STOCK PURCHASE AGREEMENT
STOCK PURCHASE RIGHT ISSUED (#) ____
STOCK PURCHASE CERTIFICATE
THIS IS TO CERTIFY that The Keith Companies, Inc., a California corporation (the
"COMPANY"), has offered you (the "PURCHASER") the right to purchase Common Stock
(the "Stock" or "Shares") of the Company under its Amended and Restated 1994
Stock Incentive Plan (the "Plan"), as follows:
Name of Purchaser: _________________________
Address of Purchaser: c/o The Keith Companies
19 Technology Drive
Irvine, CA 92618
Number of Shares: ______________________
Purchase Price: Prior services rendered with a value equal to
$____($_____per share)
Offer Grant Date: ______________________
Offer Expiration Date: 15 Days after the Offer Grant Date
Vesting
Commencement Date: ______________________
Vesting Schedule: ANNIVERSARY NUMBER OF
OF THE VESTING VESTED
COMMENCEMENT DATE SHARES
----------------- ------
First ___________
Second _________
Third _________
By your signature and the signature of the Company's representative below, you
and the Company agree to be bound by all of the terms and conditions of the
Stock Purchase Agreement, which is attached hereto as Annex I and the Plan (both
incorporated herein by this reference as if set forth in full in this document).
By executing this Agreement, you hereby irrevocably elect to exercise the
purchase rights granted pursuant to the Stock Purchase Agreement, to receive the
shares of Restricted Stock of The Keith Companies, Inc., designated above, and
to waive any claim to compensation for prior services to the Company as payment
of the purchase price of the shares being purchased.
PURCHASER: THE KEITH COMPANIES, INC.
By:
- -------------------------------------------- ------------------------------
[Name] Aram H. Keith, Chief Executive
Officer
Dated:______________________________________ Dated: _______________________
ANNEX I
THE SHARES OF STOCK GRANTED PURSUANT TO THIS AGREEMENT ARE NOT
TRANSFERABLE OTHER THAN AS SET FORTH IN THIS AGREEMENT.
THE KEITH COMPANIES, INC. AMENDED AND RESTATED 1994 STOCK
INCENTIVE PLAN
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is made and entered into on the
execution date of the Stock Purchase Certificate to which it is attached (the
"CERTIFICATE"), by and between The Keith Companies, Inc., a California
corporation (the "COMPANY"), and the Director, Employee or Consultant
("PURCHASER") named in the Certificate.
Pursuant to the The Keith Companies, Inc. Amended and Restated 1994 Stock
Incentive Plan (the "PLAN"), the Administrator of the Plan has authorized the
grant to Purchaser of the right to purchase shares of the Company's Common
Stock, upon the terms and subject to the conditions set forth in this Agreement
and in the Plan. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Plan.
SECTION 1. THE OFFER
1.1 OFFER OF THE STOCK. The Company hereby offers to sell to Purchaser the
number of shares of stock set forth in the certificate at the price
and subject to the restrictions set forth in this Agreement (the
shares of stock which you purchase under this agreement are referred
to as the "Stock" or "Shares").
1.2 PURCHASE PRICE. The Purchase Price for the Stock is set forth in the
Certificate.
1.3 PAYMENT FOR THE STOCK. Shares have been awarded under the Plan in
consideration of services rendered to the Company, a Parent or a
Subsidiary prior to the award. By your execution of the Certificate,
you agree to purchase the Shares in lieu of receiving unpaid
compensation for such prior services in the amount set forth in the
Certificate and to waive any claim for such compensation. Purchase of
the Shares constitutes payment in full of the Company's obligation to
pay you such compensation, regardless of whether or not you actually
vest in some or all of the Shares.
1.4 EXPIRATION OF OFFER. This offer expires at 5:00 o'clock p.m. on the
date set forth in the certificate.
SECTION 2. ACCEPTANCE OF THE OFFER
There is no obligation to exercise the rights granted to you under this
Agreement, in whole or in part. Purchaser may purchase fewer shares than the
number offered to Purchaser in this Agreement. However, you will not be entitled
to a cash or other form of payment attributable to compensation for prior
services if you do not accept the offer or any portion thereof. If
Purchaser decides to accept the offer and purchase any shares offered, Purchaser
must do the following:
2.1 COMPLETE DOCUMENTS. Complete, sign and date one copy of the
Certificate;
2.2 SPOUSAL CONSENT. If Purchaser is married, Purchaser must have his or
her spouse sign and date one copy of the attached Spousal Consent; and
2.3 DELIVER TO COMPANY. Deliver to the Company on or before the time the
offer expires, the signed copy of the Certificate attached to and
forming part of this Agreement and the Spousal Consent as payment for
the Stock.
Purchaser should retain a copy of all of the signed documents for his or her
files.
SECTION 3. RESTRICTIONS ON THE STOCK
3.1 RESTRICTIONS ON TRANSFER OF SHARES. Purchaser shall not sell, make any
short sale of, loan, hypothecate, pledge, grant any option for the
repurchase of, transfer the economic consequences of ownership or
otherwise dispose or transfer for value (each a "TRANSFER") or
otherwise agree to engage in any of the foregoing transactions with
respect to any shares of Stock unless and until such shares become
Vested Shares (as defined in Section 3.2) and satisfy the additional
conditions of this Section. The Company shall not be required to
register any such Transfer and the Company may instruct its transfer
agent not to register any such Transfer, unless and until all of the
following events shall have occurred:
3.1.1 The Shares are Transferred pursuant to and in conformity with:
(i) (x) an effective registration statement filed with the
Securities and Exchange Commission (the "COMMISSION") pursuant to
the Securities Act of 1933, as amended (the "ACT") or (y) an
exemption from registration under the Act; and (ii) the
securities laws of any state of the United States; and
3.1.2 Purchaser has, prior to the Transfer of such Shares, and if
requested by the Company, provided all relevant information to
the Company's counsel so that upon the Company's request, the
Company's counsel is able to deliver, and actually prepares and
delivers to the Company a written opinion that the proposed
Transfer is: (i) (x) pursuant to a registration statement which
has been filed with the Commission and is then effective or (y)
exempt from registration under the Act as then in effect, and the
Rules and Regulations of the Commission thereunder; and (ii) is
either qualified or registered under any applicable state
securities laws, or exempt from such qualification or
registration. The Company shall bear all reasonable costs of
preparing such opinion.
3.2 ADDITIONAL RESTRICTIONS ON TRANSFER OF NON-VESTED SHARES. Purchaser
agrees, for himself or herself and for his or her heirs, successors
and assigns, that Purchaser shall have no right or power under any
circumstance to Transfer any interest in shares of the Stock which are
"NON--VESTED SHARES," as determined by the schedule set forth in the
Certificate, except to the Company. As used in this Agreement, "VESTED
SHARES" means all shares of the Stock which Purchaser has the right to
Transfer at a specified point in time and "NON-VESTED SHARES" means
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all shares of the Stock which Purchaser does not have the right to
Transfer at a specified point in time. The Certificate sets forth the
vesting schedule.
3.3 COMPANY'S REPURCHASE RIGHT.
3.3.1 SCOPE OF REPURCHASE RIGHT. Unless they have become vested, the
Shares acquired under this Agreement initially shall be
"RESTRICTED STOCK" and shall be subject to a right (but not an
obligation) of repurchase by the Company (the "REPURCHASE
RIGHT"). The Purchaser shall not transfer, assign, encumber or
otherwise dispose of any Restricted Stock, except as provided in
the following sentence. The Purchaser may transfer Restricted
Stock by will or intestate succession or by transfer by
instrument to a trust providing that the Restricted Stock is to
be passed to one or more beneficiaries upon death of the trustor.
PROVIDED, HOWEVER, the transferee must agree in writing on a form
prescribed by the Company to be bound by all provisions of this
Agreement. If the Purchaser transfers any Restricted Stock, then
this Section 3 will apply to the transferee to the same extent as
to the Purchaser.
3.3.2 EXERCISE PERIOD. The Repurchase Right shall be exercisable only
during the 90-day period following the later of the date when the
Purchaser's service as an Employee, Outside Director or
Consultant ("SERVICE") terminates for any reason, with or without
cause, including (without limitation) death or disability.
3.3.3 NON APPLICABILITY AND LAPSE OF REPURCHASE RIGHT.
3.3.3.1 The Repurchase Right shall lapse with respect to the
Shares in accordance with the vesting schedule set forth in
the Certificate.
3.3.3.2 If (i) there is a Change in Control before the
Purchaser's Service terminates and (ii) the Restricted Stock
is cancelled without substitution of successor stock or
payment of any consideration, the Right of Repurchase shall
lapse and all of the remaining Non-Vested Shares of
Restricted Stock shall become Vested Shares.
3.3.3.3 In addition, if (i) there is a Change in Control before
the Purchaser's Service terminates and (ii) Purchaser is
involuntarily or constructively terminated from his position
with the Company at any time during a two year period (a
"TERMINATION") following the Change in Control, the Right of
Repurchase shall lapse and all of the remaining Non-Vested
Shares of Restricted Stock shall become Vested Shares.
3.3.3.4 For purposes of this Agreement a Change in Control of the
Company shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not the Company is then subject to such
reporting requirement; provided that, without limitation,
such a Change in Control shall be deemed to have occurred if
(i) any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act), other than (A) Aram Keith (or
his family members or affiliates) or (B) a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty
percent
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(20%) or more of the combined voting power of the Company's
then outstanding voting securities; (ii) there is a merger
or consolidation of the Company in which the Company does
not survive as an independent public company; (iii) the
business or businesses of the Company for which your
services are principally performed are disposed of by the
Company pursuant to a partial or complete liquidation of the
Company, a sale of assets (including stock of a subsidiary)
of the Company, or otherwise; or (iv) during any period of
two (2) consecutive years during the term of this Agreement,
individuals who, at the beginning of such period constitute
the Board, cease for any reason to constitute at least a
majority thereof, unless the election of each director who
was not a director at the beginning of such period has been
approved in advance by directors representing at least
two-thirds of the directors then in office who were
directors at the beginning of the period.
3.3.3.5 For the purposes of this Agreement, involuntary or
constructive Termination shall include, without limitation:
(a) A reduction by the Company in Purchaser's base salary,
bonus computation or title, or a substantial reduction
in Purchaser's responsibilities as in effect
immediately prior to the Change in Control or as the
same may be increased from time to time or a change in
employment conditions materially adverse from those in
effect immediately prior to the Change in Control;
(b) A failure by the Company to continue any bonus plans in
effect as of the date of a Change in Control (the
"Bonus Plans") or a failure by the Company to continue
Purchaser as a participant in the Bonus Plans on at
least the same basis as Purchaser presently
participates in accordance with the Bonus Plans as of
the date immediately prior to the Change in Control;
(c) Without Purchaser's express written consent, the
Company's requiring Purchaser to be based anywhere
other than within 25 miles of Purchaser's present
office location, except for required travel on the
Company's business to an extent substantially
consistent with Purchaser's present business travel
obligations;
(d) The failure by the Company to continue in effect any
stock ownership plan, stock purchase plan, stock option
plan, life insurance plan, health-and-accident plan or
disability plan in which Purchaser is participating at
the time of a Change in Control of the Company (or
plans providing you with substantially similar
benefits), or the taking of any action by the Company
which would adversely affect Purchaser's participation
in or materially reduce Purchaser's benefits under any
of such plans;
(e) The taking of any action by the Company which would
deprive Purchaser of any material fringe benefit
(including, by way of example and without limitation,
auto allowance) enjoyed by you at the time of the
Change in Control or the failure by the Company to
provide Purchaser with the number of paid vacation days
to which Purchaser is then entitled in accordance with
the Company's normal vacation policy in effect on the
date of the Change in Control;
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(f) The failure by the Company to obtain the assumption or
the agreement to perform this Agreement by any
successor of the Company; and
(g) Any other involuntary Termination which is not
otherwise a result of (i) an act or acts of dishonesty
by Purchaser constituting a felony for which Purchaser
is convicted concerning Purchaser's personal enrichment
at the Company's expense, or (ii) a deliberate and
intentional refusal by Purchaser (except by reason of
incapacity due to illness or accident) to comply with
the provisions of any confidentiality agreement between
Purchaser and the Company, and such breach results in
demonstrably material injury to the Company.
3.3.3.6 The Repurchase Right shall not exist with respect to
Vested Shares of Stock if (i) the shares have been
registered under a then currently effective registration
statement under applicable federal securities laws and the
issuer is subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act or becomes an investment
company registered or required to be registered under the
Investment Company Act of 1940, or (ii) a determination is
made by counsel for the Company that such Repurchase Right
restrictions are not required in the circumstances under
applicable federal or state securities laws.
3.3.4 REPURCHASE PRICE. Following a termination of the Participant's
Service, which does not result from the Company's termination of
Service for Cause, the Repurchase Right shall be exercisable at a
price equal to the Purchase Price of Non-Vested Shares or Fair
Market Value, if lower. Following the termination of the
Participant's Service for Cause, the Repurchase Right shall be
exercisable as to both Vested Shares and Non-Vested Shares at a
price equal to the lower of the Purchase Price as set forth in
the Certificate, or Fair Market Value.
3.3.5 RIGHTS OF REPURCHASE ADJUSTMENTS. If there is any change in the
number of outstanding shares of Stock by reason of a stock split,
reverse stock split, stock dividend, recapitalization,
combination, reclassification, dissolution or liquidation of the
Company, any corporate separation or division (including, but not
limited to, a split-up, a split-off or a spin-off), a merger or
consolidation; a reverse merger or similar transaction, then (i)
any new, substituted or additional securities or other property
(including money paid other than as an ordinary cash dividend)
distributed with respect to any Restricted Stock (or into which
such Restricted Stock thereby become convertible) shall
immediately be subject to the Right of Repurchase; and (ii)
appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class
of the Restricted Stock and to the price per share to be paid
upon the exercise of the Right of Repurchase; PROVIDED, HOWEVER,
that the aggregate Purchase Price payable for the Restricted
Stock shall remain the same.
3.4 RETENTION OF RESTRICTED STOCK. Purchaser shall immediately deliver to
the Company each certificate representing Restricted Stock issued to
Purchaser hereunder, or deemed to be issued to Purchaser hereunder,
together with the collateral instruments of transfer executed in
blank, to be held by the Company until such time as all shares
represented by that certificate become vested and any indebtedness
with respect to those shares has been paid in full; provided, however,
that if the Company holds a certificate representing Vested Shares and
Restricted Stock, and any indebtedness with respect to the vested has
been paid in full, upon Purchaser's request the Company will cause a
certificate representing the Vested Shares to be delivered to
Purchaser, but the Company will retain any certificate representing
the Restricted Stock. Any
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new, substituted or additional securities or other property with
respect to the Restricted Stock shall be held in the Company's
custody, but only to the extent the shares are at the time Restricted
Stock. All regular cash dividends on Restricted Stock (or other
securities at the time held in custody) shall be paid directly to the
Purchaser and shall not be held in custody. Restricted Stock, together
with any other assets or securities held in custody hereunder, shall
be (i) surrendered to the Company for repurchase and cancellation upon
the Company's exercise of its Right of Repurchase (ii) released to the
Purchaser upon the Purchaser's request to the extent the shares are no
longer Restricted Stock (but not more frequently than once every six
months). In any event, all shares which have vested (and any other
vested assets and securities attributable thereto) shall be released
within 60 days after the Purchaser's Termination of Service.
3.5 NON-COMPLYING TRANSFERS. Every attempted Transfer of any shares of the
Stock in violation of this Section 3 shall be null and void AB INITIO,
and of no force or effect.
SECTION 4. LEGENDS ON STOCK CERTIFICATES
Purchaser agrees that the Company may place on each certificate representing
Shares the following legend:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
AND TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN The Keith
Companies, Inc. Amended and Restated 1994 Stock Incentive Plan
AND THE Stock Purchase AGREEMENT PURSUANT TO WHICH THE SHARES
EVIDENCED BY THIS CERTIFICATE WERE ISSUED, COPIES OF WHICH ARE ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. NO TRANSFER OR
PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN
ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID PLAN AND
Stock Purchase AGREEMENT (INCLUDING THE COMPANY'S RIGHT OF
REPURCHASE CONTAINED THEREIN)."
SECTION 5. WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing the Certificate attached to and forming part of this Agreement,
Purchaser acknowledges and agrees that neither the Company nor any other person
or entity is under any obligation to sell or transfer to Purchaser any option or
equity security of the Company, other than the shares of Stock subject to this
Agreement and any other right or option to purchase Stock which was previously
granted in writing to Purchaser by the Board (or a committee thereof). By
signing the Certificate attached to and forming part of this Agreement, except
as provided in the immediately preceding sentence, Purchaser specifically waives
all rights he or she may have had prior to the date of this Agreement to receive
any option or equity security of the Company. By signing the Certificate
attached to and forming part of this Agreement, Purchaser also acknowledges and
agrees that neither the Company nor any other person or entity is under any
obligation to pay unpaid compensation to Purchaser for prior services to the
extent attributable to the Purchase Price under this Agreement, other than the
shares of Stock subject to this Agreement.
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SECTION 6. TAX WITHHOLDING.
6.1 PAYMENT OF TAXES. Purchaser agrees that, subject to SECTION 6.2 below,
no later than the date as of which the restrictions on the Restricted
Stock shall lapse with respect to all or any of the Restricted Stock
covered by this Agreement (i.e., the date the Non-Vested Shares become
Vested Shares), Purchaser shall pay to the Company any federal, state
or local taxes of any kind, including payroll taxes, required by law
to be withheld, if any, with respect to the Restricted Stock for which
the restrictions shall lapse. The Purchaser's tax withholding payments
may, to the extent permitted by the Administrator, be made (i) in
cash, (ii) by withholding and applying shares of Common Stock to which
the Participant is entitled as a result of the vesting and lapse of
restrictions on Restricted Stock, or (iii) by payment in the form of
Company Stock already held by the Purchaser. Withholding shares of
Common Stock or tendering shares of Company Stock already held by the
Purchaser, shall be limited to such number of shares, the Fair Market
Value of which on the date the Restricted Stock vests or the already
owned shares are tendered is equal to, but not in excess of, the
amount of Purchaser's minimum statutory tax withholding liability. The
Company shall, to the extent permitted by law, have the right to
deduct from any payment of any kind otherwise due to Purchaser any
federal, state or local taxes of any kind required by law to be
withheld with respect to the shares of such Common Stock.
6.2 83(B) ELECTION. If Purchaser properly elects, within thirty (30) days
of the Grant Date (the date of the purchase), to include in gross
income for federal income tax purposes an amount equal to the Fair
Market Value of the Restricted Stock less the amount, if any, paid by
the Purchaser for the Restricted Stock granted hereunder pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended,
Purchaser shall pay to the Company, or make other arrangements
satisfactory to the Administrator (including any alternative permitted
under SECTION 6.1 above) to pay to the Company in the year of such
grant, any federal, state or local taxes required to be withheld with
respect to such Stock. If Purchaser fails to make such payments, the
Company shall, to the extent permitted by law, have the right to
deduct from any payment of any kind otherwise due to Purchaser any
federal, state or local taxes of any kind required by law to be
withheld with respect to such Stock.
SECTION 7. GENERAL PROVISIONS.
7.1 FURTHER ASSURANCES. Purchaser shall promptly take all actions and
execute all documents requested by the Company which the Company deems
to be reasonably necessary to effectuate the terms and intent of this
Agreement. Any sale or transfer of the Stock to Purchaser by the
Company shall be made free of any and all claims, encumbrances, liens
and restrictions of every kind, other than those imposed by this
Agreement.
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7.2 NOTICES. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be given to the parties
hereto as follows:
If to the Company, to:
Attn: Chief Financial Officer
The Keith Companies, Inc.
19 Technology Drive
Irvine, CA 92618
If to Purchaser, to the address set forth in the records of the Company.
Any such notice request, demand or other communication shall be effective (i) if
given by mail, 72 hours after such communication is deposited in the mail by
first-class certified mail, return receipt requested, postage pre-paid,
addressed as aforesaid, or (ii) if given by any other means, when delivered at
the address specified in this Section 7.2.
7.3 TRANSFER OF RIGHTS UNDER THIS AGREEMENT. The Company may at any time
transfer and assign its rights and delegate its obligations under this
Agreement to any other person, Company, firm or entity, including its
officers, Directors and shareholders, with or without consideration.
7.4 PURCHASE RIGHTS NON TRANSFERABLE. Purchaser may not sell, transfer,
assign or otherwise dispose of any rights hereunder except by will the
laws of descent and distribution or to a Permitted Transferee and the
rights hereunder may be exercised during the lifetime of Purchaser
only by the Purchaser or by his or her guardian or legal
representative.
7.5 ADJUSTMENTS
7.5.1 STOCK DIVIDENDS, SPLITS, ETC. If there is any change in the
number of outstanding shares of Stock by reason of a stock split,
reverse stock split, stock dividend, recapitalization,
combination, reclassification, dissolution or liquidation of the
Company, any corporate separation or division (including, but not
limited to, a split-up, a split-off or a spin-off), a merger or
consolidation; a reverse merger or similar transaction, then (i)
any new, substituted or additional securities or other property
(including money paid other than as an ordinary cash dividend)
distributed with respect to any Restricted Stock (or into which
such Restricted Stock thereby become convertible) shall
immediately be subject to the Repurchase Right; and (ii)
appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class
of the Restricted Stock and to the price per share to be paid
upon the exercise of the Repurchase Right; PROVIDED, HOWEVER,
that the aggregate purchase price payable for the Restricted
Stock shall remain the same.
7.5.2 LIQUIDATION, DISSOLUTION, MERGER OR CONSOLIDATION. If a
dissolution or liquidation of the Company, or any corporate
separation or division, including, but not limited to, a
split-up, a split-off or a spin-off, or a sale of substantially
all of the assets of the Company; a merger or consolidation in
which the Company is not the Surviving Entity; or a reverse
merger in which the Company is the Surviving Entity, but the
shares of Company stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property,
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whether in the form of securities, cash or otherwise, then, the
Company, to the extent permitted by applicable law, but otherwise
in its sole discretion may provide for: (i) the continuation this
Purchase Right (if outstanding but unexercised) or the Restricted
Stock (if exercised) by the Company (if the Company is the
Surviving Entity); (ii) the assumption of the Plan and this
Purchase Right (if outstanding but unexercised) or the Restricted
Stock (if exercised) by the Surviving Entity or its parent; (iii)
the substitution by the Surviving Entity or its parent of a
purchase right (if the Purchase Right is outstanding but
unexercised) or restricted stock (if the Purchase Right is
exercised) with substantially the same terms; or (iv) the
cancellation of this Purchase Right (but not the Restricted Stock
if exercised) without payment of any consideration, provided that
if this Purchase Right would be canceled in accordance with the
foregoing, the Purchaser shall have the right, exercisable during
the later of the ten-day period ending on the fifth day prior to
such merger or consolidation or ten days after the Administrator
provides the Purchaser with a notice of cancellation, to exercise
this Purchase Right in whole or in part without regard to any
installment exercise provisions in this Agreement.
7.6 SUCCESSORS AND ASSIGNS. Except to the extent this Agreement is
specifically limited by the terms and provisions of this
Agreement, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successor,
assigns, heirs and personal representatives.
7.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO ITS CHOICE OF LAW PROVISIONS, AS CALIFORNIA LAWS ARE
APPLIED TO CONTRACTS ENTERED INTO AND PERFORMED IN SUCH STATE.
7.8 SEVERABILITY. Should any paragraph or any part of a paragraph
within this Stock Purchase Agreement be rendered void, invalid or
unenforceable by any court of law for any reason, such invalidity
or unenforceability shall not void or render invalid or
unenforceable any other paragraph or part of a paragraph in this
Stock Purchase Agreement.
7.9 THE PLAN. This Agreement is made pursuant to the Plan, and it is
intended, and shall be interpreted in a manner, to comply
herewith. Any provision of this Agreement inconsistent with the
Plan shall be superseded and governed by the Plan.
7.10 MISCELLANEOUS. Title and captions contained in this Agreement are
inserted for convenience and reference only and do not constitute
a part of this Agreement for any purpose.
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SPOUSAL CONSENT
The undersigned spouse of purchaser does hereby consent to the execution of the
foregoing Agreement by purchaser, and the performance by him of his obligations
thereunder.
DATED:
---------------------------- ---------------------------------
[Name]
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LETTER REGARDING
FEDERAL AND CALIFORNIA TAX CONSEQUENCES
The Keith Companies, Inc.
19 Technology Drive
Irvine, CA 92618
- -----------------------------
c/o The Keith Companies, Inc.
19 Technology Drive
Irvine, CA 92618
Dear______________:
This letter is to notify you of certain federal and California income tax
consequences to you as a result of your purchase of shares (the "SHARES") of
Common Stock of The Keith Companies, Inc. (the "COMPANY") pursuant to the Stock
Purchase Agreement dated __________, ____ between you and the Company.
The conclusion of this letter is that, if the purchase price for the Shares
equals their fair market value on the date you sign the Stock Purchase
Agreement, you should send copies of the attached form (the "SECTION 83 ELECTION
FORM") relating to Section 83 ("SECTION 83") of the Internal Revenue Code of
1986 (the "INTERNAL REVENUE CODE"), to the Internal Revenue Service and the
Company, not later than 30 days after the date of the Stock Purchase Agreement.
If the purchase price for the Shares is prior services rendered or is less than
their fair market value on the date you sign the Stock Purchase Agreement, you
should consider carefully whether or not you should file the Section 83 Form
within 30 days after you sign the Stock Purchase Agreement. Timely filing the
Section 83(b) Election Form will require you to recognize any taxable income
attributable to the Shares based on their market value at the date of purchase.
If you make the election, any subsequent increase in value will be taxed as
long-term or short-term capital gain (depending on your holding period) when you
sell or transfer the Shares.
FEDERAL INCOME TAX CONSEQUENCES
Certain federal income tax consequences to you in connection with your purchase
of the Shares are determined in accordance with Section 83.
SECTION 83(A). Under Section 83(a), a person to whom property is transferred in
connection with the performance of services ("SECTION 83 PROPERTY") must
recognize ordinary income in the year the property is transferred in an amount
equal to the fair market value of the Section 83 property at the time it is
transferred less the amount, if any, paid for the Section 83 property, unless
the Section 83 property is not transferable and is subject to a substantial risk
of forfeiture (collectively, a "RISK OF FORFEITURE"). If there is a Risk of
Forfeiture, then the person acquiring Section 83 property will not recognize
income until the Risk of Forfeiture lapses (unless a Section 83(b) election is
made - see below), at which time the person must recognize as ordinary income
the fair market value of the Section 83 property at that time less the amount,
if any, paid for the Section 83 property.
Your purchase of the Shares constitutes a transfer of Section 83 property.
Further, the Stock Purchase Agreement provides that, if you cease to be employed
by the Company for any reason, the Company must repurchase from you and you must
sell to the Company all Non-Vested Shares (as defined in the Stock Purchase
Agreement) for an amount which may be less than their fair market value. Under
Regulations promulgated under Section 83, these provisions constitute a Risk of
Forfeiture over your Non-Vested Shares. Thus, under Section 83(a), you would not
be required to recognize any income as a result of your purchase of the Shares
until they vest; when they vest, you would be required under Section 83(a) to
recognize as ordinary income the excess, if any, of the fair market value of the
Shares (as of the day they vest) over the price you paid for those Shares under
the Stock Purchase Agreement (for this purpose, the value of any prior services
that were consideration for the purchase of Shares will be value at zero). If
the price of the Company's Common Stock is greater when the Shares vest than
when you purchased them, you could have a substantial tax liability in
connection with your purchase of the Shares when they vest.
SECTION 83(B) ELECTION. Section 83(b) provides an alternative method for taxing
Section 83 property. Under Section 83(b), a person may elect to recognize
ordinary income in the year Section 83 property is transferred to him or her,
rather then waiting until it vests. Thus, if you make a Section 83(b) election,
you will be required to recognize as ordinary income in the year you purchase
the Shares the difference, if any, between the fair market value of the Shares
on the date you sign the Stock Purchase Agreement and the purchase price you pay
for the Shares. For example, if you make the Section 83(b) election and you paid
a purchase price for the Shares equal to their fair market value, you will not
pay any taxes in the year of the purchase in connection with your purchase of
the Shares. On the other hand, if you make the Section 83(b) election and the
purchase price of the Shares is less than their fair market value on the date
you sign the Stock Purchase Agreement (for example, if Shares are granted in
lieu of unpaid compensation for prior services), you will be required to pay
taxes on the difference between those amounts in the year of the purchase. In
either case, however, if you make the Section 83(b) election, you will not be
required to recognize any income when the Shares vest.
To make the Section 83(b) election, you must file the Section 83 Form with both
the Company and the Internal Revenue Service office where you file federal
income tax returns. YOU MUST FILE THE SECTION 83(B) FORM WITHIN 30 DAYS AFTER
YOU SIGN THE STOCK PURCHASE AGREEMENT. In addition, you must attach a copy of
the Section 83(b) Form to your income tax return that covers the year in which
you filed the Form.
SALE OF SECTION 83 PROPERTY. If a person sells Section 83 property after the
Risk of Forfeiture lapses (or after making a Section 83(b) election), he or she
will recognize taxable gain or loss equal to the difference between the amount
realized upon the sale of the Section 83 property and the person's "adjusted
basis" for the Section 83 property. The person's adjusted basis for the Section
83 property will be (i) the amount paid for the Section 83 property plus (ii)
any amount which the person has included in gross income pursuant to the Section
83(b) election. Thus, upon sale, you will recognize taxable gain or loss equal
to the difference between the sale price of the Shares and your adjusted basis
for the Shares.
In general, the gain or loss you recognize will be capital gain or loss if the
following "Capital Gain Requirements" are met: (i) the Section 83
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property is a capital asset and (ii) the Section 83 property is held for more
than 12 months from either the date the Restrictions on Transfer lapse or, if a
Section 83(b) election is made, the date the Section 83 property is acquired.
Thus, as the Shares are probably a capital asset in your hands, you will
recognize long-term capital gain or loss upon their sale if you hold them for
more than 12 months from either the date they vest or, if you make the Section
83(b) election, from the date you sign the Stock Purchase Agreement. If you hold
the Shares for less than 12 months from either the day they vest or, if you make
the Section 83 (b) election, from the date you sign the Stock Purchase
Agreement, you will recognize short-term capital gain or loss.
FORFEITURE OF SECTION 83 PROPERTY. If a person's interest in Section 83 property
is forfeited, the person will recognize gain or loss equal to the difference
between the amount realized upon forfeiture and the amount paid for the Section
83 property. In your case, if your employment with the Company is terminated
before all of the Shares have vested, the Company is obligated to repurchase
from you, and you are obligated to sell to the Company, any Non-Vested Shares at
the price you paid for them. As there would be no difference between the amount
realized upon forfeiture and the amount paid for the Shares, you would not be
required to recognize any gain or loss at that time. However, UPON FORFEITURE,
YOU WOULD NOT BE ABLE TO RECOUP ANY TAXES YOU PAY PURSUANT TO A SECTION 83(B)
ELECTION. The amount of taxes you pay in connection with Shares that are
forfeited will be considered a capital loss, but only to the extent of the
consideration you actually paid to purchase the Shares (i.e. other than your
prior services).
CALIFORNIA INCOME TAX CONSEQUENCES.
The California income tax consequences to you in connection with your purchase
of the Shares are identical to the federal income tax consequences. To make the
Section 83(b) election in California, you must file the Section 83(b) Form with
the Internal Revenue Service, as described above; there are no extra filing
requirements for making the Section 83(b) election in California.
If you have any questions concerning the tax consequences described in this
letter, please feel free to call me.
Sincerely,
The Keith Companies, Inc.
By:
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Its:
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ELECTION TO INCLUDE IN GROSS INCOME IN
YEAR OF TRANSFER PURSUANT TO SECTION 83(B)
THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to the provisions of Section
83(b) of the Internal Revenue Code of 1986, as amended, and the regulations of
the Commissioner of Internal Revenue promulgated thereunder, with respect to the
Section 83 property described below, and supplies the following information in
connection with that election:
1. The name, address, taxable year and taxpayer identification number of the
undersigned are:
Name
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Address
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-------------------------------------------
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Taxable Year __________ Taxpayer I.D. No.______________
2. The description of the Section 83 property with respect to which the
undersigned is making the election is as follows:
_______________ (_____) shares (the "SUBJECT SHARES") of the Common Stock of The
Keith Companies, Inc., a California corporation (the "COMPANY").
3. The date upon which the Subject Shares were transferred to, and acquired
by, the undersigned was ____________, ________.
4. The Subject Shares are subject to restrictions under a ___________ vesting
period. If the undersigned's employment terminates, the Company is
obligated to purchase and the undersigned is obligated to sell to the
Company all Subject Shares that are not vested for a purchase price, which
in certain circumstances may be less than the fair market value of the
Subject Shares.
5. The fair market value of the Subject Shares at the time of the transfer to,
and acquisition by, the undersigned (determined without regard to any
restrictions other than restrictions which by their terms will never lapse)
was $_____ per share.
6. The amount paid by the undersigned for the Subject Shares was $____ per
share.
7. The undersigned has furnished a copy of this election to the Company.
Dated:
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(Signature)
Make 4 copies
(1) IRS (to be filed at the IRS where you ordinarily file your returns) within
30 days after you sign the Stock Purchase Agreement.
(2) IRS (to be filed with your income tax return)
(3) The Keith Companies, Inc.
(4) Copy for purchaser
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