Exhibit #10.38
December 16, 1998
Xx. Xxxxxx X. Xxxxx
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000-0000
(000) 000-0000
Dear Xxxx:
This letter is intended to serve as the definitive agreement between
Fair, Xxxxx and Company, Inc. (the " Company") and you and your children with
respect to possible transactions involving the Company's common stock. The term
"Founding Shareholder" as used in this letter agreement refers to you.
The terms of our agreement are as follows:
(A) The Company hereby grants the Founding Shareholder's estate the right
to sell to the Company, and Company agrees to purchase, up to 250,000
shares of Fair, Xxxxx stock, but not exceeding $10 million in amount,
upon the Founding Shareholder's death. (This right is commonly known as
a "put".) The Founding Shareholder's estate must notify the Company of
the number of shares to be sold to the Company within 60 calendar days
after the date of death, and the Company must pay for the shares not
later than nine months after the date of death.
The purchase price of this stock shall be based on the average of the
"last trade" prices quoted by the New York Stock Exchange (NYSE) during
the 30 calendar days ending on the date of death.
This "put" right will expire on October 31, 2003, unless terminated
earlier as set forth herein.
(B) The Founding Shareholder and her children grants the Company a "right
of first refusal" to purchase up to 500,000 shares of Fair, Xxxxx stock
effective on the date of this agreement. Under this "right of first
refusal" Founding Shareholder and her children shall not sell any
shares, excepting permitted transactions by the Founding Shareholder
described below, without first giving notice to the Company.
The notice of sale shall include the exact and complete terms of the
proposed sale and will have attached thereto a photocopy of an executed
bona fide offer and if applicable, counteroffer. For a period of ten
(10) business days after receipt by
FOUNDING SHAREHOLDER STOCK AGREEMENT
December 16, 1998
Page 2
the Company of the notice of sale, the Company shall have the right to
give the Founding Shareholder or her child, as the case may be, (a)
notice of the Company's exercise of the right to purchase the shares,
on the same terms, price and conditions as set forth in notice of sale,
or (b) notice declining to exercise its right of first refusal to
purchase the shares. In the event that Company declines to exercise its
right to purchase these shares and thereafter there are changes in
terms, price or conditions between the Founding Shareholder or her
child (as the case may be) and the prospective purchaser, the right of
first refusal shall reapply to these shares.
In the event of the Founding Shareholder's death, any shares sold by
the estate under (A), above, would count against the 500,000 shares.
The Company's right of first refusal would not apply to the following
types of transactions by the Founding Shareholder:
o Gift, sale or transfer to the Founding Shareholder's
children.
o Gift, sale or transfer in the aggregate of no more than
20,000 shares to persons who are not Founding
Shareholder's children during the period that this right
of first refusal is in effect.
o Sales on the NYSE under the volume limit of Rule 144
adopted under the Securities Act of 1933, as amended, or
any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in
effect from time to time limit ("Rule 144").
o Funding of charitable remainder and charitable lead
trusts.
o Purchase of shares by the Fair, Xxxxx Employee Stock
Ownership Plan.
The Company's right of first refusal will expire on October 31, 2003.
(C) The Founding Shareholder and her children agree to reduce the number of
Fair, Xxxxx shares they hold from the current level to a number below
1.4 million shares by October 31, 2001. The Founding Shareholder and
her children agree to achieve this result in part by disposing of at
least 150,000 shares during the period from the date of this letter to
September 30, 1999, and a cumulative total of at least 300,000 shares
by September 30, 2000. The types of dispositions contemplated by this
section include dispositions in which the Founding Shareholder and her
family retain no beneficial interest in the shares, such as gift, sale
or other transfer to persons who are not Founding Shareholder's
children; sales on the NYSE under Rule 144; funding of charitable
remainder and charitable lead trusts; and sales of shares to the Fair,
Xxxxx Employee Stock Ownership Plan.
If the Founding Shareholder and her family have not brought their
combined holdings below the required applicable level at any of the
foregoing three
FOUNDING SHAREHOLDER STOCK AGREEMENT
December 16, 1998
Page 3
milestone dates listed above, the right of the Founding Shareholder's
estate to sell shares to the Company, as set forth in section (A),
above, shall terminate on that date without notice by Company.
(D) For a period of one year from the date of the agreement, if this
agreement would prevent the Company from applying the pooling of
interests' method of accounting to a business combination, the Company
may rescind this agreement at its sole option, by written notice.
(E) If the Company does rescind this agreement under section (D) above and
if the Founding Shareholder dies on or before October 31, 2003, the
Founding Shareholder's estate may require the Company to approve the
registration of between 250,000 and 500,000 shares held by the estate.
The term "registration" refers to a registration of securities for sale
effected by preparing and filing a registration statement or similar
document in compliance with the Securities Act of 1933 and the
declaration or ordering of effectiveness of such registration statement
or document by the Securities and Exchange Commission.
(F) The Board of Directors of the Company has, by duly adopted resolution,
authorized the execution of this agreement on behalf of the Company.
(G) The Company and the Founding Shareholder, her children and estate will
give notice under this agreement in writing and the notice will be
deemed effectively given upon personal delivery to the party to be
notified, or overnight courier service, or upon deposit with the United
States Post Office, by registered or certified mail, postage prepaid
and addressed, if to the Company, at Fair, Xxxxx and Company,
Incorporated, 000 Xxxxx Xxxxxxx Xxxxx, Xxx Xxxxxx, XX 00000, Attention:
General Counsel; if to Founding Shareholder or her children, at the
address shown in this letter; and, if to her estate, at the address for
notice specified by the estate in writing. Any party may change its
address for notices by giving written notice of such change to the
other party or parties.
(H) This agreement shall inure to the benefit of, and shall be and become
binding on, the heirs, executors, administrators, and assigns of the
respective parties, but neither this agreement nor any of the rights,
interests or obligations hereunder may be assigned, transferred or
delegated by Founding Shareholder or her children to any person other
than executors, administrators, legatees or heirs of Founding
Shareholder upon the death of such Founding Shareholder. Each of us
will pay our own fees and expenses incurred incident to the
preparation and carrying out of the transactions contemplated by this
agreement.
FOUNDING SHAREHOLDER STOCK AGREEMENT
December 16, 1998
Page 4
(I) This agreement contains the entire understanding of the parties with
respect to the matters covered herein and supersedes all prior
agreements and understandings, written or oral, between the parties
relating to the subject matter hereof. Any additions or modifications
to this agreement must be made in writing and must be signed on behalf
of all the parties to this agreement.
(J) The laws of the State of California (irrespective of its choice of law
principles) shall govern this agreement. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
If this letter correctly sets forth our understanding, please sign both
copies of this letter and have them signed by each of your children, and return
one fully signed copy to me.
Very truly yours,
Xxxxx X. XxXxxxxxx
Senior Vice President and
General Counsel
Agreed to this day of December, 1998
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Xx. Xxxxxx X. Xxxxx Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxx
