EXHIBIT 10.6
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT, made as of March 1, 2003 (the
"Grant Date") by and between STONEHOUSE TECHNOLOGIES, INC., a Texas corporation
(the "Company"), and Mardan Afrasiabi (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company and Optionee are parties to that certain Employment
Agreement dated as of March 1, 2003 (the "Employment Agreement");
WHEREAS, as of the Grant Date, the Company has 16,000,000 shares of common
stock, par value $.01 per share, of the Company (the "Common Stock")
outstanding; and
WHEREAS, the Company wishes to increase the incentive of the Optionee whose
contributions are important to the success of the Company by granting to
Optionee as of the Grant Date options to purchase shares of Common Stock of the
Company on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF OPTION
Subject to and upon the terms and conditions set forth in this Agreement,
the Company hereby grants to Optionee the following options to purchase shares
of Common Stock of the Company:
(a) Initial Option. A nonqualified stock option (sometimes hereinafter
referred to as the "Initial Option") to purchase, during the term specified in
Section 2 below, 937,500 shares (the "Initial Option Shares") of Common Stock at
an exercise price per share of $0.01.
(b) Time-Based Option. A nonqualified stock option (sometimes hereinafter
referred to as the "Time-Based Option") to purchase, during the term specified
in Section 2 below, an aggregate of 1,500,000 shares (the "Time-Based Option
Shares") of Common Stock at the following exercise prices:
750,000 shares at $.45 per share
375,000 shares at $.55 per share
375,000 shares at $.65 per share
(c) Participating Option. A nonqualified stock option (sometimes
hereinafter referred to as the "Participating Option" and together with the
Initial Option and the Time-Based Option, the "Option") to purchase, during the
term specified in Section 2 below, an aggregate of 1,500,000 shares (the
"Participating Option Shares" and together with the Initial Option Shares and
the Time-Based Option Shares, the "Option Shares") of Common Stock at the
following exercise prices:
750,000 shares at $.45 per share
375,000 shares at $.55 per share
375,000 shares at $.65 per share
2. TERMS AND VESTING OF OPTION
(a) Option Period. Subject to the provisions of this Section 2, Section 5
and Section 7 hereof, this Option shall terminate and all rights to purchase
shares hereunder shall cease on the seventh anniversary of the Grant Date.
(b) Time Vesting and Exercisability. Subject to the provisions of Section 5
and Section 7 hereof, this Option shall vest as follows:
(i) Initial Option. The Initial Option shall vest, and shall be
exerciseable, commencing June 1, 2003.
(ii) Time-Based Option. The Time-Based Option shall vest, and shall be
exercisable, in sixteen equal quarterly installments of 93,750 commencing
September 1, 2003 and each subsequent quarterly anniversary until the
entire Time-Based Option is fully vested and exercisable, provided that the
Time-Based Option shall vest and become exerciseable immediately prior to
the occurrence of a Liquidity Event (as defined below), where the acquiring
party or parties have refused to be bound by, and assume, the Company's
obligations under this Option Agreement and the Employment Agreement. For
purposes of this Agreement, the term "Liquidity Event" shall mean the
consummation of a sale of the Company to an independent third party or
group of third parties pursuant to which such party or parties acquire (y)
capital stock of the Company possessing the voting power under normal
circumstances to elect a majority of the Company's Board of Directors
(whether by merger, consolidation or the sale or transfer of the Company's
capital stock) or (z) substantially all of the Company's assets.
(iii) Participating Option. The Participating Option shall be deemed
vested only upon occurrence of a Liquidity Event or an Initial Public
Offering ("IPO") of the Company's Common Stock, provided that the
Participating Option shall only be exerciseable immediately prior to the
consummation of the Liquidity Event or IPO and provided further that if
such Liquidity Event or IPO is not consummated, the Participating Option
shall not be deemed vested and shall not be exerciseable and Optionee shall
have no rights with respect thereto until such time as a subsequent
Liquidity Event or IPO occurs
(c) Acceleration of Vesting. Notwithstanding the foregoing, the Board of
Directors of the Company (the "Board") may in its discretion provide that any
vesting requirement or other such limitation on the exercise of this Option may
be rescinded, reduced or waived by the Board, in its sole discretion, at any
time and from time to time after the Grant Date, so as to accelerate the time at
which this Option may be exercised.
3. MANNER OF EXERCISE AND PAYMENT
(a) Exercise. This Option may be exercised as provided in Section 2 by
delivery to the Company on any business day, at its principal office, addressed
to the attention of the Stock Option Administrator, of written notice stating
that Optionee is exercising this Option and specifying the Option being
exercised (i.e., Initial Option, Time-Based Option or Participating Option), the
number of shares of Common Stock for which this Option is being exercised, and
shall be accompanied by payment in full of the applicable exercise price of the
shares for which this Option is being exercised, by one or more of the methods
provided below. The minimum number of shares of Common Stock with respect to
which this Option may be exercised, in whole or in part, at any time shall be
the lesser of 93,750 or the maximum number of shares available for purchase
under this Option at the time of exercise.
(b) Payment. Payment of the applicable exercise price for the shares of
Common Stock purchased pursuant to the exercise of this Option shall be made by
(i) certified or cashier's check or (ii) by delivering a written direction to
the Company that this Option be exercised pursuant to a "cashless" exercise/sale
procedure based on the Fair Market Value (as defined below) of the Common Stock
on the date of exercise. Notwithstanding, the Board may, in its sole and
absolute discretion and to the extent permitted by applicable law, permit such
payment to be made using an alternative method.
(c) Issuance of Certificates. The Company shall deliver to Optionee a
certificate evidencing Optionee's ownership of the shares of Common Stock issued
pursuant to an exercise of this Option as soon as administratively practicable
after satisfaction of all conditions relating to the issuance of such shares.
Optionee shall not have any of the rights of a stockholder with respect to the
Option Shares until certificates evidencing the Option Shares are issued to the
Optionee, and, except as expressly provided for in this Agreement, no adjustment
shall be made for dividends, distributions or other rights of any kind for which
the record date is prior to the date of such issuance.
(d) Reduction of Exercise Price. Optionee shall be entitled to a one-time
$37,500 reduction of the exercise price of the Time-Based Option but only to the
extent Optionee exercises his Time-Based Option to purchase a minimum of 375,000
Time-Based Option Shares.
(e) Fair Market Value. For purposes of this Section 3, Fair Market Value
shall mean the fair market value of the Common Stock as determined by the Board
of Directors of the Company, provided, however, that in the event that Optionee
shall not agree with any determination made by the Board of Directors, and
Optionee shall give written notice of such disagreement to the Company within
ten (10) business days of such determination or valuation, then such
determination or valuation shall be made by a firm of independent certified
public accountants, an investment banking firm or appraisal firm (which firm
shall not be an affiliate of the Company) retained by the Company and reasonably
acceptable to Optionee (the "Valuation Agent"). Any such determination of any
value by such Valuation Agent pursuant hereto shall be binding. The fees and
expenses of the Valuation Agent shall be borne by Optionee if the Valuation
Agent's valuation doesn't exceed the valuation proposed by the Board of
Directors by at least 10%, and otherwise shall be borne by the Company.
(f) Execution of Shareholders' Agreement as Condition to Exercise of
Option. Upon exercise of this Option by Optionee, Optionee shall execute and
deliver a shareholders' agreement in the form attached hereto as Exhibit A.
4. TRANSFERABILITY OF OPTION
Unless otherwise permitted by the Board in its sole and absolute
discretion, Optionee may not Transfer this Option other than by will or the laws
of descent and distribution; provided, however, that Optionee may Transfer this
Option to family members or entities (including trusts) established for the
benefit of Optionee or Optionee's family members if Optionee does not receive
consideration for the Transfer of such Option. Any Option assigned or
transferred pursuant to this Section 4 shall continue to be subject to the same
terms and conditions as were applicable to the Option immediately before the
Transfer. Any purported Transfer shall have no force or effect and shall be null
and void, and the purported transferee of the Option shall not acquire any
rights with respect to this Option. For purposes of this Agreement, the term
"Transfer" means to assign, encumber, pledge, transfer, gift, bequest or
otherwise dispose in any way whatsoever.
5. TERMINATION OF EMPLOYMENT
(a) By the Company Without Cause or By Optionee for Good Reason. To the
extent the Company terminates Optionee's employment with the Company other than
by reason of "Cause" (as defined in the Employment Agreement) or Optionee
voluntarily terminates his employment with the Company for "Good Reason" (as
defined in the Employment Agreement), (i) any Option which has vested as of the
date upon which the termination occurs, which has not been exercised, shall be
exercisable for a period not to exceed nine (9) months after such termination at
which time, the vested and unexercised portion of the Option shall expire and
Optionee shall have no further right to purchase shares of Common Stock pursuant
to such vested but unexercised Option and (ii) any Option that has not vested as
of the date upon which the termination occurs shall expire immediately and
Optionee shall have no further right to purchase shares of Common Stock pursuant
to the unvested portion of the Option. Unless otherwise determined by the Board,
temporary absence from unemployment because of illness, vacation, approved
leaves of absence, military service and transfer of employment shall not
constitute termination of employment with the Company. Notwithstanding the
foregoing, in the event that a Liquidity Event or IPO occurs within six (6)
months after termination pursuant to this Section 5(a), the Participating Option
shall vest and be exercisable upon consummation of the Liquidity Event or IPO,
provided that Optionee must exercise the Participating Option simultaneously
with said consummation. If the Participating Option is not exercised at that
time, the unexercised portion of the Participating Option shall expire and
Optionee shall have no further right to purchase shares of Common Stock pursuant
to such Participating Option.
(b) By the Company for Cause. Upon termination of employment of the
Optionee with the Company for Cause (as defined in the Employment Agreement),
(i) any Option which has vested as of the date upon which the termination
occurs, which has not been exercised, shall be exercisable for a period not to
exceed thirty (30) days after such termination at which time, the vested and
unexercised portion of the Option shall expire and Optionee shall have no
further right to purchase shares of Common Stock pursuant to such vested but
unexercised Option and (ii) any Option that has not vested as of the date upon
which the termination occurs shall expire immediately and Optionee shall have no
further right to purchase shares of Common Stock pursuant to the unvested
portion of the Option.
(c) Voluntary Termination By Optionee Without Good Reason. To the extent
the Optionee voluntarily terminates his employment with the Company without
"Good Reason" (as defined in the Employment Agreement), (i) any Option which has
vested as of the date upon which the termination occurs, which has not been
exercised, shall be exercisable for a period not to exceed three (3) months
after such termination at which time, the vested and unexercised portion of the
Option shall expire and Optionee shall have no further right to purchase shares
of Common Stock pursuant to such vested but unexercised Option and (ii) any
portion of the Option that has not vested as of the date upon which the
termination occurs shall expire immediately and Optionee shall have no further
right to purchase shares of Common Stock pursuant to the unvested portion of the
Option.
(d) Death or Disability. Upon the termination of employment of the Optionee
with the Company by reason of death or Disability (as defined in the Employment
Agreement), the Optionee, Optionee's estate or the devisee named in the
Optionee's valid last will and testament or the Optionee's heir at law who
inherits the Option (whichever is applicable) has the right, at any time within
a period not to exceed six (6) months after the date of the Optionee's death or
Disability and prior to termination of the Option pursuant to Section 2 above,
to exercise, in whole or in part, (i) the vested portion of the Option held by
such Optionee upon such termination and (ii) any portion of the Option which
vests, by its terms, within such six-month period following Optionee's death or
disability, at which time, the vested and unexercised portion of the Option
shall expire and Optionee shall have no further right to purchase shares of
Common Stock pursuant to such vested but unexercised Option.
(e) Optional Repurchase. In the event the Optionee's employment with the
Company is terminated for any reason prior to an IPO or Liquidity Event, the
Company shall have the right, but not the obligation, at any time thereafter, to
repurchase any and all shares of Common Stock held by the Optionee which were
acquired upon exercise of any Option for a purchase price equal to the Fair
Market Value of such shares of Common Stock on the date of notice by the Compay
of its intent to effectuate the repurchase process. For purposes of this Section
5(e), the determination of the Fair Market Value shall be in accordance with
Section 3(e) above.
6. REQUIREMENTS OF LAW
(a) Registration. At the time of any exercise of this Option, the Company
may, if it shall determine it necessary or desirable for any reason, require the
Optionee (or his or her heirs, legatees or legal representative, as the case may
be), as a condition to the exercise thereof, to deliver to the Company a written
representation of present intention to purchase the shares for their own account
as an investment and not with a view to, or for sale in connection with, the
distribution of such shares, except in compliance with applicable federal and
state securities laws with respect thereto. In the event such representation is
required to be delivered, an appropriate legend may be placed upon each
certificate delivered to the Optionee (or his or her heirs, legatees or legal
representative, as the case may be) upon his or her exercise of part or all of
this Option and a stop transfer order may be placed with the transfer agent.
This Option shall also be subject to the requirement that, if at any time the
Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to this Option upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of or in
connection with, the issuance or purchase of the shares thereunder, this Option
may not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained, at the
Company's expense, free of any conditions not acceptable to the Company in its
sole discretion. The Company shall not be obligated to list, register or qualify
the Options or the Option Shares with any securities exchange or under any state
or federal law, nor take any affirmative action in order to cause the
exercisability of this Option or the issuance of Option Shares pursuant hereto
to comply with any law or regulation of any governmental authority.
(b) Withholding. The Board may make such provisions and take such steps as
it may deem necessary or appropriate for the withholding of any taxes that the
Company is required by any law or regulation of any governmental authority,
whether federal, state or local, domestic or foreign, to withhold in connection
with the exercise of this Option, including, but not limited to, (i) the
withholding of delivery of shares of Common Stock upon exercise of this Option
until the holder reimburses the Company for the amount the Company is required
to withhold with respect to such taxes, (ii) the canceling of any number of
shares of Common Stock issuable upon exercise of this Option in an amount
sufficient to reimburse the Company for the amount it is required to so
withhold, (iii) withholding the amount due from Optionee's wages or
compensation, or (iv) requiring the Optionee to pay the Company cash in the
amount the Company is required to withhold with respect to such taxes.
7. EFFECT OF CHANGES IN CAPITALIZATION
(a) Recapitalization. If the outstanding shares of Common Stock of Company
are increased or decreased or changed into or exchanged for a different number
or kind of shares or other securities of Company by reason of any
recapitalization, reclassification, reorganization (other than as described in
Section 7(b) below), stock split, reverse split, combination of shares, exchange
of shares, stock dividend or other distribution payable in capital stock of
Company, or other increase or decrease in such shares effected without receipt
of consideration by Company, an appropriate and proportionate adjustment shall
be made by the Board in the number and kind of shares of Common Stock issuable
upon exercise of this Option, and in the applicable exercise price per share of
this Option.
(b) Reorganization. Subject to Section 7(c) below, in the event of a
Reorganization (as defined below) or a Change in Control (as defined below) of
the Company,
(i) with respect to the Initial Option, the Board may in its sole and
absolute discretion provide on a case by case basis that (A) the Initial
Option shall terminate, provided, however, that Optionee shall have the
right immediately prior to the consummation of such Reorganization or
Change of Control and during such reasonable period as the Board in its
sole discretion shall determine and designate to exercise all or any
portion of the Initial Option; (B) after the consummation of the Change of
Control, the Initial Option will continue in full force and effect and
shall be subject to the terms and conditions set forth in this Agreement;
and/or (C) to the extent a Reorganization occurs, upon exercise of the
Initial Option after consummation of such Reorganization, the Optionee
shall be entitled to receive such number of shares of Common Stock or other
securities or property to which a holder of shares of Common Stock would
have been entitled to upon such Reorganization;
(ii) with respect to the Time-Based Option, (A) to the extent such
Reorganization or Change in Control also constitutes a Liquidity Event (as
defined in Section 2(b)(ii)), the Time-Based Option shall vest pursuant to
Section 2(b)(ii) and (B) to the extent such Reorganization or Change in
Control does not constitute a Liquidity Event (as defined in Section
2(b)(ii)), if Optionee's employment with the Company is terminated by the
Company Without Cause or if Optionee voluntarily terminates his employment
for Good Reason within eighteen months of the consummation of such
Reorganization or Change of Control, all of the outstanding Time-Based
Option shall become immediately exerciseable, without regard to any
limitation imposed herein, and (C) to the extent a Reorganization occurs,
upon exercise of any vested Time-Based Option after consummation of such
Reorganization, the Optionee shall be entitled to receive such number of
shares of Common Stock or other securities or property to which a holder of
shares of Common Stock would have been entitled to upon such
Reorganization; and
(iii) with respect to the Participating Option, (A) the Participating
Option shall vest and become immediately exerciseable and (B) to the extent
a Reorganization occurs, upon exercise of any Participating Option after
consummation of such Reorganization, the Optionee shall be entitled to
receive such number of shares of Common Stock or other securities or
property to which a holder of shares of Common Stock would have been
entitled to upon such Reorganization.
For purposes of this Agreement, a "Reorganization" of the Company
shall be deemed to occur if (i) the Company is a party to a merger,
consolidation, reorganization, or other business combination (including a
spin-off, split-off, split-up or similar transaction) with one or more
entities in which neither the Company, nor any parent or subsidiary of the
Company is the surviving entity or (ii) if the Company disposes of
substantially all of its assets determined on a consolidated basis. For
purposes of this Agreement, a "Change in Control" shall be deemed to occur
if any person or group of persons shall acquire direct or indirect
beneficial ownership (whether as a result of stock ownership, revocable or
irrevocable proxies or otherwise) of securities of the Company, pursuant to
one or more transactions, such that after consummation and as a result of
such transaction, such person possesses the voting power under normal
circumstances to elect a majority of the Company's Board of Directors. For
purposes of this Agreement, a "person" shall mean any person, corporation,
partnership, joint venture or other entity or any group (as such term is
defined for purposes of Section 13(d) of the Exchange Act), other than a
parent or subsidiary, and "beneficial ownership" shall be determined in
accordance with Rule 13d-3 under the Exchange Act. The Company shall notify
Optionee of any proposed Reorganization or Change of Control at least
thirty (30) days prior to the consummation of such Reorganization or Change
of Control, which notice (the "Transaction Notice") shall include a
description of the proposed transaction as well as the consideration to be
paid to holders of the Company's Common Stock upon consummation of the
Reorganization or Change of Control.
(c) Tag Along; Drag-Along. Notwithstanding anything to the contrary
contained herein, upon the occurrence of a Liquidity Event, Optionee shall have
the right to participate with the holders of the Company's Common Stock in any
such Liquidity Event, to the extent that any Option granted hereunder vests and
becomes exercisable immediately upon the occurrence of a Liquidity Event, by
providing written notice to the Company within ten (10) days of receipt by him
of the Transaction Notice. In addition, notwithstanding the foregoing, upon the
occurrence of a Reorganization or Change of Control, (i) the Company shall have
the right to require Optionee to exercise his vested Option and participate with
the holders of the Company's Common Stock (on a net-exercise basis) in any such
Reorganization or Change of Control and (ii) to the extent Optionee holds or
owns beneficially any Common Stock, the Company shall have the right to require
Optionee to sell such Common Stock on the terms and subject to the conditions
set forth in the Transaction Notice, by providing written notice to Optionee at
least ten (10) days prior to the consummation of the Reorganization or Change of
Control. To the extent the Company requires Optionee to participate in the
Reorganization or Change of Control as provided in the foregoing sentence,
Optionee shall take such necessary or desirable actions in connection with the
consummation of the Reorganization or Change of Control as reasonably requested
by the Company.
(d) Dissolution or Liquidation. Upon the dissolution or liquidation of the
Company, this Option shall terminate. In the event of any termination of this
Option under this Section 7(d), Optionee shall have the right, immediately prior
to the occurrence of such termination and during such reasonable period as the
Board in its sole discretion shall determine and designate, to exercise this
Option in whole or in part.
(e) Adjustments. Adjustments under this Section 7 related to stock or
securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding, and conclusive. No fractional shares of
Common Stock or units of other securities shall be issued pursuant to any such
adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(f) No Limitations. The grant of this Option hereunder shall not affect or
limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
8. DISCLAIMER OF RIGHTS
No provision of this Agreement shall be construed to confer upon any
individual, including Optionee, the right to remain in the employ of or to
continue in any other contractual relationship with the Company or to interfere
in any way with the right and authority of the Company either to increase or
decrease the compensation of any individual, including Optionee, at any time, or
to terminate any employment or other relationship between any individual,
including Optionee, and the Company.
9. NONEXCLUSIVITY OF THIS AGREEMENT
This Agreement shall not be construed as creating any limitations upon the
right and authority of the Board to adopt such other incentive compensation
arrangements (which arrangements may be applicable either generally to a class
or classes of individuals or specifically to a particular individual or
individuals) as the Board in its discretion determines desirable, including,
without limitation, the granting of stock options or stock appreciation rights.
However, by signing this Agreement, the Optionee acknowledges and agrees that
any other previous option or similar agreements between the Company, its
affiliates, and the Optionee are hereby cancelled and shall be null and void.
10. MISCELLANEOUS
(a) Indulgences, Etc. Neither the failure nor any delay on the part of
either party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.
(b) Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of Florida, without
application to the principles of conflict of laws.
(c) Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when personally
delivered, one day following the day when deposited with an overnight courier
service for overnight priority service, such as Federal Express, for delivery to
the intended addressee or three days following the day when deposited in the
United States mails, first class postage prepaid, certified or registered mail,
and addressed, in the case of Company, to its principal place of business, and,
in the case of Optionee, as set forth below Optionee's signature on the last
page hereof. Any person may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
(d) Binding Nature of Agreement; Transferability. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns. This Agreement shall
not be assignable or transferable by the Optionee other than by will or the laws
of descent and distribution.
(e) Severability. The provisions of this Agreement are independent of and
separable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.
(f) Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
(g) Number of Days. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however that if the final day of any time period falls on a Saturday,
Sunday or holiday on which federal banks are or may elect to be closed, then the
final day shall be deemed to be the Company day which is not a Saturday, Sunday
or such holiday.
(h) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties and their respective
successors and permitted assigns.
(i) Entire Agreement; Amendments. This Agreement (including the documents
and exhibits referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements, or representations
by or among the parties, written or oral, that may have related in any way to
the subject matter hereof. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
(j) Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and thereof
strict construction shall be applied against any party. Any reference to any
federal, state, local or foreign statute or law shall be deemed also to refer to
the rules and regulations promulgated thereunder, unless the context requires
otherwise. The parties intend that each representation, warranty, and covenant
contained herein shall have independent significance. If any party has breached
any representation, warranty, or covenant contained herein in any respect, the
fact that there exists another representation, warranty or covenant relating to
the same subject matter (regardless of the relative levels of specificity) which
the party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or covenant.
(k) Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
(l) Pronouns. The use of any gender in this Agreement shall be deemed to
include all genders, and the use of the singular shall be deemed to include the
plural and vice versa, wherever it appears appropriate from the context.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
STONEHOUSE TECHNOLOGIES, INC.
By: /s/ H. Xxxxx Xxxx
Name: H. Xxxxx Xxxx
Title: Chairman of the Board
OPTIONEE:
/s/ Mardan Afrasiabi
Mardan Afrasiabi
Address:
00000 Xxxxxxxxx Xx. #000
Xxxxxx, XX 00000
EXHIBIT A
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT ("Agreement") is entered into as of the ___ day
of _________, 200_ by and among STONEHOUSE TECHNOLOGIES, INC., a Texas
corporation ("Corporation" or the "Company") and Mardan Afrasiabi
("Shareholder").
W I T N E S S E T H :
WHEREAS, the Shareholder owns of record and beneficially _____ shares (the
"Shares") of common stock, par value $0.01 per share, of the Corporation (the
"Common Stock"); and
WHEREAS, the Shareholder and the Corporation agree that it is in the best
interest of the Corporation to provide for the transfer, ownership, pledge and
disposition of the Shares in the manner and to the extent set forth herein;
NOW, THEREFORE, in consideration of TEN DOLLARS ($10.00), and the mutual
promises herein exchanged, the parties hereto, each intending to be legally
bound hereby, agree as follows:
1. Recitals. The foregoing recitals are true and correct and are
incorporated herein by reference.
2. Legend. All Shares now or hereafter owned by the Shareholder shall be
subject to the provisions of this Agreement and the certificates
representing same shall bear a legend in substantially the following form:
"Any sale, assignment, transfer, pledge or other disposition of the shares
of stock represented by this certificate is restricted by and subject to
the terms and provisions of a Shareholders Agreement, dated as of the day
of _________, 200_. A copy of said Shareholders Agreement is on file with
the Secretary of the Corporation. By acceptance of this certificate, the
holder hereof agrees to be bound by the terms of said Shareholders
Agreement.
The securities represented by this certificate have not been registered
under the Securities Act of 1933 as amended, or the securities laws of any
state or other jurisdiction, and may not be sold, transferred, pledged,
hypothecated or otherwise disposed of in the absence of (1) an effective
Registration Statement for such securities under applicable law, or (2) an
opinion of counsel, satisfactory to the Corporation, that such registration
is not required."
A copy of this Agreement shall be filed with the Secretary of the
Corporation.
3. Voting Provisions. The Shareholder hereby agrees, on behalf of himself
and his heirs, successors and permitted assigns, that he shall vote his
Shares, and take such other action as may be necessary, to elect _________
as the entire Board of Directors of the Corporation.
4. Restrictions on Transfer and Issuance.
(a) Except as expressly provided in this Agreement and in accordance with
its terms and conditions, the Shareholder shall not, in any way or manner
whatsoever, sell, assign, transfer, give, bequeath, devise, donate or
otherwise dispose of, or pledge, deposit or otherwise encumber any of the
Shares now or hereafter held by him.
(b) Shareholder shall have the right to transfer or assign during his
lifetime and/or bequeath or devise at the time of his death all or any
Shares now or hereafter owned by him to family members or entities
(including trusts) established for the benefit of Shareholder or
Shareholder's family members if Shareholder does not receive consideration
for the transfer of such Shares subject, however, to the provisions of
subsection (c) hereof.
(c) In the event any purported or attempted transfer of Shares does not
comply with the provisions of this Agreement, the purported transferee
shall not be deemed to be a shareholder of the Corporation and shall not be
entitled to registration of such transfer of Shares on the books of the
Corporation. No transfer of Shares shall be valid unless the transferee has
first become a party to this Agreement. The Corporation shall not be bound
to acknowledge or recognize any transfer of Shares until the Corporation
has been furnished with such reasonable written proof of the transfer as it
shall demand. In addition, no person shall have the right to become a
shareholder of the Corporation unless: (i) such person has executed any and
all instruments, in form and substance reasonably satisfactory to counsel
for the Corporation, required to evidence (A) such person's ownership of
the Shares on the books and records of the Corporation, and (B) such
person's acceptance and adoption of all of the terms and provisions of this
Agreement; and (ii) such person has paid all reasonable attorneys' fees
incurred by the Corporation in connection with the preparation of such
documentation. The Shareholders hereby agree to cause this Agreement to be
amended to permit a transferee acquiring Shares in accordance with the
provisions of this Agreement to become a shareholder of the Corporation, a
party hereto and a "Shareholder" hereunder.
(d) The restrictions on transfer set forth in this Section 4 shall continue
with respect to the Shareholder until the date on which the Corporation
shall have consummated an Initial Public Offering ("IPO").
5 "Piggyback" Registration Rights.
(a) Piggyback Rights. If, at any time prior to the first anniversary date
after the consummation of an IPO (the "Registration Period"), the Company
proposes to register any of its Common Stock under the Securities Act
(other than in connection with a merger, acquisition, exchange offer,
dividend reinvestment plan or pursuant to Form S-8 or any successor form)
either on its own behalf or on behalf of any shareholder of the Company,
the Company shall give written notice to the Shareholder at least twenty
(20) days prior to the filing of each such registration statement of its
intention to do so and shall inquire whether the Shareholder desires to
include any of his Shares therein. If the Shareholder notifies the Company
within ten (10) days after receipt of any such notice of his desire to
include any of his Shares in such proposed registration statement, the
Company shall afford the Shareholder the opportunity to have any such
Shares registered under such registration statement (a "Piggyback
Registration"). Notwithstanding anything to the contrary contained herein,
the Company shall have the right at any time after it shall have given
written notice pursuant to this Section (irrespective of whether a written
request for inclusion of any such Shares shall have been made by the
Shareholder) to elect not to file any such proposed registration statement,
or to withdraw such registration statement after the filing but prior to
the effective date thereof.
(b) Piggyback Expenses. If the Company proposes to sell any of its
CommonStock in a Piggyback Registration, the Company shall pay all expenses
incident to the registration, other than the fees and expenses of any
separate counsel(s) retained by the Shareholder and any transfer taxes or
underwriting discounts or commissions applicable to the Shares sold
pursuant hereto, the Shareholder shall pay those expenses incident to the
Piggyback Registration allocable to the registration of his Shares so
included, and any expenses incident to the Piggyback Registration not so
allocable shall be borne by all sellers of Shares included in such
registration in proportion to the aggregate selling price of the Shares to
be so registered.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion
the number of shares of Common Stock requested to be included in such
registration exceeds the number which can be sold in such offering in an
orderly manner within a price range acceptable to the Company and without
adversely affecting the marketability of the offering, the Company shall
include in such registration (i) first, the shares of Common Stock the
Company proposes to sell, and (ii) second, other shares of Common Stock
requested to be included in such registration, pro rata among the holders
of such shares on the basis of the number of shares owned by each such
shareholder, including the Shares requested to be included in such
registration by the Shareholder.
(d) Priority on Secondary Registrations. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of shares of the
Company's Common Stock, and the managing underwriters advise the
Corporation in writing that in their opinion the number of shares of Common
Stock requested to be included in such registration exceeds the number
which can be sold in such offering in an orderly manner within a price
range acceptable to the holders initially requesting such registration and
without adversely affecting the marketability of the offering, the Company
shall include in such registration (i) first, the shares of Common Stock
requested to be included therein by the holders requesting such
registration, and (ii) second, other shares of Common Stock requested to be
included in such registration, pro rata among the holders of such shares on
the basis of the number of shares owned by each such shareholder, including
the Shares requested to be included in such registration by the
Shareholder.
(e) Indemnification. The Company agrees to indemnify, to the extent
permitted by law, the Shareholder (solely in his capacity as a seller of
Shares and not as an officer of the Company), against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged untrue
statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by the Shareholder
expressly for use therein or by the Shareholder's failure to deliver a copy
of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Shareholder with a
copy of the same. In connection with any registration statement in which
the Shareholder is participating, the Shareholder shall furnish to the
Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, shall
indemnify the Company, its directors and officers and each person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in
writing by the Shareholder; provided, however, that the obligation to
indemnify shall be limited to the net amount of proceeds received by the
Shareholder from the sale of Shares pursuant to such registration
statement.
(f) Indemnification Claims. Any person entitled to indemnification
hereunder shall (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification (provided that the
failure to give prompt notice shall not impair any person's right to
indemnification hereunder to the extent such failure has not prejudiced the
indemnifying party) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying
party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall
not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall not be obligated
to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless
in the reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim. An indemnified party shall be able to
assume the defense (at the cost of the indemnifying party) if the
indemnifying party does not diligently pursue the defense of the
indemnified party. In addition, no indemnifying party shall consent to the
entry of a settlement except with the consent of the indemnified party.
(g) Participation in Underwritten Registrations. The Shareholder may not
participate in any registration hereunder which is underwritten unless he
(i) agrees to sell his securities on the basis provided in any underwriting
arrangements approved by the Corporation, and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
underwriting arrangements.
(h) Termination of Registration Rights. As to any particular Shares, such
securities shall cease to be eligible for the registration rights provided
by this Section 5 when they have been transferred in a public sale or
repurchased by the Company or may in the written opinion of counsel for the
Corporation, be publicly sold without the need for compliance with the
registration provisions of the Securities Act and applicable state
securities laws.
(i) Additional Terms. In connection with the filing of a registration
statement pursuant to this Section 5, the Company shall: (a) prepare and
file without expense to the Shareholder any amendment or supplement to such
registration statement or prospectus as may be necessary to comply with
Section 10(a)(3) of the Securities Act or advisable in connection with the
proposed distribution of the Shares by the Shareholder (but only during
such period as the Company is required to keep the registration statement
effective); (b) use its reasonable best efforts to qualify the Shares being
so registered for sale under the Securities Act or state securities laws in
such reasonable number of states as the Shareholder may designate in
writing and to register or obtain the approval of any federal or state
authority which may be required in connection with the proposed
distribution, except, in each case, in jurisdictions in which the Company
must either qualify to do business or file a general consent to service of
process as a condition to the qualification of such Shares; (c) undertake
to keep said registration statement and prospectus effective until such
time as the Shares are sold or become available for public sale without
registration under the Securities Act; and (d) furnish to the Shareholder,
as soon as available, copies of any such registration statement and each
preliminary or final prospectus and any supplement or amendment required to
be prepared pursuant to the foregoing provisions hereof, all in such
quantities as the Shareholder may from time to time reasonably request.
(j) Suspension of Distribution of Shares. The Shareholder, upon receipt of
notice from the Company upon the occurrence of an event which requires a
post-effective amendment to the registration statement or a supplement to
the prospectus included therein, shall promptly discontinue the sale of the
Shares until he has received copies of a supplemented or amended prospectus
from the Company, which the Corporation shall provide as soon as
practicable after such notice. The Shareholder agrees not to effect any
public sale of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during
the seven days prior to the 180-day period beginning on the effective date
of any (i) underwritten Piggyback Registration in which Shares are included
(except as part of such underwritten registration), or (ii) a public
offering, in each case unless the underwriters managing such public
offering and the Company otherwise agree.
6. Miscellaneous.
(a) All notices, demands, or other communications given hereunder shall be
in writing and shall only be deemed duly given upon hand delivery thereof
or upon the first business day after mailing by United States registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Corporation: Stonehouse Technologies, Inc.
[Address]
If to Shareholder Mardan Afrasiabi
[Address]
or such other address or to such other person as either party shall
designate to the other for such purpose in the manner hereinafter set
forth.
(b) The Shareholder hereby agrees to execute any and all instruments or
other documents which counsel to the Corporation shall reasonably deem
necessary in order to effectuate this Agreement.
(c) This Agreement shall be construed in accordance with the laws of the
State of Florida and any proceeding arising between the parties in any
manner pertaining or related to this Agreement, to the extent permitted by
law, shall be held in Palm Beach County, Florida.
(d) This Agreement shall be binding upon the parties hereto, their heirs,
administrators, successors and permitted assigns.
(e) The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope or intent of this
Agreement or the intent of any provision hereof.
(f) All pronouns shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identity of the party or parties, or
their personal representatives, successors and assigns may require.
(g) This Agreement may be executed in any number of counterparts and all
executed counterparts shall constitute one Agreement notwithstanding that
all signatories are not signatories to the original or to the same
counterpart.
(h) Each party hereto recognizes and agrees that the violation of any term,
provision or condition of this Agreement may cause irreparable damage to
the other parties which may be difficult to ascertain, and that the award
of any sum of damages may not be adequate relief to such parties. Each
party, therefore, agrees that, in addition to other remedies available in
the event of a breach of this Agreement, any other party shall have a right
to equitable relief including, but not limited to, the remedy of specific
performance.
(i) If any party hereto is required to engage in litigation against any
other party hereto, either as plaintiff or as defendant, in order to
enforce or defend any of its or his rights under this Agreement, and such
litigation results in a final judgment in favor of such party ("Prevailing
Party"), then the party or parties against whom said final judgment is
obtained shall reimburse the Prevailing Party for all direct, indirect or
incidental expenses incurred by the Prevailing Party in so enforcing or
defending its or his rights hereunder including, but not limited to, all
attorney's fees and court costs and other expenses incurred throughout all
negotiations, trials or appeals undertaken in order to enforce the
Prevailing Party's rights hereunder.
(j) If any provisions or any portion of any provision of this Agreement, or
the application of any such provision or any portion thereof to any person
or circumstance, shall be held invalid or unenforceable, the remaining
portion of such provision and the remaining provisions of this Agreement,
or the application of such provision or portion of such provision as is
held invalid or unenforceable to persons or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected
thereby.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth beneath each signature.
STONEHOUSE TECHNOLOGIES, INC.
By: /s/ H. Xxxxx Xxxx
Name: H. Xxxxx Xxxx
Title: Chairman of the Board
Dated: 6/16/03
SHAREHOLDER
/s/ Mardan Afrasiabi
Mardan Afrasiabi
