EXHIBIT 10.8
Consulting Agreement
THIS CONSULTING AGREEMENT (the "Agreement") is entered into this 12 day of
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July , 2002, by and between HiEnergy Technologies, Inc. (the
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"Company"), a Washington corporation, located at 00 Xxxxxxx Xxxxx, Xxxxxx,
Xxxxxxxxxx 00000 and Yeffet Security Consultant, Inc. (the "Consultant"), of 000
Xxxxxxx Xxxxx, Xxxxxxxxx Xxxx, Xxx Xxxxxx 00000.
WHEREAS, the Company is engaged in researching and developing noninvasive
stoichiometric detection and imaging technology that is capable of identifying
the chemical formula and retrieving the 3D image of materials remotely and
non-intrusively; and
WHEREAS, the Consultant has the capacity to provide the services of Xxxxx
Xxxxxx ("Yeffet") to the Company, and Yeffet is knowledgeable and has
substantial experience in the area of aviation security and has numerous
business contacts in the aviation industry and government; and
WHEREAS, the Company desires to retain the services of the Consultant to
assist the Company with business development, product and corporate image
advertising, and access to government grants and purchases;
NOW THEREFORE, in consideration of the promises and mutual covenants set forth
in this Agreement, the parties hereby agree as follows:
1. Scope of Services. The Company hereby retains the Consultant to
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assist the Company by providing the following services (collectively, the
"Services"):
a. Advertise and promote the Company's image, technology and
products to the aviation industry and government officials
involved directly or indirectly with security; and
b. Educate persons in the aviation industry and government about the
Company's technology and products; and
c. Pursue directly and indirectly research and development funding
for and purchasing from the Company through government grants and
purchases or other methods of funding purchases of the Company's
products; and
d. Pursue candidates for strategic alliances with the Company; and
e. Accomplish such other tasks and undertake such other
responsibilities as the Company or the Consultant may determine
that, due to Yeffet's contacts and expertise, will further the
Company's marketing and business objectives.
2. Performance of Services. The Consultant shall make Yeffet available
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to perform the Services. The parties agree that Yeffet possesses unique talents
and contacts with respect to performing the Services, and for this reason the
Company shall, in its sole and absolute discretion, be
Consulting Agreement - Page 1
entitled to insist that any or all of the Services hereunder be rendered by
Yeffet and not by another person or persons working at Yeffet's direction;
provided, however, that this right of the Company shall not preclude the
Consultant from employing others to assist Yeffet if the Services are performed
in a manner satisfactory to the Company. The Consultant and Yeffet shall perform
the services in a professional manner in accordance with accepted industry
standards. The Consultant shall determine the manner in which the Services are
to be performed and the specific hours to be worked by Yeffet. The Company will
rely on the Consultant to cause Yeffet to work as many hours as may be
reasonably necessary to fulfill the Consultant's obligations under this
Agreement. The Consultant represents and warrants that Yeffet is the chief
executive officer and principal consulting representative of the Consultant. The
Consultant agrees, and has secured Yeffet's agreement, that Yeffet will remain
the chief executive officer and principal consulting representative of the
Consultant during the Term (as hereinafter defined).
For purposes of this Agreement, the term "Measurement Period" shall mean
the period of time from the Commencement Date (as defined below) until the date
one year after the Company's Minisenzor product is operational and ready to be
shown for approval to appropriate authorities. For purposes of this Agreement,
the term "Minimum Performance Standards" shall, with respect to the Measurement
Period, mean the collection in cash by the Company of $500,000 or more, in the
aggregate, from the following sources: (a) government grants or business and
other third-party business that the Consultant produces for the Company and (b)
investment and/or financing sources that both (i) directly provide cash to the
Company and (ii) were directly or indirectly introduced to the Company by the
Consultant without the requirement of a fee or other remuneration being paid to
a third party.
During the Term, the Consultant shall make Yeffet available by telephone
conference as frequently as monthly to provide progress reports to members of
the Company's Board of Directors regarding the status of and progress on the
Services.
3. Commencement, Term and Renewal. This Agreement shall commence on
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the date first set forth above (the "Commencement Date") and shall remain in
effect for a period of three (3) years (the "Term") from the Commencement Date.
This Agreement may be renewed with revised terms, conditions and compensation
only upon the written agreement of both parties.
4. Termination.
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a. Termination. During the Term, this Agreement may be terminated as
follows:
(1) by the Company, (A) if on or after a date that is two (2)
years from the Commencement Date, the Company, in its sole and absolute
discretion, decides to terminate this Agreement, (B) effective as of the date on
which the Measurement Period ends, if the Consultant has failed to meet the
Minimum Performance Standards and notice of such failure is delivered within
sixty (60) days following the date
Consulting Agreement - Page 2
on which the Measurement Period ends, or (C) at any time, following delivery of
a written notice setting out specific deficiencies and a failure on the part of
the Consultant to cure within a reasonable period of time (but in no event more
than thirty (30) days), if Yeffet is not available to perform the Services as
provided by Section 2; or
(2) by the Consultant, if on or after a date that is two (2)
years from the Commencement Date, the Consultant, in its sole and absolute
discretion, decides to terminate this Agreement; or
(3) by either party, in the event the Company terminates or
suspends its business, becomes subject to any bankruptcy or insolvency
proceeding under Federal or state law, or becomes subject to direct control by a
trustee or similar authority; or
(4) by the Company, if at any time after the commencement of
the Services by the Consultant and Yeffet, the Company, pursuant to the
mechanism set forth in Section 16(g)(3), obtains a determination that Yeffet,
the Consultant or any of its agents or employees has committed a "for Cause"
violation. In such an instance, this Agreement shall be deemed terminated "for
Cause" effective as of the date the Company first provides notice, either to the
Consultant or the arbitrator, of its intent to invoke the arbitration mechanism
established hereby. During the pendency of any arbitration proceeding
(including any appeal therefrom), the Company shall provide the Consultant and
Yeffet with the severance benefits set forth in Section 4(c)(1), and if the
Company fails to obtain a determination of "Cause", the Company shall fully
restore the Consultant to the status under this Agreement to which it would
otherwise have been entitled. For purposes of this Section, termination "for
Cause" shall mean a termination due to objective evidence, with respect either
to Yeffet, the Consultant or any of its agents or employees, of any of the
following: (A) conviction of a felony; (B) illegal conduct that is injurious to
the Company; (C) willful or gross misconduct in connection with performing the
Services; (D) material dishonesty; (E) fraud; or (F) breach of the
Confidentiality Agreement described in Section 11 of this Agreement resulting in
financial harm to the Company. If at any time following termination of this
Agreement the Consultant or its assignee is receiving severance benefits under
either Section 4(c)(2) or 4(c)(3) and Yeffet, the Consultant or any of its
agents or employees libels or slanders the Company, intentionally interferes
with an existing or prospective business relationship of the Company or commits
some other similar tortious act, then the Consultant and Yeffet shall be
entitled only to the severance benefits provided by Section 4(c)(1).
b. Notice. In the event that any of the above events occurs to or
by a party, that party shall immediately notify the other party in writing of
its occurrence, which written notice shall be effective: (1) if delivered by
hand, upon receipt; (2) if delivered by US mail, return receipt requested, upon
the earlier of the date of receipt or the date five days after the first
attempted delivery; or (3) if delivered by reputable overnight courier service,
upon the earlier of the date of receipt or the date five days after the first
attempted delivery. Any delivery by mail or overnight courier service shall be
made to
Consulting Agreement - Page 3
the respective address provided by the parties in this Agreement, or to such
address as a party may subsequently specify by notice provided in accordance
with this Section 4(b).
c. Effect of Termination.
(1) If this Agreement is terminated pursuant to Section
4(a)(4), the parties agree that neither will have any further obligations under
this Agreement, including payment of any fees or royalties to the Consultant or
its assignee by the Company. In such a case, any stock options that have been
granted by the Company to Yeffet that had vested prior to the termination date
of this Agreement shall remain outstanding and in full force and effect, and any
unvested stock options that have been granted by the Company to Yeffet shall
terminate on the date this Agreement terminates.
(2) If this Agreement is terminated pursuant to Section
4(a)(1)(B), 4(a)(1)(C), 4(a)(2) or 4(a)(3), the parties agree that neither will
have any further obligations under this Agreement, except that: (A) the Company
shall continue to pay the Consultant a royalty payment as provided in Section
5(b) of this Agreement for any gross revenues collected in cash from government
grants or business or other business secured by the Consultant prior to the
termination date of this Agreement; (B) any stock options granted to Yeffet by
the Company that had vested prior to the termination date of this Agreement
shall remain outstanding and in full force and effect; and (C) any unvested
stock options that have been granted by the Company to Yeffet shall terminate on
the date this Agreement terminates.
(3) If this Agreement is terminated pursuant to Section
4(a)(1)(A), the provisions of Section 4(c)(2) shall govern the parties'
respective obligations, but in addition, the Consultant shall receive a
severance payment of $10,000 per month during the balance of the original Term
of three years.
5. Compensation; Issuance of Stock.
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a. Fees. In consideration for the Services to be performed by the
Consultant and Yeffet pursuant to the terms of this Agreement, the Company
agrees to pay a fee to the Consultant in the amount of $20,000.00 per month
payable semi-monthly in arrears on the fifteenth and last day of each month.
Payment for the stub periods, if any, at the beginning and end of the Term shall
be made in advance and the amount due shall be determined by pro-ration based on
the number of days in such stub period divided by 15.
b. Royalty. The Company shall pay the Consultant a commission
payment of five percent (5%) of any gross revenues (1) collected in cash from
government grants or business and other third-party business that the Consultant
produces for the Company, including renewals or extensions of contracts with
respect to products under contract when the Consultant initially produced the
business for the Company, or (2) received in kind from government grants or
business and other third-party business that the Consultant is responsible for
bringing to the Company, provided that the right to any commission payment based
on and the amount of the value of any in kind consideration
Consulting Agreement - Page 4
must be agreed upon in advance in writing by the Company and the Consultant. The
commission shall be calculated and paid on a quarterly basis based on the
Company's fiscal year end of April 30. The Consultant may assign these
commission payments in whole or in part, subject to the consent of the Company,
which shall not be unreasonably withheld, delayed or conditioned.
c. Stock Option. Subject to the execution of a Stock Option
Agreement, the form of which is attached hereto as Exhibit A, by Yeffet, the
Company will xxxxx Xxxxxx an option to purchase 1,000,000 shares of common stock
of the Company, which shall vest over the term of this Agreement as provided in
the Stock Option Agreement. The Consultant may transfer vested options in whole
or in part, subject to the consent of the Company, which shall not be
unreasonably withheld, delayed or conditioned; provided, however, that Yeffet
shall, in the case of each such transfer, provide the Company with an opinion of
counsel reasonably acceptable to the Company (both as to substance and the
competence of counsel) that such transfer may be accomplished in accordance with
all applicable securities laws.
6. Expense Reimbursement. The Consultant and other agents and
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employees of the Consultant shall be entitled to reimbursement from the Company
for all reasonable "out-of-pocket" expenses directly related to performance of
the Services. For purposes of this Agreement, first-class ticketing on
commercial air travel shall be deemed reasonable.
7. Support Services. The Company will not provide support services,
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including office space and secretarial services, for the benefit of Yeffet, the
Consultant or any of its agents or employees.
8. Independent Contractor. The Consultant and the Company hereby
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acknowledge that Yeffet, the Consultant and any of its agents or employees are
independent contractors. The Consultant agrees, and agrees to cause Yeffet and
any of its agents and employees not to hold it or themselves out as, nor take
any action from which third parties might reasonably infer that Yeffet, the
Consultant or any of its agents or employees is an employee, partner or agent
of, or a joint venturer with the Company. In addition, the Consultant shall not
take, and agrees to cause Yeffet and any of its agents and employees not to
take, any action which, to the knowledge of Yeffet, the Consultant or any of its
agents or employees binds, or purports to bind, the Company to any contract or
agreement, and any such action shall constitute willful or gross misconduct for
purposes of the definition of "for Cause" in Section 4(a)(4).
9. Information Disclosed Remains Property of Company. All ideas,
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concepts, information, and written material disclosed to Yeffet, the Consultant
or any of its agents or employees by the Company, or acquired from a third
party, are and shall remain the sole and exclusive property and proprietary
information of the Company or such third parties, and are disclosed in
confidence by the Company or permitted to be acquired from such third parties in
reliance on the Company's agreement to maintain
Consulting Agreement - Page 5
them in confidence and not to use or disclose them to any other person except in
furtherance of the Company's business.
10. Creations and Works Belong to Company. Any and all inventions,
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discoveries, improvements or creations (collectively "Creations") that Yeffet,
the Consultant or any of its agents or employees have conceived or made or may
conceive or make during the term of this Agreement in any way, directly or
indirectly, connected with the Company's business shall be the sole and
exclusive property of the Company. The Consultant agrees, and agrees to cause
Yeffet and any of its agents and employees, to (A) disclose promptly to the
Company all such Creations that Yeffet, the Consultant or any of its agents or
employees has made or may make solely, jointly or commonly with others, (B)
assign all such Creations to the Company, and (C) execute and sign any and all
applications, assignments or other instruments in order to transfer to the
Company all right, title and interest in the Creations without further
compensation.
In addition, the Consultant agrees that all works created by Yeffet,
the Consultant or any of its agents or employees or under the Company's
direction in connection with the Company's business are "works made for hire"
and shall be the sole and complete property of the Company and that any and all
rights to such works shall belong to the Company. The Consultant hereby
assigns, and agrees to cause Yeffet and any of its agents and employees to
assign, all proprietary rights in the works to the Company without further
compensation.
Notwithstanding any other provision of this Section 10 to the
contrary, the Company acknowledges that Yeffet's knowledge of the security
industry and his sales and interpersonal skills are his own unique attributes,
which are not and are not intended to become the property of the Company.
11. Confidential Information. The Consultant and Yeffet have executed
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a Confidentiality Agreement with the Company, which remains in full force and
effect and is hereby ratified and affirmed by the parties.
12. Indemnification. Each party agrees to indemnify and shall hold
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harmless (including payment of reasonable attorneys' fees) the other, its
corporate affiliates, and any employee or agent thereof (each of the foregoing
being hereinafter referred to individually as "Indemnified Party") against all
liability to third parties (other than liability solely the fault of the
Indemnified Party) arising from or in connection with its or any of its agents'
or employees' breach of their obligations under this Agreement. An indemnifying
party's obligation to indemnify any Indemnified Party will survive the
expiration or termination of this Agreement by either party for any reason. The
Indemnified Party shall conduct the defense of any such third party action
arising as described herein unless the parties hereto shall mutually agree that
the indemnifying party will conduct the defense.
13. Limitation of Liability. In no event shall either of the parties
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hereto be liable to the other for the payment of any consequential, indirect, or
special damages,
Consulting Agreement - Page 6
including lost profits. The provisions of this Section, however, shall not apply
in any way to the Consultant's obligations to indemnify any Indemnified Party or
to the Company's obligations to the Consultant and Yeffet under Sections 4, 5
and 6.
14. Injunctive Relief. It is hereby understood and agreed that damages
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shall be an inadequate remedy in the event of a breach by Yeffet, the Consultant
or any of its agents or employees of this Agreement and that any such breach by
Yeffet, the Consultant or any of its agents or employees will cause the Company
great and irreparable injury and damage. Accordingly, the Consultant agrees
that the Company shall be entitled, without waiving any additional rights or
remedies otherwise available to the Company at law or in equity or by statute,
to injunctive and other equitable relief in the event of a breach or intended or
threatened breach by Yeffet, the Consultant or any of its agents or employees.
15. Representations of the Company. As an inducement to the Consultant
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to enter into this Agreement, the Company hereby represents and warrants to the
Consultant as follows:
a. The consulting agreement that the Consultant has with
World-Wide Flight Services, Inc. does not conflict with the Services to be
provided by the Consultant hereunder.
b. This Agreement and the related Stock Option Agreement
(Nonqualified Stock Option) have been approved by the Company's Board of
Directors.
16. Other Provisions.
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a. Assignment. Except as expressly provided otherwise, neither
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party. The Consultant consents to the
Company's assignment of its rights and obligations hereunder in connection with
a business combination transaction.
b. Notices. All notices required or permitted under this
Agreement shall be in writing and shall be deemed delivered when delivered as
provided by Section 4(b), and, if applicable, addressed as follows:
If for the Company: HiEnergy Technologies, Inc.
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: President
If for the Consultant: Yeffet Security Consultant, Inc.
000 Xxxxxxx Xxxxx
Xxxxxxxxx Xxxx, XX 00000
Attn: President
Consulting Agreement - Page 7
Such address may be changed from time to time by either
party by providing written notice to the other in the manner
set forth above.
c. Entire Agreement. This Agreement contains the entire agreement
between the parties and there are no other promises or conditions in any other
agreement whether oral or written. This Agreement supersedes any prior written
or oral agreements between the parties.
d. Amendments. This Agreement may be modified or amended if the
amendment is made in writing and is signed by both parties.
e. Severability. If one or more provisions of this Agreement are
held to be invalid or unenforceable under applicable law, such provision(s)
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were excluded and shall be enforceable in
accordance with its terms.
f. Waiver. The failure of either party to enforce any provision
of this Agreement shall not be construed as a waiver or limitation of that
party's right to subsequently enforce and compel strict compliance with every
provision of this Agreement.
g. Governing Law; Venue; Arbitration.
(1) This Agreement shall be construed and enforced according
to the laws of the State of California, without regard to conflicts of laws
principles thereof.
(2) All legal actions arising under this Agreement may be
instituted in, and the Consultant, and the Company consent to jurisdiction and
venue in the County of Orange, State of California and the County of Bergen in
the State of New Jersey.
(3) Except for claims (or the portion thereof) seeking
injunctive relief, all claims of breach of this Agreement by either party not
barred and foreclosed shall be resolved by arbitration between the parties in
either Orange County, California or Bergen County, New Jersey under the auspices
of and pursuant to the rules for commercial arbitration of the American
Arbitration Association. Any award thereon may include mandatory or injunctive
relief or a direction therefor in the discretion of the arbitrator(s). Judgment
upon an award duly rendered in such an arbitration proceeding may be entered by
the party in whose favor the award has been made in any court having
jurisdiction to do so and over the party (including by contractual consent)
against whom such award has been rendered. Arbitration awards for money in
favor of the Company shall also be enforceable by it by charging the amounts
awarded it thereunder, in whole or in part, against and deducting such amounts
from royalties or other payments then or thereafter owed to the Consultant by
the Company under this Agreement.
Consulting Agreement - Page 8
h. Counterparts and Facsimile Signature. This Agreement may be
signed in counterparts, all of which when taken together shall constitute a
single executed document. Signatures transmitted by facsimile shall be deemed
valid execution of this Agreement binding on the parties.
i. Headings. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
j. Survival. The provisions of this Agreement that by their terms
or context require performance after a termination as permitted by Section 4(a)
shall remain in full force and effect following any such termination.
IN WITNESS WHEREOF, and in acknowledgment that the parties hereto have read and
understood each and every provision hereof, the parties have executed this
Agreement on the date first set forth above.
Party receiving the Services:
HIENERGY TECHNOLOGIES, INC.
By: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, CEO and President
Party providing the Services:
YEFFET SECURITY CONSULTANT, INC.
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, President
Consulting Agreement - Page 9
Exhibit A
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTION)
OPTIONEE: Xxxxx Xxxxxx
NUMBER OF SHARES: 1,000,000
OPTION EXERCISE PRICE: $1.00 per Share
DATE OF GRANT: July ____, 2002
EXERCISE TERM: Six Years from the Date of Grant
VESTING SCHEDULE: The option will vest as follows over the Exercise
Term:
Date of Grant 500,000 shares
Date following the Measurement
Period (as defined in the
Consulting Agreement (as defined
below)) 500,000 shares
THIS OPTION AGREEMENT (the "AGREEMENT") is entered into effective as of the
____ day of ___________________, 2002 by and between HIENERGY TECHNOLOGIES, INC.
(formerly SLW Enterprises Inc.) (the "Company"), a Washington corporation, and
the individual designated above (the "Optionee").
RECITALS
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WHEREAS, a consulting agreement (the "Consulting Agreement") was executed
between Yeffet Security Consultant, Inc. ("Yeffet"), a corporation solely owned
by the Optionee, and HiEnergy Technologies, Inc., a Washington corporation, on
___________________, 2002; and
WHEREAS, through Yeffet the Optionee has agreed to perform valuable
services for the Company;
Stock Option Agreement, Xxxxx Xxxxxx - Page 1
NOW, THEREFORE, the parties agree to the terms and conditions as follows:
1. GRANT OF OPTION.
1.1 Option. An option to purchase shares of the Company's Common
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Stock, par value $0.0001 per share, (the "Shares") is hereby granted to the
Optionee (the "Option").
1.2 Number of Shares. The number of Shares that the Optionee can
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purchase upon exercise of the Option is set forth above.
1.3 Option Exercise Price. The price the Optionee must pay to exercise
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the Option (the "Option Exercise Price") is set forth above.
1.4 Date of Grant. The date the Option is granted (the "Date of
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Grant") is set forth above.
1.5 Type of Option. The Option is intended to be a Nonqualified Stock
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Option. It is not intended to qualify as an Incentive Stock Option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended from
time to time, or any successor provision thereto.
1.6 Condition. The Option is conditioned on the Optionee's execution
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of this Agreement. If this Agreement is not executed by the Optionee, it may be
canceled by the Board.
2. DURATION.
The Option shall be exercisable to the extent and in the manner provided
herein during the Exercise Term, which is set forth above; provided, however,
that the Option may be earlier terminated as provided in Section 1.6 or Section
5 hereof or in the Consulting Agreement.
3. VESTING.
The Option shall vest, and may be exercised, with respect to the Shares, on
or after the dates set forth above, subject to earlier termination of the Option
as provided in Section 1.6 and Section 5 hereof. The right to purchase the
Shares as they become vested shall be cumulative and shall continue during the
Exercise Term unless sooner terminated as provided herein or in the Consulting
Agreement.
4. MANNER OF EXERCISE AND PAYMENT.
4.1 To exercise the Option, the Optionee must deliver a completed copy
of the Option Exercise Form, attached hereto as Exhibit A, to the address
indicated on such Form or such other address designated by the Company from time
to time. Contemporaneously with the delivery of the Option Exercise Form, the
Optionee shall
Stock Option Agreement, Xxxxx Xxxxxx - Page 2
tender the Option Exercise Price to the Company, by cash, check, wire transfer
or such other method of payment (e.g., delivery or attestation of Shares already
owned) as may be acceptable to the Company. The Option may be exercised in whole
or in part with respect to the vested Shares. Within thirty (30) days of
delivery of the Option Exercise Form and tender of the Option Exercise Price,
the Company shall deliver certificates evidencing the Shares to the Optionee,
duly endorsed for transfer to the Optionee, free and clear of all liens,
security interests, pledges or other claims or charges.
4.2 The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to any Shares subject to the Option
until (i) the Option shall have been exercised pursuant to the terms of this
Agreement and the Optionee shall have paid the full purchase price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
shall have issued and delivered the Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such Shares.
5. TERMINATION.
5.1 Termination Due to Death. In the event of the death of the
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Optionee during the Term of the Consulting Agreement, any vested options shall
terminate on the expiration date otherwise provided in this Agreement. Under
these circumstances, the Option will be exercisable at any time prior to such
termination by the Optionee's estate, or by such person or persons who have
acquired the right to exercise the Option by bequest or by inheritance or by
reason of the death of the Optionee. Any nonvested options shall terminate
immediately upon the death of the Optionee.
5.2 Termination Due to Disability. If the Optionee's status as a
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Consultant is terminated at any time during the Term of the Consulting Agreement
by reason of a disability (within the meaning of Section 22(e)(3) of the Code),
any vested options shall terminate on the expiration date otherwise provided in
this Agreement. Any nonvested options shall terminate immediately upon
termination of the Optionee's status as a Consultant.
5.3 Termination of Consulting Agreement for Other Reasons. If the
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Optionee's status as a Consultant is terminated at any time after the grant of
the Option for any reason other than death or disability, as provided in
Sections 5.1 and 5.2, then any vested options shall terminate on the expiration
date otherwise provided in this Agreement. Any nonvested options shall
terminate immediately upon the effective date of termination of the Consulting
Agreement.
6. TRANSFERABILITY.
The Optionee may transfer vested options in whole or in part, subject to
the consent of the Company, which shall not be unreasonably withheld, delayed or
conditioned;
Stock Option Agreement, Xxxxx Xxxxxx - Page 3
provided, however, that the Optionee shall, in the case of each such transfer,
provide the Company with an opinion of counsel reasonably acceptable to the
Company (both as to substance and the competence of counsel) that such transfer
may be accomplished in accordance with all applicable securities laws. Any
transferee shall execute a writing in form and substance satisfactory to the
Company and its counsel agreeing to be bound by the terms of this Agreement.
7. RESTRICTIONS ON THE OPTIONS; RESTRICTIONS ON THE SHARES.
The Option, whether owned by the Optionee or his transferee, may not be
exercised at any time unless, in the opinion of counsel for the Company, the
issuance and sale of the Shares issued upon such exercise is exempt from
registration under the Securities Act of 1933, as amended, or any other
applicable federal or state securities law, rule or regulation, or the Shares
have been duly registered under such laws. The Company shall not be required to
register the Shares issuable upon the exercise of the Option under any such
laws. Unless the Shares have been registered under all applicable laws, the
Optionee (or his transferee, as the case may be) shall represent, warrant and
agree, as a condition to the exercise of the Option, that the Shares are being
purchased for investment only and without a view to any sale or distribution of
such Shares and that such Shares shall not be transferred or disposed of in any
manner without registration under such laws, unless it is the opinion of counsel
for the Company that such a disposition is exempt from such registration. The
Optionee (or his transferee, as the case may be) acknowledges that an
appropriate legend, in such form as the Company shall determine, giving notice
of the foregoing restrictions shall appear conspicuously on all certificates
evidencing the Shares issued upon the exercise of the Option. The Company may,
in its sole discretion, place a "Blue Sky" legend on the certificates in
accordance with U.S. state securities laws or as required by applicable
securities laws.
The Optionee (or his transferee, as the case may be) also acknowledges and
agrees that, in connection with any public offering of the Company's stock, upon
request of the Company or the underwriters managing any underwritten public
offering of the Company's stock and making such request with the approval of the
Company's Board of Directors, not to sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any of his Shares
without the prior written consent of the Company or such underwriters, as the
case may be, from the effective date of such registration for so long as the
Company or the underwriters may specify, but in any event not to exceed 180
days.
Stock Option Agreement, Xxxxx Xxxxxx - Page 4
8. NO RIGHT TO CONTINUED STATUS AS CONSULTANT.
Nothing in this Agreement shall be interpreted or construed to confer upon
the Optionee any right with respect to continuance as a Consultant for the
Company or any Parent or Subsidiary, nor shall this Agreement interfere in any
way with the right of the Company or a Parent or Subsidiary to terminate the
Optionee's status as a Consultant at any time.
9. ADJUSTMENTS UPON CERTAIN EVENTS.
9.1. Adjustments Upon Changes in Capitalization. Subject to any
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required action by the shareholders of the Company, the event of a change in
capitalization, such as a stock split or other subdivision or consolidation of
Shares or the payment of any stock dividend consisting of Shares or any other
increase or decrease in the number of Shares effected without receipt of
consideration by the Company, the Company shall make appropriate and
proportionate adjustments to the number and class of Shares subject to the
Option and the purchase price for such Shares or other stock or securities;
provided, however, that conversion of the Option will not be deemed to have been
"effected without receipt of consideration". Any adjustments as a result of a
change in the Company's capitalization will be made by the Board of Directors,
whose determination in that respect is final, binding and conclusive. Except as
otherwise expressly provided in this Section 9.1, any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect the number of Shares or the exercise price of the
Shares subject to the Option, and no adjustments in the Option shall be made by
reason thereof. The grant of this Option does not in any way affect the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure.
9.2. Liquidation or Dissolution. In the event of a liquidation or
----------------------------
dissolution, any unexercised options will terminate. The Board of Directors may,
in its discretion, provide that the Optionee (or his transferee, as the case may
be) will have the right to exercise the Optionee's Option as to all of the
optioned stock prior to the consummation of the liquidation or dissolution.
9.3. Change of Control, Merger, Sale of Assets, Etc. In the event of
------------------------------------------------
the sale or other transfer of the outstanding shares of stock of the Company in
one transaction or a series of related transactions or a merger or
reorganization of the Company with or into any other corporation, where
immediately following the transaction, those persons who were shareholders of
the Company immediately before the transaction control less than 50% of the
voting power of the surviving organization (a "change of control event") or in
the event of a proposed sale of substantially all of the assets of the Company
(collectively, "sale transaction"), the Option shall be assumed or replaced with
a substitute equivalent option.
Stock Option Agreement, Xxxxx Xxxxxx - Page 5
10. WITHHOLDINGS OF TAXES.
The Company shall have the right to deduct from any distribution of cash to
the Optionee (or his transferee, as the case may be) an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld (the "Withholdings Taxes") with respect to the Option. If
the Optionee (or his transferee, as the case may be) is entitled to receive
Shares upon exercise of the Option, the Optionee (or his transferee, as the case
may be) shall pay the Withholdings Taxes (if any) to the Company in cash prior
to the issuance of such Shares. In satisfaction of the Withholdings Taxes, the
Optionee (or his transferee, as the case may be) may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of the
Company, to have withheld a portion of the Shares issuable to him or her upon
exercise of the Option, having an aggregate Fair Market Value equal to the
Withholdings Taxes, provided that, if the Optionee may be subject to liability
under Section 16(b) of the Exchange Act, the election must comply with the
requirements applicable to Share transactions by such Optionees.
11. MODIFICATION OF AGREEMENT.
This Agreement may be modified, amended, suspended or terminated, and any
terms or conditions may be waived, only by a written instrument executed by the
parties hereto.
12. SEVERABILITY.
Should any provision of this Agreement be held by a court of competent
jurisdiction to be unenforceable or invalid for any reason, the remaining
provisions of this Agreement shall not be affected by such holdings and shall
continue in full force in accordance with their terms.
13. GOVERNING LAW.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California without
giving effect to the conflicts of laws principles thereof.
14. SUCCESSORS IN INTEREST.
This Agreement shall be binding upon, and inure to the benefit of, the
Company and its successors and assigns, and upon any person acquiring, whether
by merger, consolidation, reorganization, purchase of stock or assets, or
otherwise, all or substantially all of the Company's assets and business. This
Agreement shall inure to the benefit of the Optionee's transferees, heirs and
legal representatives. All obligations imposed upon the Optionee and all rights
granted to the Company under this Agreement shall be final, binding and
conclusive upon the Optionee's transferees, heirs, executors, administrators and
successors.
Stock Option Agreement, Xxxxx Xxxxxx - Page 6
15. RESOLUTION OF DISPUTES.
Any dispute or disagreement which may arise under, or as a result of, or in
any way relate to, the interpretation, construction or application of this
Agreement shall be determined by the Board of Directors of the Company;
provided, however, that any component of such a determination based on the
interpretation, construction or application of the Consulting Agreement must be
established as provided by the Consulting Agreement. Any determination made
hereunder shall be final, binding and conclusive on the Optionee and the Company
for all purposes.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
HIENERGY TECHNOLOGIES, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
By signing below, Optionee hereby accepts the Option subject to all its
terms and provisions.
OPTIONEE
Signature: _________________________
Print Name: _______________________
[EXHIBIT FOLLOWS]
Stock Option Agreement, Xxxxx Xxxxxx - Page 7
EXHIBIT A
OPTION EXERCISE FORM
--------------------
To: HiEnergy Technologies, Inc.
(1) The undersigned hereby elects to purchase the number of shares of the
common stock of HiEnergy Technologies, Inc. (the "Company") set forth
below, pursuant to the terms of the Stock Option Agreement dated
__________________, 2002, tendering simultaneous full payment of the
Total Option Exercise Price for such shares.
Number of Shares: ________________ Shares
Option Exercise Price Per Share: x $____________ per Share
Total Option Exercise Price: = $____________
(2) In exercising this Option, the undersigned hereby confirms and
acknowledges that:
a) the shares of Common Stock to be issued upon exercise are being
acquired solely for the account of the undersigned and not as a
nominee for any other party; and
b) the shares of Common Stock to be issued upon exercise are not
acquired with a view toward distribution; and
c) the undersigned is an "accredited investor" as that term is
defined in Rule 501 of Regulation D under the Securities Act of
1933, as amended, and as provided in the Subscription Agreement;
and
d) the undersigned will not offer, sell or otherwise dispose of any
such shares of Common Stock except pursuant to an effective
registration, or an exemption therefrom, under the Securities Act
of 1933, as amended, together with a similar exemption under the
securities laws of all applicable jurisdictions; and
e) the undersigned otherwise reaffirms all representations,
warranties, and indemnifications contained in the Stock Option
Agreement and Subscription Agreement, including, but not limited
to, those contained in Section 7 of the Stock Option Agreement;
and
Option Exercise Form - Page 1
f) the undersigned has reviewed all of Company's public filings with
the Securities and Exchange Commission; and
g) the undersigned consents to delay the exercise of the Option
until, in the Company's judgment, the Company has disclosed any
additional matters that need to be disclosed to the undersigned,
beyond those contained in the public filings with the Securities
and Exchange Commission.
(3) Subject to Section (2), please issue a certificate or certificates
representing said shares of Common Stock in the name of the
undersigned as instructed.
(4) Please issue a new Option for the unexercised portion of the attached
Option in the name of the undersigned.
This ____ day of __________, _____:
______________________________________
Signature
______________________________________
Print Name of Signatory
______________________________________
Name of Entity (if applicable)
Send or deliver this Form with an original signature to:
HiEnergy Technologies, Inc.
Attn: President
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
XXX
Option Exercise Form - Page 2
