DETTO TECHNOLOGIES, INC.
REPURCHASE OPTION AGREEMENT
This Stock Issuance Agreement (the "Agreement") is made as of November 18,
2005, by and among Detto Technologies, Inc., a Delaware corporation (the
"Corporation") and Xxxxxxx Xxxxxxxx (the "Stockholder").
R E C I T A L S :
WHEREAS the Stockholder and the Corporation entered into that certain
Purchase Agreement dated of even date herewith (the "Purchase Agreement")
pursuant to which the Corporation agreed to issue 1,400,000 shares of the
Corporation's Common Stock;
WHEREAS as a condition to the issuance of the shares pursuant to the
Purchase Agreement, the Stockholder agreed to enter into this Agreement; and
WHEREAS all capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix, unless otherwise
indicated.
NOW, THEREFORE, it is hereby agreed as follows:
1. Issuance of Shares.
(a) Issuance. The Company shall issue to the Stockholder 1,400,000 shares
of the Corporation's Common Stock pursuant to the Purchase Agreement (the
"Acquired Shares").
(b) Shareholder Rights. Until such time as the Corporation exercises the
Repurchase Right (as defined in Section 4(a) hereof), the Stockholder (or any
successor in interest) shall have all the rights of a shareholder (including
voting, dividend and liquidation rights) with respect to the Acquired Shares,
subject, however, to the transfer restrictions of this Agreement.
(c) Escrow. The Corporation shall have the right to hold the Acquired
Shares in escrow until those shares have vested in accordance with the Vesting
Schedule and the Stockholder shall execute (in blank) the Assignment Separate
from Certificate in the form attached hereto as Exhibit 2.
(d) Compliance With Law. Under no circumstances shall shares of Common
Stock or other assets be issued or delivered to the Stockholder pursuant to the
provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange (or the NASDAQ National Market, if
applicable) on which the Common Stock is at the time listed for trading and all
other requirements of law or of any regulatory bodies having jurisdiction over
such issuance and delivery.
2. Securities Law Compliance.
(a) Exemption From Registration. The Stockholder acknowledges that the
Acquired Shares have not been registered under the 1933 Act and are accordingly
being issued to the Stockholder in reliance upon the exemption from such
registration in accordance to the Purchase Agreement.
(b) Disposition of Shares. The Stockholder hereby agrees that the
Stockholder shall make no disposition of the Acquired Shares unless and until
there is compliance with all of the following requirement: the Stockholder shall
have provided the Corporation with written assurances, in form and substance
satisfactory to the Corporation, that: (A) the proposed disposition does not
require registration of the Acquired Shares under the 1933 Act; or (B) all
appropriate action necessary for compliance with the registration requirements
of the 1933 Act or of any exemption from registration available under the 1933
Act (including Rule 144) has been taken.
The Corporation shall not be required: (i) to transfer on its books any
Acquired Shares which have been sold or transferred in violation of the
provisions of this Agreement; or (ii) to treat as the owner of the Acquired
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Acquired Shares have been transferred in violation of
this Agreement.
(c) Restrictive Legends. In order to reflect the restrictions imposed by
this Agreement upon the disposition of the Acquired Shares, the stock
certificates for the Acquired Shares shall be endorsed with restrictive legends,
including one or more of the following legends:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF: (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SHARES UNDER SUCH ACT; (B) A `NO ACTION' LETTER OF THE SECURITIES AND
EXCHANGE COMMISSION WITH RESPECT TO SUCH SALE OR OFFER; OR (C) SATISFACTORY
ASSURANCES TO THE CORPORATION THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED
WITH RESPECT TO SUCH SALE OR OFFER."
(ii) "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN
CONFORMITY WITH THE TERMS OF A STOCK ISSUANCE AGREEMENT BETWEEN THE CORPORATION
AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS CERTAIN REPURCHASE RIGHTS TO THE CORPORATION (OR
ITS ASSIGNEES) UPON THE SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER
DISPOSITION OF THE SHARES. A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE
CORPORATION'S PRINCIPAL CORPORATE OFFICES. ANY TRANSFER IN VIOLATION OF SAID
AGREEMENT IS NULL AND VOID."
3. Transfer Restrictions. The Stockholder shall not transfer, assign, encumber
or otherwise dispose of any of the Acquired Shares which are subject to the
Repurchase Right.
4. Repurchase Right.
(a) Grant. The Corporation is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the ninety (90) day period following the
date the Stockholder ceases for any reason to remain in Service, to repurchase
at a price of $0.01 per share all or any portion of the Acquired Shares in which
the Stockholder is not, at the time of his or her cessation of Service, vested
in accordance with the Vesting Schedule or the special vesting acceleration
provisions of Section 4(e) hereof (such shares to be hereinafter referred to as
the "Unvested Shares").
(b) Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to the Stockholder prior to the
expiration of the ninety (90) day exercise period. The notice shall indicate the
number of Unvested Shares to be repurchased and the date on which the repurchase
is to be effected, such date to be not more than thirty (30) days after the date
of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Corporation on or before the close of
business on the date specified for the repurchase. Concurrently with the receipt
of such stock certificates, the Corporation shall pay to the Stockholder $0.01
per share.
(c) Termination of the Repurchase Right. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Section 4(b) hereof. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and all Acquired
Shares in which the Stockholder vests in accordance with the following Vesting
Schedule:
(i) the Stockholder shall acquire a vested interest in, and the
Repurchase Right shall lapse with respect to, the Acquired Shares in a series of
twenty-four successive equal monthly installments upon the Stockholder's
completion of each additional month of Service over the twenty-four month period
measured from the date of this Agreement.
(d) Recapitalization. Any new, substituted or additional securities or
other property (including cash paid other than as a regular cash dividend) which
is by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other transaction affecting the outstanding
Common Stock as a class effective without the Corporation's receipt of
consideration ("Recapitalization"), distributed with respect to the Acquired
Shares shall be immediately subject to the Repurchase Right and any escrow
requirements hereunder, but only to the extent the Acquired Shares are at the
time covered by such right or escrow requirements. Appropriate adjustments to
reflect such distribution shall be made to the number and/or class of securities
subject to this Agreement and to the price per share to be paid upon the
exercise of the Repurchase Right in order to reflect the effect of any such
Recapitalization upon the Corporation's capital structure; provided, however,
that the aggregate purchase price shall remain the same.
(e) Change in Control. Immediately prior to the consummation of a Change
in Control transaction, the Repurchase Right shall automatically lapse in its
entirety and the Acquired Shares shall vest in full.
(f) Death or Disability
In the case of death of the Stockholder the Acquired Share shall
vest in full. In the case of Disability, which shall mean the inability of the
Stockholder remain in Service (or perform similar service to any one else) due
to a physical or mental impairment, the Repurchase Right will be suspended until
such time as the Stockholder can resume the Service. The Corporation will have a
reasonable right to have the Disability confirmed by independent medical
sources.
5. General Provisions.
(a) Assignment. The Corporation may assign its Repurchase Right and/or its
Special Purchase Right to any person or entity selected by the Board, including
(without limitation) one or more stockholders of the Corporation.
(b) No Employment or Service Contract. Nothing in this Agreement or in the
Plan shall confer upon the Stockholder any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Parent or Subsidiary) or the Stockholder,
which rights are hereby expressly reserved by each, to terminate the
Stockholder's Service at any time for any reason whatsoever, with or without
cause.
(c) Notices. Any notice required in connection with: (i) the Repurchase
Right, or the Special Purchase Right; or (ii) the disposition of any Acquired
Shares covered thereby shall be given in writing and shall be deemed effective
upon personal delivery or upon deposit in the United States mail, registered or
certified, postage prepaid and addressed to the party entitled to such notice at
the address indicated below such party's signature line on this Agreement or at
such other address as such party may designate by ten (10) days advance written
notice under this Section 6(c) to all other parties to this Agreement.
(d) No Waiver. The failure of the Corporation (or its assignees) in any
instance to exercise the Repurchase Right or the failure of the Corporation (or
its assignees) in any instance to exercise the Special Purchase Right shall not
constitute a waiver of any other purchase rights that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Corporation and the Stockholder or the Stockholder's spouse. No waiver of any
breach or condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of like or different nature.
(e) Cancellation of Shares. If the Corporation (or its assignees) shall
make available, at the time and place and in the amount and form provided in
this Agreement, the consideration for the Acquired Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Corporation (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates therefor have been delivered as required
by this Agreement.
(f) Indemnification of the Corporation. The Stockholder agrees to
indemnify and hold the Corporation free and harmless from any and all loss,
damage or expense suffered by the Corporation resulting from any breach of this
Agreement by the Stockholder or any inaccuracy or breach of any of the
representations, warranties or covenants contained herein by the Stockholder.
6. Miscellaneous Provisions.
(a) The Stockholder Undertaking. The Stockholder hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either the Stockholder or
the Acquired Shares pursuant to the express provisions of this Agreement.
(b) Agreement is Entire Contract. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
This Agreement is made pursuant to the provisions of the Purchase Agreement and
shall in all respects be construed in conformity with the express terms and
provisions of the Purchase Agreement.
(c) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Washington without resort to that
State's conflict-of-laws rules.
(d) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
(e) Successors and Assigns. Subject to the transfer restrictions contained
herein, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the Corporation and its successors and assigns and the Stockholder
and the Stockholder's legal representatives, heirs, legatees, distributees,
assigns and transferees by operation of law, whether or not any such person
shall have become a party to this Agreement and have agreed in writing to join
herein and be bound by the terms and conditions hereof.
(f) Power of Attorney. The Stockholder's spouse hereby appoints the
Stockholder his or her true and lawful attorney in fact, for him or her and in
his or her name, place and xxxxx, and for his or her use and benefit, to agree
to any amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. The Stockholder's spouse further gives
and grants unto the Stockholder as his or her attorney in fact full power and
authority to do and perform every act necessary and proper to be done in the
exercise of any of the foregoing powers as fully as he or she might or could do
if personally present, with full power of substitution and revocation, hereby
ratifying and confirming all that the Stockholder shall lawfully do and cause to
be done by virtue of this power of attorney.
(g) Attorneys' Fees. In the event of any litigation between the parties to
enforce any of the provisions of this Agreement, the non-prevailing party to
such litigation agrees to pay the prevailing party all costs and expenses,
including reasonable attorneys' fees, incurred therein by the prevailing party,
all of which shall be included in and be a part of the judgment in such
litigation.
(h) Time of Essence. Time is expressly made the essence of this Agreement
and every provision hereof of which time of performance is a factor.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first indicated above.
DETTO TECHNOLOGIES, INC,
a Delaware corporation
By:
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Xxxxx Mana'o
Chief Executive Officer
By:
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Name: Xxxxxxx Xxxxxxxx
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[SIGNATURE OF SPOUSE]
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[NAME OF SPOUSE]
Address:
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APPENDIX TO EXHIBIT A
DEFINITIONS
A. "Board" shall mean the Corporation's Board of Directors.
B. "Common Stock" shall mean the Corporation's common stock.
C. "Change in Control" shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(i) a merger, consolidation or reorganization approved by the
Corporation's stockholders, unless securities representing more than fifty
percent (50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation's outstanding voting securities immediately
prior to such transaction;
(ii) any stockholder-approved transfer or other disposition of all
or substantially all of the Corporation's assets; or
(iii) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the
0000 Xxx) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which
the Board recommends such stockholders accept.
D. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
E. "Fair Market Value" of a share of Common Stock on any relevant date,
shall be the closing bid price of the Corporation's common stock; provided
however, if the Corporation's Common Stock is not traded, quoted or listed on
any exchange or national quotation system, the fair market value of a share of
Common Stock shall be determined by the Corporation's Board of Directors after
taking into account such factors as it shall deem appropriate.
F. "1933 Act" shall mean the Securities Act of 1933, as amended.
G. "Parent" shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
H. "Reorganization" shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially
all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons other than those who held
such securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in which
the Corporation is incorporated or to create a holding company structure.
I. "SEC" shall mean the Securities and Exchange Commission.
J. "Service" shall mean the provision of services to the Corporation or
any Parent or Subsidiary by an individual in the capacity of an employee,
subject to the control and direction of the employer entity as to both the work
to be performed and the manner and method of performance, a non-employee member
of the board of directors, a consultant or an independent advisor.
K. "Subsidiary" shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
such corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
L. "Vesting Schedule" shall mean the vesting schedule specified in Section
4(c) of this Agreement, subject to the special vesting acceleration provisions
of Section 4(e) of this Agreement.
