more
than two years prior thereto:
I understand that material misstatements or the omission of material
facts in the Registration Statement may give rise to civil and criminal
liabilities to the Company, to each officer and director of the Company
signing the Registration Statement and other persons signing the Registration
Statement. I will notify you and the Company of any misstatement of a
material fact in the Registration Statement or any amendment thereto, and of
the omission of any material fact necessary to make the statements contained
therein not misleading, as soon as practicable after a copy of the
Registration Statement or any such amendment has been provided to me.
I confirm that the foregoing statements are correct, to the best of my
knowledge and belief.
Dated.
Very truly yours,
(Signature)
(Typed or Printed Name)
DEFINITIONS
The term "arrangement" means any plan, contract, authorization or
understanding whether or not set forth in a formal document.
The term "associate," as used throughout this questionnaire, means (a)
any corporation or organization (other than the Company) of which I am an
officer, director or partner or of which I am, directly or indirectly, the
beneficial owner of 5% or more of any class of equity securities, (b) any
trust or other estate in which I have a substantial beneficial interest or
as to which I serve as trustee or in a similar capacity, (c) my spouse,
(d) any relative of my spouse or any relative of mine who has the same home
as me or who is a director or officer or key executive of the Company,
(e) any partner, syndicate member or person with whom I have agreed to act
in concert with respect to the acquisition, holding, voting or disposition
of shares of the Company's securities.
The term "beneficially," when used in connection with the ownership of
securities, means (a) any interest in a security which entitles me to any of
the rights or benefits of ownership even though I may not be the owner of
record or (b) securities owned by me directly or indirectly, including those
held by me for my own benefit (regardless of how registered) and securities
held by others for my benefit (regardless of how registered), such as by
custodians, brokers, nominees, pledgees, etc., and including securities held
by an estate or trust in which I have an interest as legatee or beneficiary,
securities owned by a partnership of which I am a partner, securities held by
a personal holding company of which I am a stockholder, etc., and securities
held in the name of my spouse, minor children and any relative (sharing the
same home). A "beneficial owner" of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares:
(a) voting power which includes the power to vote, or to direct
the voting of, such security; and/or
(b) investment power which includes the power to dispose, or to
direct the disposition, of such security.
The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract or
otherwise.
A "control person" of a specified person is a person that directly, or
indirectly through one or more intermediaries, controls the person specified.
The term "family relationship" means any relationship by blood,
marriage or adoption, not more remote than first cousin.
The term "material," when used in this questionnaire to qualify a
requirement for the furnishing of information as to any subject, limits the
information required to those matters as to which an average prudent investor
ought reasonably to be informed before purchasing the Common Stock of the
Company.
The term "material relationship has not been defined by the Securities
and Exchange Commission. However, the Commission has indicated that it will
probably construe as a "material relationship" any relationship which tends
to prevent arms-length bargaining in dealings with a company, whether arising
from a close business connection or family relationship, a relationship of
control or otherwise. It seems prudent, therefore, to consider that I would
have such a relationship, for example, with any organization of which I am an
officer, director, trustee or partner or in which I own, directly or
indirectly, 10% or more of the outstanding voting stock, or in which I have
some other substantial interest, and with any person or organization with
whom I have, or with whom any relative or spouse (or any other person or
organization as to which I have any of the foregoing other relationships)
has, a contractual relationship.
The NASD defines a "member" as being any individual, partnership,
corporation or other legal entity that is a broker or dealer admitted to
membership in the NASD.
The NASD defines a "person associated with a member" as being every sole
proprietor, partner, officer, director or branch manager of any member, or
any natural person occupying a similar status or performing similar
functions, or any natural person engaged in the investment banking or
securities business who is directly or indirectly controlling or controlled
by such member (for example, any employee), whether or not any such person is
registered or exempt from registration with the NASD.
The term "plan" includes all plans, contracts, authorizations or
arrangements, whether or not set forth in any formal document.
The term "promoter" includes:
(a) Any person who, acting alone or in conjunction with one or more
other persons, directly or indirectly takes initiative in founding and
organizing the business or enterprise of an issuer; or
(b) Any person who, in connection with the founding and organizing
of the business or enterprise of an issuer, directly or indirectly receives
in consideration of services or property, or both services and property, 10
percent or more of any class of securities of the issuer or 1 0 percent or
more of the proceeds from the sale of any class of such securities. However,
a person who receives such securities or proceeds either solely as
underwriting commissions or solely in consideration of property shall not be
deemed a promoter within the meaning of this paragraph if such person does
not otherwise take part in founding and organizing the enterprise.
The term "Stock Options" includes all options, warrants, or rights to
purchase securities of the Company, other than those issued to security
holders as such on a pro rata basis.
The NASD defines an "underwriter or a related person" with respect to a
proposed offering as being underwriters, underwriter's counsel, financial
consultants and advisors, finders, members of the selling or distribution
group, any member participating in the public offering, and any and all other
persons associated with or related to and members of the immediate family of
the aforementioned persons.
1"Public companies" are those which either: (i) have a class of
securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of that Act;
or (ii) are registered as investment companies under the Investment Company Act
of 1940).
2Includes amounts that were earned for services performed by me,
or that were otherwise accrued, in the fiscal year prior to the lost fiscal
year, but which were paid to me during the last fiscal year.
3Includes additional amounts which are due to me, in the form of cash,
which were earned for services performed during the Company's last fiscal
year but with respect to which payment was deferred and not paid during the
last fiscal year, either voluntarily by me or pursuant to the provisions of an
agreement.
4If securities, give number of shares and type of stock.
5The extension of options is deemed to be a grant of now options.
6"Indirectly" means done through an intermediary. Payments to sales agents
which are passed on in whole or in part to purchasers, or compensation to
persons in consideration for their acts, are examples of acts done through
intermediaries.
