EXHIBIT 10.11
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated January 1, 1996, is made by and between
EISI, Inc., a California corporation hereinafter referred to as "Company," and
Xxxxxxx Xxxxxx, an employee of the Company or a Parent Corporation or Subsidiary
of the Company, hereinafter referred to as "Optionee":
WHEREAS, the Company wishes to afford the Optionee the
opportunity to purchase shares of its Common Stock; and
WHEREAS, the Company has determined that it would be to the
advantage and best interest of the Company and its shareholders to grant the
Non-Qualified Option provided for herein to the Optionee as an inducement to
enter into or remain in the service of the Company, its Parent Corporations or
its Subsidiaries and as an incentive for increased efforts during such service,
and has advised and instructed the undersigned officers to issue said Option;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement, they
shall have the meaning specified below unless the context clearly indicates to
the contrary. The masculine pronoun shall include the feminine and neuter, and
the singular the plural, where the context so indicates.
Section 1.1. Board
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"Board" shall mean the Board of Directors of the Company.
Section 1.2. Code
----
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3. Company
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"Company" shall mean EISI, Inc.
Section 1.4. Director
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"Director" shall mean a member of the Board.
Section 1.5. Exchange Act
------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.6. Officer
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"Officer" shall mean an officer of the Company, as defined in
Rule 16a-l(f) under the Exchange Act, as such Rule may be amended in the future.
Section 1.7. Option
------
"Option" shall mean the non-qualified option to purchase Common
Stock of the Company granted under this Agreement.
Section 1.8. Parent Corporation
------------------
"Parent Corporation" shall mean any corporation in an unbroken
chain of corporations ending with the Company if each of the corporations other
than the Company then owns stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one (1) of the other
corporations in such chain.
Section 1.9. Rule 16b-3
----------
"Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended in the future.
Section 1.10. Chairman
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"Chairman" shall mean the Chairman of the Board.
Section 1.11. Securities Act
--------------
"Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.12. Subsidiary
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"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one (1) of the other corporations in such chain.
Section 1.13. Termination of Employment
-------------------------
"Termination of Employment" shall mean the time when the
employee-employer relationship between the Optionee and the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death or retirement, but excluding any termination where there is a
simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary.
The Company, in its absolute discretion, shall determine the effect of all other
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the
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question of whether a Termination of Employment resulted from a discharge for
good cause, and all questions of whether particular leaves of absence constitute
Terminations of Employment.
ARTICLE II.
GRANT OF OPTION
Section 2.1. Grant of Option
---------------
In consideration of the Optionee's agreement to remain in the
employ of the Company, its Parent Corporations or its Subsidiaries and for other
good and valuable consideration, on the date hereof the Company irrevocably
grants to the Optionee the option to purchase any part or all of an aggregate of
5,000 shares of its Common Stock upon the terms and conditions set forth in this
Agreement.
Section 2.2. Purchase Price
--------------
The purchase price of the shares of stock covered by the Option
shall be $3.00 per share without commission or other charge.
Section 2.3. Consideration to Company
------------------------
In consideration of the granting of this option by the Company,
the Optionee agrees to render faithful and efficient services to the Company, a
Parent Corporation or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least one (1) year
from the date this Option is granted. Nothing in this Agreement, however, shall
confer upon the Optionee any right to continue in the employ of the Company, any
Parent Corporation or any Subsidiary or shall interfere with or restrict in any
way the rights of the Company, its Parent Corporations and its Subsidiaries,
which are hereby expressly reserved, to discharge the Optionee at any time for
any reason whatsoever, with or without cause.
Section 2.4. Adjustments in Option
---------------------
In the event that the outstanding shares of the stock subject to
the Option are changed into or exchanged for a different number or kind of
shares of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split up, stock
dividend or combination of shares, the Company shall make an appropriate and
equitable adjustment in the number and kind of shares as to which the Option, or
portions thereof then unexercised, shall be exercisable, to the end that after
such event the Optionee's proportionate interest shall be maintained as before
the occurrence of such event. Such adjustment in the Option shall be made
without change in the total price applicable to the unexercised portion of the
option (except for any change in the aggregate price resulting from rounding-off
of share quantities or prices) and with any necessary corresponding adjustment
in the option price per share. Any such adjustment made by the Company shall be
final and binding upon the Optionee, the Company and all other interested
persons.
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ARTICLE III.
PERIOD OF EXERCISABILITY
Section 3.1. Commencement of Exercisability
------------------------------
(a) Subject to Section 5.6, the Option shall become exercisable
in five (5) cumulative installments as follows:
(i) The first installment shall consist of twenty percent
(20%) of the shares covered by the option and shall become exercisable on
the first anniversary of the date the Option is granted.
(ii) The second installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on
the second anniversary of the date the Option is granted.
(iii) The third installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on
the third anniversary of the date the Option is granted.
(iv) The fourth installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on
the fourth anniversary of the date the Option is granted.
(v) The fifth installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on
the fifth anniversary of the date the Option is granted.
(b) No portion of the Option which is unexercisable at
Termination of Employment shall thereafter become exercisable.
Section 3.2. Duration of Exercisability
--------------------------
The installments provided for in Section 3.1 are cumulative. Each
such installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.
Section 3.3. Expiration of Option
--------------------
The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(a) The expiration of ten (10) years from the date the Option
was granted; or
(b) The time of the Optionee's Termination of Employment unless
such Termination of Employment results from his death, his retirement or his
disability; or
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(c) The expiration of three (3) months from the date of the
Optionee's Termination of Employment by reason of his disability; or
(d) The expiration of three (3) months from the date of the
Optionee's death.
Section 3.4. Acceleration of Exercisability
------------------------------
In the event of the merger or consolidation of the Company with
or into another corporation, or the acquisition by another corporation or person
of all or substantially all of the Company's assets or eighty percent (80%) or
more of the Company's then outstanding voting stock, or the liquidation or
dissolution of the Company, the Company may, in its absolute discretion and upon
such terms and conditions as it deems appropriate, provide prior to such event,
that at some time prior to the effective date of such event this Option shall be
exercisable as to all the shares covered hereby, notwithstanding that this
Option may not yet have become fully exercisable under Section 3.1(a); provided,
however, that this acceleration of exercisability shall not take place if:
(a) This Option becomes unexercisable under Section 3.3 prior to
said effective date; or
(b) In connection with such an event, provision is made for an
assumption of this Option or a substitution therefor of a new option by an
employer corporation or a parent or subsidiary of such corporation; or
(c) The contemplated corporate transaction is not consummated;
and provided, further, that nothing in this Section 3.4 shall make this Option
exercisable if it is otherwise unexercisable by reason of Section 5.6.
ARTICLE IV.
EXERCISE OF OPTION
Section 4.1. Person Eligible to Exercise
---------------------------
During the lifetime of the Optionee, only he may exercise the
Option or any portion thereof. After the death of the Optionee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by his personal representative or
by any person empowered to do so under the Optionee's will or under the then
applicable laws of descent and distribution.
Section 4.2. Partial Exercise
----------------
Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time prior
to the time when the Option or portion thereof becomes unexercisable under
Section 3.3; provided, however, that each partial exercise shall be for not less
than ten (10) shares (or the minimum installment set forth in Section 3.1, if a
smaller number of shares) and shall be for whole shares only.
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Section 4.3. Manner of Exercise
------------------
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Chairman or his office of all of the following prior
to the time when the Option or such portion becomes unexercisable under Section
3.3:
(a) Notice in writing signed by the Optionee or the other person
then entitled to exercise the Option or portion, stating that the Option or
portion is thereby exercised, such notice complying with all applicable rules
established by the Company; and
(b) Full payment (in cash or by check) for the shares with
respect to which such Option or portion is exercised; and
(c) A bona fide written representation and agreement, in a form
satisfactory to the Company, signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that the shares of stock
are being acquired for his own account, for investment and without any present
intention of distributing or reselling said shares or any of them except as may
be permitted under the Securities Act and then applicable rules and regulations
thereunder, and that the Optionee or other person then entitled to exercise such
Option or portion will indemnify the Company against and hold it free and
harmless from any loss, damage, expense or liability resulting to the Company if
any sale or distribution of the shares by such person is contrary to the
representation and agreement referred to above. The Company may, in its absolute
discretion, take whatever additional actions it deems appropriate to insure the
observance and performance of such representation and agreement and to effect
compliance with the Securities Act and any other federal or state securities
laws or regulations. Without limiting the generality of the foregoing, the
Company may require an opinion of counsel acceptable to it to the effect that
any subsequent transfer of shares acquired on an Option exercise does not
violate the Securities Act, and may issue stop-transfer orders covering such
shares. Share certificates evidencing stock issued on exercise of this Option
shall bear an appropriate legend referring to the provisions of this subsection
(c) and the agreements herein. The written representation and agreement referred
to in the first sentence of this subsection (c) shall, however, not be required
if the shares to be issued pursuant to such exercise have been registered under
the Securities Act, and such registration is then effective in respect of such
shares; and
(d) Full payment to the Company (or other employer corporation)
of all amounts which, under federal, state or local tax law, it is required to
withhold upon exercise of the option; and
(e) In the event the Option or portion shall be exercised
pursuant to Section 4.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the Option.
Section 4.4. Conditions to Issuance of Stock Certificates
--------------------------------------------
The shares of stock deliverable upon the exercise of the Option,
or any portion thereof, may be either previously authorized but unissued shares
or issued shares which have
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then been reacquired by the Company. Such shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any
certificate or certificates for shares of stock purchased upon the exercise of
the Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Company shall, in its absolute
discretion, determine to be necessary or advisable; and
(b) The payment to the Company (or other employer corporation)
of all amounts which, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; and
(c) The lapse of such reasonable period of time following the
exercise of the Option as the Company may from time to time establish for
reasons of administrative convenience.
Section 4.5. Rights as Shareholder
---------------------
The holder of the Option shall not be, nor have any of the rights
or privileges of, a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company to
such holder.
ARTICLE V.
OTHER PROVISIONS
Section 5.1. Administration
--------------
The Company shall have the power to interpret this Agreement. All
actions taken and all interpretations and determinations made by the Company in
good faith shall be final and binding upon the Optionee, the Company and all
other interested persons. No member of the Company shall be personally liable
for any action, determination or interpretation made in good faith with respect
to the Option.
Section 5.2. Option Not Transferable
-----------------------
Neither the Option nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Optionee
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
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Section 5.3. Shares to Be Reserved
---------------------
The Company shall at all times during the term of the Option
reserve and keep available such number of shares of stock as will be sufficient
to satisfy the requirements of this Agreement.
Section 5.4. Notices
-------
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Chairman, and any
notice to be given to the Optionee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Optionee shall, if
the Optionee is then deceased, be given to the Optionee's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.4. Any notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.
Section 5.5. Titles
------
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
Section 5.6. Construction
------------
This Agreement shall be administered, interpreted and enforced
under the laws of the State of California.
Section 5.7. Conformity to Securities Laws
-----------------------------
The Optionee acknowledges that this Agreement is intended to
conform to the extent necessary with all provisions of the Securities Act and
the Exchange Act, the California Corporations Code and any and all regulations
and rules promulgated by the Securities and Exchange Commission and/or the
Corporations Commissioner thereunder, including without limitation Rule 16b-3.
Notwithstanding anything herein to the contrary, this Agreement shall be
administered, and the Option is granted and may be exercised, only in such a
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, this Agreement shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.
Section 5.8. Restrictions on Transfer of Shares
----------------------------------
(a) There can be no valid transfer (as hereinafter defined) of
any shares of stock purchased on exercise of the Option, or any interest in such
shares, by any holder of such
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shares or interests unless such transfer is solely for cash consideration and is
made in compliance with the following provisions:
(1) Before there can be a valid transfer of any shares or any
interest therein, the record holder of the shares to be transferred (the
"Offered Shares") shall give written notice (by registered or certified
mail) to the Company. Such notice shall specify the identity of the
proposed transferee, the cash price offered for the Offered Shares by the
proposed transferee and the other terms and conditions of the proposed
transfer. The date such notice is mailed shall be hereinafter referred to
as the "notice date" and the record holder of the Offered Shares shall be
hereinafter referred to as the "Offeror."
(2) For a period of thirty (30) calendar days after the notice
date, the Company shall have the option to purchase all (but not less than
all) of the Offered Shares at the purchase price and on the terms set forth
in subsection (a)(3) of this Section 5.8. This option shall be exercisable
by the Company by mailing (by registered or certified mail) written notice
of exercise to the Offeror prior to the end of said thirty (30) days.
(3) The price at which the Company may purchase the Offered
Shares pursuant to the exercise of such option shall be the cash price
offered for the Offered Shares by the proposed transferee (as set forth in
the notice required under subsection (a)(1) of this Section 5.8). The
Company's notice of exercise of such option shall be accompanied by full
payment for the Offered Shares and, upon such payment by the Company, the
Company shall acquire full right, title and interest to all of the Offered
Shares.
(4) If, and only if, the option given pursuant to subsection
(a)(2) of this Section 5.8 is not exercised, the transfer proposed in the
notice given pursuant to subsection (a)(1) of this Section 5.8 may take
place; provided, however, that such transfer must, in all respects, be
exactly as proposed in said notice except that such transfer may not take
place either before the tenth (10th) calendar day after the expiration of
said thirty-day option exercise period or after the ninetieth (90th)
calendar day after the expiration of said thirty-day option exercise
period, and if such transfer has not taken place prior to said ninetieth
(90th) day, such transfer may not take place without once again complying
with subsection (a) of this Section 5.8.
(b) As used in this Section 5.8, the term "transfer" means any sale,
encumbrance, pledge, gift or other form of disposition or transfer of shares of
the Company's stock or any legal or equitable interest therein; provided,
however, that the term "transfer" does not include a transfer of such shares or
interests by will or by the applicable laws of descent and distribution or a
gift of such shares if the donee agrees to be bound by the provisions of this
Section 5.8.
(c) None of the shares of the Company's stock purchased on exercise
of the Option shall be transferred on the Company's books nor shall the Company
recognize any such transfer of any such shares or any interest therein unless
and until all applicable provisions of this Section 5.8 have been complied with
in all respects. The certificates of stock evidencing shares
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of stock purchased on exercise of the Option shall bear an appropriate legend
referring to the transfer restrictions imposed by this Section 5.8 and to the
repurchase option provided for in Section 5.8.
Section 5.9. Complete Agreement
------------------
This Agreement represents the sole and entire agreement among the
Optionee and the Company relating to options granted hereunder and supersedes
all prior agreements, negotiations, and discussions between the parties. Any
amendment or modification to this Agreement must be in writing specifically
referring to this Agreement and signed by duly authorized representatives of all
of the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
EISI, Inc.
By: /s/ XXXXXX XXXXXX
-------------------------
Xxxxxx Xxxxxx
Chairman of the Board
/s/ XXXXXXX XXXXXX
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Optionee
00000 Xxxxx Xxxx
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Xxxxxxxx, XX 00000
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Address
Optionee's Taxpayer
Identification Number:
###-##-####
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