EXHIBIT 10.4
XXXXXXX JEWELERS, INC.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
September 29, 1998
Xx. Xxxxx X. XxXxxxxxxx
Dear Xx. XxXxxxxxxx:
Xxxxxxx Jewelers, Inc. ("Xxxxxxx") hereby grants to you, as of the
Effective Date (as hereinafter defined) and subject to the conditions
hereinafter set forth, One Hundred Thousand (100,000) shares of the Common Stock
(as hereinafter defined) of Xxxxxxx (the "Restricted Stock"). This letter
agreement (the "Restricted Stock Agreement") shall evidence such grant.
1. Date of Grant: This grant shall take effect on the Effective Date,
which for all purposes hereunder shall be deemed the Date of Grant.
2. Cost of Shares of Restricted Stock: This grant of Restricted Stock is
considered additional compensation, for the periods specified in paragraph 6,
and shall be at no cost to you.
3. Delivery of Restricted Stock: The Restricted Stock shall be issued to
you as a matter of record as of the Date of Grant but shall not be delivered to
you until certain specified conditions, hereinafter set forth, are met.
4. Dividend Rights: You shall have full dividend rights with respect to
each share of Restricted Stock, beginning with the Date of Grant, and shall
retain such rights so long as such share of Restricted Stock is not forfeited by
you prior to vesting or disposed of by you after vesting.
5. Voting Rights: You shall have full voting rights with respect to each
share of Restricted Stock, beginning with the Date of Grant, and shall retain
such rights so long as such share of Restricted Stock is not forfeited by you
prior to vesting or disposed of by you after vesting.
6. Vesting: One quarter (25%) of the shares of Restricted Stock shall be
deemed earned on the Date of Grant and shall vest and be delivered to you free
of any restriction imposed hereunder on the Date of Grant, one quarter (25%) of
the shares of Restricted Stock shall be deemed earned during the one-year period
ending on the first anniversary of the Date of Grant and shall vest and be
delivered to you free of any restriction imposed hereunder on the last day of
such period, one quarter (25%) of the shares of Restricted Stock shall be deemed
earned during the one-
HO1:\158500\01\3#@S01!.DOC\21901.0001
year period ending on the second anniversary of the Date of Grant and shall vest
and be delivered to you free of any restriction imposed hereunder on the last
day of such period, and one quarter (25%) of the shares of Restricted Stock
shall be deemed earned during the one-year period ending on the third
anniversary of the Date of Grant and shall vest and be delivered to you free of
any restriction imposed hereunder on the last day of such period, provided
however, that except as provided in paragraph 8 below, such shares shall vest
and be delivered only if at the time set forth above for vesting and delivery
you are then in the employ of Xxxxxxx or one of its subsidiaries
("Subsidiaries"), as such term is defined in ss.424(f) of the Internal Revenue
Code of 1986, as amended ("Code"), and shall have been continuously so employed
since the Date of Grant. If there should come a time when you are no longer
employed by either Xxxxxxx or a Subsidiary of Xxxxxxx (collectively, the
"Company"), then at such time all shares of Restricted Stock not yet vested
shall be forfeited (except as provided in paragraph 8 below). Notwithstanding
the foregoing, the Board of Directors of Xxxxxxx in its sole discretion, may
accelerate the vesting schedule as set out above in whole or in part at any time
and from time to time.
7. Non-Transferability: No share of Restricted Stock shall be
transferable by you prior to vesting, except pursuant to (i) will or the laws of
descent and distribution upon your death or (ii) in connection with the Loan (as
such term is defined in the Employment Agreement between you and Xxxxxxx dated
as of even date herewith, as the same may be amended (as so amended, if amended,
the "Employment Agreement")).
8. Accelerated Vesting:
(a) Death or Disability: In the event of your death or
Disability while in the employ of the Company, all shares of Restricted Stock
not yet vested due to the restrictions set forth above shall become immediately
vested and, if not already delivered, shall be delivered to you or your estate.
As used herein, "Disability" shall mean the occurrence of an event or events
that renders you with respect to your physical or mental condition unable to
perform, in the view of the Board of Directors of Xxxxxxx and as certified in
writing by a competent medical physician, the duties of your position with the
Company and which results in your being entitled to benefits under Xxxxxxx'
disability insurance plan.
(b) Termination of Employment: In the event (i) your
employment by the Company is terminated Without Cause (as hereinafter defined)
or (ii) you voluntarily terminate your employment with the Company for Good
Reason (as hereinafter defined), then all shares of Restricted Stock not yet
vested due to the restrictions set forth above shall become immediately vested
and, if not already delivered, shall be delivered to you.
(c) Change in Control: In the event of a Change in Control (as
hereinafter defined), all shares of Restricted Stock not yet vested due to the
restrictions set forth above shall become immediately vested and, if not already
delivered, shall be delivered to you.
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9. Definitions:
(a) "Without Cause" means any termination of your employment
by the Company which is not a termination of employment for Cause or for
Disability. "Cause" means (i) your conviction for, or plea of nolo contendere
to, any felony; (ii) your willful fraud or material dishonesty in connection
with your performance of your duties in your position with the Company; (iii)
your failure, other than due to illness, Disability or death or as a result of
any event that constitutes Good Reason hereunder, to substantially perform your
duties in your position with the Company that results in material harm to the
Company; or (iv) your gross negligence in the performance of your duties in your
position with the Company (other than arising solely due to physical or mental
Disability) that results in material harm to the Company; in each case, for
purposes of clauses (iii) and (iv), after the Board of Directors of Xxxxxxx has
provided you with 30 days' written notice of such circumstances and the
possibility of an event giving rise to termination for Cause, and you fail to
cure such circumstances within those 30 days. For purposes of this definition,
no act, or failure to act, on your part shall be considered "willful" unless
done, or omitted to be done, by you in bad faith and without reasonable belief
that your action or omission was in the best interests of the Company. You shall
not be deemed to have been terminated for Cause unless and until the Board of
Directors of Xxxxxxx finds that your termination for Cause is justified and has
given you written notice of termination, specifying in detail the particulars of
your conduct found by the Board to justify such termination for Cause.
(b) "Good Reason," when used with reference to your voluntary
termination of your employment with the Company, means (i) a change in your
status, title, position or responsibilities (including reporting
responsibilities) which, in your reasonable judgment, represents an adverse
change from your status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with your
status, title, position or responsibilities; or any removal of you from or
failure to reappoint or reelect you to any of such offices or positions, except
in connection with the termination of your employment for Disability, Cause, as
a result of your death or by you other than for Good Reason; (ii) a breach by
the Company of the compensation and benefit provisions set forth in Sections 4
through 6 of the Employment Agreement; (iii) a written notice of non-renewal of
the Employment Agreement being given by Xxxxxxx to you pursuant to Section 3
thereof; (iv) the inability of Xxxxxxx and you to reach agreement on the terms
of a new employment agreement prior to the Expiration Date or any Renewal Date
(as such terms are defined in the Employment Agreement) that follows notice by
Xxxxxxx to you of its intent to renegotiate the terms of the Employment
Agreement; (v) any termination by you within twenty-four (24) months of the
occurrence of a Change in Control; (vi) a material breach by Xxxxxxx of any
other term of the Employment Agreement; provided, however, that none of the
events described in (i) through (vi) above shall be considered Good Reason, if
you consent, in writing, to the proposed action by Xxxxxxx which would otherwise
constitute Good Reason prior to the time the event actually occurs; and further
provided that no event described in clauses (i), (ii), or (vi) above shall be
considered Good Reason until you have provided Xxxxxxx with written notice which
(a) describes the event or occurrences which you believe constitute Good Reason
and (b) provide Xxxxxxx with a minimum of fifteen (15) days in which to correct
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or address such events or occurrences, after which if no such correction occurs
to your reasonable satisfaction, such event shall be deemed to be Good Reason.
(c) "Change of Control" shall mean the occurrence of (i) the
dissolution or liquidation of Xxxxxxx, (ii) a reorganization, merger or
consolidation of Xxxxxxx with one or more corporations as a result of which
Xxxxxxx is not the surviving corporation or as a result of which it is the
surviving corporation and its outstanding voting securities are converted to or
reclassified as cash, securities of another corporation or other property
(unless the principal purpose of such transaction is to change the state of
Xxxxxxx' incorporation), (iii) upon a sale of assets of Xxxxxxx having a fair
market value equal to more than 50% of the total fair market value of Xxxxxxx'
assets to an entity which is not controlling, controlled by or under common
control with Xxxxxxx, or (iv) the acquisition of a record or beneficial interest
in more than 30% of the then outstanding voting securities of Xxxxxxx, either in
a single transaction or a series of transactions, by an entity or "group" within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, which is not an affiliate
of Xxxxxxx; provided, however, that two or more persons or entities shall not be
deemed to constitute a "person" or "group" for purposes hereof in respect of any
securities of Xxxxxxx received by them pursuant to the Plan of Reorganization
merely by virtue of the fact that such persons or entities were each Bondholders
(as such term is defined in the Plan of Reorganization).
(d) "Common Stock" means shares of the common stock of
Xxxxxxx, par value $.001 per share, authorized and issued pursuant to the terms
of the Plan of Reorganization.
(e) "Effective Date" shall have the meaning ascribed to that
term in the Plan of Reorganization.
(f) "Plan of Reorganization" means the Original Disclosure
Statement and Plan of Reorganization dated April 30, 1998 proposed by Barry's
Jewelers, Inc., as modified, as confirmed by the United States Bankruptcy Court
for the Central District of California (Case No. LA 97-27988 VZ).
10. Adjustment Upon Changes in Capitalization: In the event that each of
the outstanding shares of Common Stock of Xxxxxxx shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of Xxxxxxx or of another corporation or entity, whether by reason of stock
dividend, recapitalization, merger, consolidation, split-up, spinoff,
combination, exchange of shares or the like, then there shall be substituted for
each share of Restricted Stock the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock of Xxxxxxx shall be
so changed or for which each such share shall be exchanged.
11. Taxes: When the shares of Restricted Stock vest or upon your earlier
election pursuant to Section 83(b) of the Code to be taxed at the time of the
transfer of the Restricted Stock, Xxxxxxx shall withhold from any delivery of
shares the amount required by law which is necessary to satisfy any federal and
state income tax, as well as any Federal Insurance Contributions Act ("FICA")
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withholding requirements. At such time, Xxxxxxx shall pay to the respective
taxing authority the amount of cash as is necessary (after taking into account
all federal, state and local income taxes and FICA taxes which would be payable
by you as a result of a deemed receipt of Xxxxxxx' payment) to place you in the
same after-tax position as you would have been in if no federal, state or local
income taxes were required to be withheld. For purposes of the preceding
sentence, it shall be conclusively presumed that your actual rate of income tax
shall equal the rate of withholding tax.
12. Right to Continued Employment: Nothing in this Agreement shall
confer upon you any right to continue in the employ of Xxxxxxx or any of its
Subsidiaries or interfere with the right of Xxxxxxx or any of its Subsidiaries
to terminate your employment at any time (subject to any rights you may have
under a separate employment agreement).
13. Investment Representation: In the event the Restricted Stock to be
delivered to you is not registered under the Securities Act of 1933, as amended
(the "1933 Act"), you represent to Xxxxxxx that the shares of Restricted Stock
to be received by you will be acquired for investment for your own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that at the time of receipt of such shares of Restricted Stock
you will have no present intention of selling, granting participation in or
otherwise distributing the same. You will reconfirm such investment
representation at the time of the future delivery of shares of Restricted Stock.
You further represent that you do not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person with respect to any of the shares of Restricted
Stock.
You understand that if the Restricted Stock to be delivered to you is
not registered under the 1933 Act, on the grounds that the issuance of such
Restricted Stock is exempt from registration under the 1933 Act pursuant to
Section 4(2) thereof, Xxxxxxx' reliance on such exemption will be predicated on
your representations set forth herein.
You understand that the shares of Restricted Stock to be delivered to
you under this Restricted Stock Agreement may not thereafter be sold,
transferred or otherwise disposed of without registration under the 1933 Act or
an exemption therefrom.
In the event of any conflict between the terms of this Restricted Stock
Agreement and the Employment Agreement, the terms of the Employment Agreement
shall govern.
This Restricted Stock Agreement shall be governed by, construed, applied
and enforced in accordance with the laws of the state of Texas, except that no
doctrine of choice of law shall be used to apply any law other than that of
Texas, and no defense, counterclaim or right of set-off given or allowed by the
laws of any other state or jurisdiction, or arising out of the enactment,
modification or repeal of any law, regulation, ordinance or decree of any
foreign jurisdiction, shall be interposed in any action hereon.
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Any action or proceeding arising out of this Restricted Stock Agreement
(excluding any actions or proceedings subject to the mandatory arbitration
provisions set forth below, but including any action to confirm an award of such
arbitrators and enter judgment thereon) may be commenced in the courts of the
state of Texas located in the County of Xxxxxx or the United States District
Courts located in the County of Xxxxxx. Xxxxxxx and you consent to in personam
jurisdiction with respect to such courts, agree that venue will be proper in
such courts and waive any objections based upon forum non conveniens. This
choice of forum shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Restricted Stock
Agreement to enforce same in any other jurisdiction.
With the exception of actions to enforce an arbitration award, all
claims and disputes between Xxxxxxx and you in connection with this Restricted
Stock Agreement shall be submitted to final and binding arbitration administered
and conducted by the American Arbitration Association in Austin, Texas pursuant
to its Labor Arbitration Rules then in effect; provided, that, that the party
seeking to submit a claim or dispute hereunder to arbitration shall give the
other party written notice of any arbitration proceeding at least 60 days' prior
to such proceeding; provided, further, that the parties mutually agree to
negotiate in good faith to resolve their differences prior to such arbitration
proceeding.
Very truly yours,
XXXXXXX JEWELERS, INC.
By: /s/ E. Xxxxx Xxxxxx
--------------------------------------------
Name: E. Xxxxx Xxxxxx
Title: Executive Vice President,
Chief Financial Officer and Secretary
Agreed to and accepted
/s/ Xxxxx X. XxXxxxxxxx
----------------------------------------
Xxxxx X. XxXxxxxxxx
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