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EXHIBIT 10.7
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made as of the third day
of April, 1997, between Xxxxxx General Corporation, a California corporation
(the "Company"), and Xxxxxx X. Xxxxx ("Crane").
The Company hereby grants an option to purchase shares of the Company's
Common Stock to Crane, and Crane hereby accepts the option, on the following
terms and conditions:
Section 1. GRANT OF OPTION.
The Company hereby grants to Crane the right and option ("Option") to
purchase up to Seven Hundred Thousand (700,000) shares of the Company's
authorized but unissued Common Stock (the "Shares"), all of which have been
reserved for issuance pursuant to the Option.
Section 2. OPTION PRICE.
The Option price shall be $1.53 per share, representing the closing bid
price of the Common Stock on the last trading day before the issuance of the
Option, subject to adjustment as provided in Section 6 hereof.
Section 3. WHEN OPTION MAY BE EXERCISED.
Each Option issued pursuant to Section I shall be exercisable at any time
and from time to time, as to all or any portion of the Shares, from the date
hereof until the close of business on the fifth anniversary of the date of this
Option.
Section 4. INVESTMENT REPRESENTATION OF EMPLOYEE.
Crane acknowledges that the Option and the Shares issuable upon exercise
of the Option (the "Restricted Securities") have not been registered under the
Securities Act of 1933, as amended (the "Act") or applicable state securities
laws. Crane acknowledges that the offer, sale and delivery of the Restricted
Securities to him is made in reliance upon his representations, warranties,
agreements and undertakings reflected herein. Crane represents and warrants that
he is acquiring the Restricted Securities solely for his own account and
interest and not with a view to distribute them to the public. Crane understands
and agrees that unless the Restricted Securities either are registered under the
Act or are disposed of in transactions for which exemptions from such
registration are available, Crane must continue to own and hold the Restricted
Securities for his own account and interest indefinitely. Crane further
understands that whether an exemption from the registration requirements of the
Act will be available for such future transactions
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as he may propose will depend upon the nature of each such transaction, the
pertinent surrounding facts and circumstances then extant, and the then
applicable law.
Any certificate evidencing the Restricted Securities shall bear a legend
substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW.
Section 5. EXERCISE OF OPTION.
The Option, or any portion of the Option, may be exercised from time to
time, in whole or in part, in accordance with the provisions of Section 3 above,
which exercise shall be effective immediately upon written notice to the Company
at its principal offices, setting forth the number of Shares with respect to
which the Option is being exercised, accompanied by the full amount of the
purchase price for such Shares. The purchase price shall be payable in cash or
by check. Upon receipt of notice and payment, the Company shall promptly make
arrangements for the issuance to Crane of the number of Shares as to which the
Option was exercised. Upon exercise of the Option, the number of Shares subject
to the Option shall be automatically reduced to the extent of the number of
Shares as to which the Option is exercised, and the Option shall remain in
effect as to the remaining number of Shares. The Company reserves the right to
require Crane, before receipt of the Shares, to represent and warrant in
writing, in form and substance reasonably satisfactory to the Company, that the
Shares purchased are being acquired without any view to distribution and to
agree in writing to the imposition of legends on the share certificates setting
forth any restrictions upon disposition required by applicable federal or state
securities laws.
Section 6. ADJUSTMENTS.
If all or any portion of the Option is exercised subsequent to any stock
dividend, split-up, recapitalization combination or exchange of shares, merger,
consolidation, acquisition of property for stock, separation, reorganization,
or liquidation, as a result of which shares of any class shall be issued in
respect of outstanding shares of Common Stock, or shares of Common Stock shall
be changed into the same or a different number of shares of the same or another
class or classes, Crane shall receive, upon the exercise of such exercise right,
the aggregate number and class of shares which, if the Option had been exercised
at the date hereof and the shares acquired thereby had not been disposed of,
Crane would be holding as a result of any such stock dividend, split-up,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of
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property for stock, separation, reorganization, or liquidation; provided,
however, that no fractional share shall be issued upon any such exercise.
Section 7. ASSIGNABILITY OF THE OPTION.
The Option may not be assigned, transferred, pledged, hypothecated, sold
or otherwise disposed of, in whole or in part, either voluntarily or
involuntarily, except with the prior written consent of the Company, and the
Option may be exercised, during the lifetime of Crane, only by him. Any
attempted assignment, transfer, pledge, hypothecation, sale or other disposition
of the Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall be null and void and
without effect. Notwithstanding the foregoing, upon the death of Crane, the
Option may be exercised by the estate and/or beneficiary of Crane.
Section 8. REGISTRATION RIGHTS.
The Company covenants and agrees to provide the following registration
rights at any time from and after the date of this Agreement to Crane:
8.1 (a) If the Company receives a written request from Crane that
the Company effect a registration statement and any related blue sky
qualification or compliance with respect to all or a part of the Shares of the
Common Stock of the Company issued or issuable upon exercise of the Option
("Registrable Shares"), the Company will, as soon as reasonably practicable,
effect such registration and all such qualifications and compliances as would
reasonably permit or facilitate the sale and distribution of all or such portion
of the Registrable Shares; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance, pursuant
to this Section 8.1: (1) if the Company shall furnish to Crane a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such registration to be effected at such
time, in which event the Company shall have the right to defer the filing of the
registration statement for a period of not more than 60 days after receipt of
the request under this Section 8.1; provided, however, that the Company shall
not utilize this right more than once; (2) if the Company has already effected a
registration pursuant to this Section 8.1; or (3) in any particular
jurisdiction in which the Company would be required to qualify to do business in
effecting such registration, qualification or compliance. Subject to the
foregoing, the Company shall file a registration statement covering the
Registrable Shares as soon as practicable after receipt of the request.
(b) Whenever the Company proposes to file a registration
statement relating to any of its capital stock under the Act, other than a
registration statement required to be filed in respect of employee benefit plans
on Form S-8 or similar form or any registration statement on Form S-4 or similar
form relating to securities issued in connection with a reorganization, the
Company shall, at least seven business days prior
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to such filing, give written notice thereof to Crane. Upon receipt by the
Company, not more than four business days after receipt of such notice by Crane,
of a written request by Crane for registration of all or a portion of the
Registrable Shares then owned by Crane, the Company shall include such
Registrable Shares in such registration statement or in a separate registration
statement concurrently filed, and shall use all reasonable efforts to cause such
registration statement to become effective with respect to such Registrable
Shares, unless the managing underwriter therefor concludes in its reasonable
good faith judgment that compliance with this Section 8.1 would materially
adversely affect such offering. If the managing underwriter determines in good
faith that a portion but not all of such Registrable Shares may be included,
then only such portion shall be included.
8.2 The Company will use all reasonable efforts to cause such
registration statement to remain effective until the earlier of 45 days from
the effective date of the registration statement or the date that Crane
completes his distribution of the Registrable Shares. The Company will use all
reasonable efforts to effect such qualifications under applicable blue sky or
other state securities laws as may be reasonably requested by Crane to permit
or facilitate such sale or other distribution. The Company Will cause the
Registrable Shares for which the registration statement is effected to be
listed on any national securities exchange or quoted on any stock quotation
system on which the shares of Common Stock are listed or quoted.
8.3 Crane shall furnish to the Company such information as the
Company may reasonably request and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 8. The
Company agrees to furnish to Crane the number of prospectuses, offering
circulars or other documents, or any amendments or supplements thereto,
incident to any registration, qualification or compliance referred to in this
Section 8 as Crane from time to time may reasonably request.
8.4 The Company will bear all expenses of registrations,
qualifications or compliance pursuant to this Section 8 (other than
underwriting discounts and commissions and brokerage commissions and fees, if
any, payable with respect to the Registrable Shares or the cost of counsel for
Crane), including, without limitation, registration fees, printing expenses,
expenses of blue sky or other state securities law registration or compliance,
and legal and auditing fees incurred by the Company in connection therewith.
8.5 In connection with any registration of Registrable Shares
pursuant to this Section 8, the Company agrees to provide reasonable
cooperation to Crane and any underwriters participating in such offering,
including, without limitation, entering into such customary underwriting or
other agreements (which may contain customary representations and warranties
by the Company and indemnification provisions); furnishing a customary comfort
letter or letters, dated the date of the final prospectus with respect to the
Registrable Shares, from the independent certified public accountants of the
Company and addressed to Crane and any such underwriters; furnishing an
opinion of counsel for the Company, dated the date of the closing of the sale
of the Registrable Shares, with
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respect to such matters as may be reasonably requested; and making available for
inspection by Crane and his agents all financial and other records, corporate
documents and properties of the Company as shall be reasonably requested.
8.6 During the effectiveness of a registration statement in which
Registrable Shares are included pursuant to this Section 8, the Company will
notify Crane promptly of any notice from a regulatory authority affecting the
sale of the Registrable Shares and of any event or facts that, in the reasonable
judgment of the Company, should be set forth in such registration statement. The
Company will, as promptly as practicable, take such action as may be necessary
to amend or supplement such registration statement in order to set forth or
reflect such event or facts.
8.7 In the event of the registration of any Registrable Shares
pursuant to this Section 8, each party hereto (the "Indemnifying Party"), to the
extent permitted by law, shall indemnify and hold harmless the other party
hereto and its officers, directors, employees and agents (collectively, the
"Indemnified Parties") against any losses, claims, damages or liabilities, joint
or several (collectively, "Claims"), to which any of the Indemnified Parties may
become subject under the Act or otherwise, insofar as such Claims (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of material fact contained in the registration statement (or
any document contained in or incorporated by reference in the registration
statement) relating to the Registrable Shares, or arise out of or are based upon
any omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Indemnified Party for any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any Claims; provided however, that the Indemnifying Party will not be liable in
any such case to the extent that any such Claim arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made or incorporated by reference in such registration statement in reliance
upon and in conformity with written information provided by such Indemnified
Party specifically for use in the preparation thereof The indemnity provided by
this paragraph shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Party. If the
indemnification provided for by this paragraph is unavailable to a party that
would have been an Indemnified Party in respect of any Claims, then each party
that would have been an Indemnifying Party shall, in lieu of indemnifying such
Indemnified Party, contribute to the extent permitted by law to the amount paid
or payable by such Indemnified Party as a result of such Claims in such
proportion as is appropriate on an equitable basis to reflect the relative fault
of the Indemnifying Party on the one hand and such Indemnified Party on the
other hand in connection with the statement or omission which resulted in such
Claims; provided, however, that no person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the Act shall be entitled to contribution
from any person who was not found guilty of such fraudulent misrepresentation.
Section 9. RESERVATION OF SHARES.
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The Company will at all times reserve and keep available out of its
authorized capital stock, solely for issuance upon the exercise of this Option,
such number of shares of Common Stock as shall be issuable upon the exercise of
this Option. Such Common Stock, when issued pursuant to this Agreement, shall be
duly and validly issued, fully paid and nonassessable.
Section 10. RIGHTS OF OPTIONEE.
With respect to the shares underlying this Option, prior to the exercise
of this Option, except as otherwise provided herein, Crane shall not be entitled
to any rights of a stockholder of the Company, including without limitation the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive notice of any
proceedings of the Company.
Section 11. GENERAL PROVISIONS.
11.1 Severability. If any provision of this agreement is held to
be unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this agreement shall be deemed valid and
enforceable to the extent possible.
11.2 Successors. This agreement shall inure to the benefit of and
be binding upon the successors of the parties hereto.
11.3 Notices. Any notice or other communication provided for in
this agreement shall be in writing and sent if to the Company to its principal
office at 00-X Xxxxxxx, Xxxxxx, XX 00000, Attention: President, or at such other
address as the Company may from time to time in writing designate, and if to
Crane at 0000 Xxxxx Xxxxxx Xxx, Xxxx Xxxx, XX 00000 or at such address as Crane
may from time to time in writing designate. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number specified pursuant to this Section 11 and a
verification of receipt is received, (ii) if given by mail, three days after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when actually
delivered at such address.
11.4 Entire Agreement. This agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
any prior agreements, undertakings, commitments and practices relating to the
subject matter hereof.
11.5 Amendments. No amendment or modification of the terms of
this agreement shall be valid unless made in writing and duly executed by both
parties.
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11.6 Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to conflicts of law doctrines and any court action arising out of this Agreement
shall be brought in any court of competent jurisdiction within the State of
California, County of Orange.
11.7 Headings. Section and other headings contained in this
agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this agreement.
IN WITNESS WHEREOF, the parties have executed this Option as of the date
first above written.
XXXXXX GENERAL CORPORATION
By: /s/XXXXXXX X. XXXXXX
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XXXXXXX X. XXXXXX, Chairman
/s/ XXXXXX X. XXXXX
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XXXXXX X. XXXXX
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WAIVER OF DEMAND REGISTRATION RIGHT
Provided that this agreement is executed on behalf of Xxxxxx General
Corporation, a California corporation (the "Company") and delivered to the
undersigned on or before May 30, 1997, the undersigned hereby agrees to amend
his Stock Option Agreement with the Company dated April 3, 1997 (the "Stock
Option Agreement") as follows:
1. The undersigned hereby waives his right to demand the filing of a
registration statement by the Company, pursuant to Section 8.1 of the Stock
Option Agreement, with respect to the resale by him of all or a portion of his
Registrable Securities (as that term is defined in the Stock Option Agreement).
2. In lieu of such demand registration right, the undersigned shall have
the right, at any time and from time to time, at the election of the
undersigned, to exercise his right for a cashless exercise of all or a portion
of the options subject to the Stock Option Agreement by notifying the Company
that he is exercising a number of options. The number of shares to be issued to
the undersigned shall equal the product of (a) the fair market value per share
less the exercise price, divided by the fair market value per share, times (b)
the number of options to be exercised. For purposes of the foregoing sentence,
the fair market value per share of the Company's Common Stock shall be deemed to
be the average of the closing sale or bid price of the Common Stock for the five
trading days immediately prior to the delivery of such election by the
undersigned to the Company.
All other terms and conditions of the Stock Option Agreement shall remain
unchanged.
/s/XXXXXX X. XXXXX
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Dated: May 21, 1997 Xxxxxx X. Xxxxx
AGREED AND ACCEPTED:
XXXXXX GENERAL CORPORATION
By /s/ XXX X. XXXX
------------------------------- Dated: May 21, 1997
Xxx X. Xxxx
