EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement"), dated as of June 10,
2005 (the "Commencement Date"), between Xxxxxxx X. Xxxxxxxxxx Xx.
[residing at the address set forth on Schedule A] (the "Employee")
and Stealth Microwave, Inc., a New Jersey corporation
("Stealth").
In consideration of the terms and mutual covenants herein
contained, the Employee and Stealth agree as follows:
1. Term of Employment. Stealth hereby employs the Employee,
and the Employee hereby accepts employment by Stealth, for the
period commencing on the Commencement Date and continuing until
the second anniversary of the Commencement Date, unless at any
time terminated earlier in accordance with Section 7 hereof (the
"Employment Period").
2. Capacity. The Employee shall serve as the President and
Chief Executive Officer of Stealth and shall only perform duties
and functions consistent with such position and consistent with
those performed by him for Stealth prior to the date hereof.
Employee at all times shall be treated as a senor executive.
Without limiting the generality of the preceding sentence, the
Employee shall be provided with his current office and with
secretarial services and other services consistent with Stealth's
current practices as in effect prior to the date hereof. Except
for travel from time to time reasonably consistent with past
practices to perform his duties hereunder, Employee shall not be
required to perform his duties hereunder at any location other
than Stealth's present location in Trenton, New Jersey.
3. Full-Time Employment. The Employee shall devote his
entire business and professional time, attention and energies to
the performance of his duties to Stealth and shall not, directly
or indirectly, actively engage in or concern himself with any
other activities or commitments which interfere with the
performance of his duties hereunder or which, even if
non-interfering, may be inimical or contrary to the best
interests of Stealth.
4. Compensation and Benefits. For all services rendered by
the Employee to Stealth, Stealth shall pay and provide to the
Employee during the Employment Period the following compensation:
(a) Base Salary. The Employee shall be entitled to an
annual base salary of $132,890 from the date of this Agreement
until the expiration of the Employment Period. This base salary
may be increased (but may not be reduced) by the Board of
Directors of Stealth during the Employment Period.
(b) Annual Bonus. In addition to the salary described
in Section 4(a) above, the Employee shall receive lump sum
bonuses in respect of the period beginning on April 1, 2005 and
ending on March 31, 2006 (the "First Bonus Period") and the
period beginning April 1, 2006 and ending on March 31, 2007 (the
"Second Bonus Period"). The Employee shall be entitled to
receive such bonus for the First Bonus Period equal to (a) $0.15
for every dollar that Stealth's Actual Pre-Tax Income (as such
term is defined in that certain Earnout Agreement (the "Earnout
Agreement"), dated as of the date hereof, by and among
Micronetics, Inc., a Delaware corporation ("Micronetics"),
Stealth and the Sellers (as defined therein)) for the First Bonus
Period exceeds $2,400,000 but does not exceed $3,100,000, and (b)
$0.25 for every dollar that Stealth's Actual Pre-Tax Income for
the First Bonus Period exceeds $3,100,000. The Employee shall be
entitled to receive such bonus for the Second Bonus Period equal
to (x) $0.15 for every dollar that Stealth's Actual Pre-Tax
Income for the Second Bonus Period exceeds $2,650,000 but does
not exceed $3,350,000, and (y) $0.25 for every dollar that
Stealth's Actual Pre-Tax Income for the Second Bonus Period
exceeds $3,350,000. For the purposes of this Agreement, Actual
Pre-Tax Income shall be the amount thereof as determined pursuant
to the Earnout Agreement, or in the case of the acceleration of
the payment of the maximum Performance Earnout(s) pursuant to
Section 3 of the Earnout Agreement, in accordance with the
principles and procedures set forth in the Earnout Agreement as
applicable to the determination of Actual Pre-Tax Income.
(c) Payment of Salary and Bonus. The Employee's salary
under Section 4 (a) above shall be payable in regular and
substantially equal installments in accordance with Stealth's
normal schedule for the payment of executive salaries. Any bonus
payable under Section 4(b) above shall be paid to the Employee on
the same date as the date upon which the Earnout Amount in
respect of the period for which the bonus is determined shall be
paid to the Sellers under the Earnout Agreement (or in the case
of the acceleration of the payment of the maximum Performance
Earnout(s) pursuant to Section 3 of the Earnout Agreement, by the
earlier to occur of (a) the expiration of 15 days after the date
of filing with the Securities and Exchange Commission of the
Buyer's Annual Report on Form 10-KSB with respect to the relevant
period, and (b) the expiration of 100 days after March 31, 2006
or March 31, 2007, as the case may be)(such date, as so
determined, the "Bonus Payment Date").
(d) Equity Incentive Compensation Arrangements.
(i) The Employee shall also be eligible to participate
during the term of his employment under this Agreement in such
equity incentive compensation arrangements as are generally
provided by Micronetics for the executives of Micronetics and its
subsidiaries that hold positions of substantially similar levels
of responsibility as that of the Employee.
(ii) In addition, Micronetics hereby grants to the
Employee stock options (the "Options") which shall entitle the
Employee to acquire 125,000 shares of Micronetics common stock,
par value $0.01 per share (as such title or par value may be
amended) ("Shares"), for a per Share exercise price of $8.00,
determined in accordance with the provisions of Section 6(c)(ii)
of the Plan (as hereinafter defined), and to exercise such
options, to the extent such options have become vested, within
five years following the date hereof, except as otherwise
provided in Section 7 hereof.
(iii) Such options include incentive stock options (as
defined in Section 422 of the Internal Revenue Code of 1986, as
amended) to acquire 40,000 Shares, which incentive stock options
(the "Incentive Options") are hereby awarded pursuant to the 2003
Stock Incentive Plan of Micronetics, Inc. (the "Plan"). Such
options also include non-qualified stock options to acquire an
additional 85,000 Shares, which non-qualified options are hereby
awarded outside of the Plan (or any other stock option plan
previously adopted by the Company).
(iv) 25% of the Options shall vest on the date
immediately preceding the first anniversary of the grant date,
25% of the Options shall vest on the date immediately preceding
the second anniversary of the grant date, 25% of the Options
shall vest on the date immediately preceding the third
anniversary of the grant date, and 25% of the Options shall vest
on the date immediately preceding the fourth anniversary of the
grant date. Additional terms with respect to the stock options
granted pursuant to this Section 4(d) are set forth in Exhibit A
attached hereto, provided, in the event of a conflict between
such additional terms and the terms of the Plan, then the terms
of the Plan shall control with respect to the Incentive Options.
(v) The Incentive Options granted hereunder may be
exercisable, and shall be exercised, in accordance with the terms
set forth herein and the terms of the Plan (and the
Administrator, as defined in the Plan, shall not determine
otherwise without the Employee's prior written consent).
(vi) Within 90 days after the date of this Agreement,
Micronetics agrees to file with the Securities and Exchange
Commission, a Registration Statement on Form S-8 or other
appropriate form under the Securities Act of 1933 (the "Act"),
relating to the Options and the Shares, provided that (i) such
form is available under the Act with respect to the Options and
the Shares and (ii) Micronetics is eligible to use such form
under the Act. Micronetics will use its commercially reasonable
efforts to cause such Registration Statement to remain effective
until the exercise or expiration of the Options. Additionally,
Micronetics shall take such steps as may be required to cause the
listing of the Shares on the NASDAQ Small Cap Market.
(e) Withholding Taxes. The Employee agrees that Stealth
shall withhold from any and all payments required to be made to
the Employee pursuant to this Agreement all federal, state, local
and/or other taxes that are required to be withheld in accordance
with applicable statutes and/or regulations from time to time in
effect.
5. Employment Benefit Plans. Stealth agrees to provide to
the Employee, during the Employment Period, hospitalization and
other medical and health benefits, life insurance, paid holidays,
paid vacation and other benefits on terms and conditions
equivalent to those provided by Stealth to other senior
executives of Stealth as of the date immediately preceding the
date of this Agreement. Further, until March 31, 2006, Stealth
shall use its best efforts to maintain in force and effect, and
the employee shall continue to be eligible to participate in, the
employee benefit plans maintained by Stealth on the date hereof.
Thereafter, during the remainder of the term of his employment
under this Agreement, the Employee shall be eligible to
participate in such employee benefit plans as Micronetics shall
establish or maintain from time to time for senior executives of
Micronetics, Inc. and its subsidiaries; provided however, the
employee benefits provided for in this Section 5 shall be in
addition to those provided for in other Sections of this
Agreement.
6. Reimbursement. Stealth shall promptly reimburse the
Employee for all reasonable business expenses incurred by him in
connection with his performance of his duties to Stealth, upon
reasonable substantiation of such expenses.
7. Termination of Employment.
(a) Termination Without Cause or For Good Reason.
Stealth expressly reserves the right to terminate the employment
of the Employee hereunder other than for Cause (as defined in
Section 7(c) below) and other than as provided in Sections 7(d)
and 7(e) below, provided Stealth shall have given Employee not
less than thirty (30) days prior written notice of such
termination; and the Employee expressly reserves the right to
terminate his employment hereunder for Good Reason (as defined
below in this Section 7(a)) or without Good Reason. In the event
that the Employee's employment shall have been so terminated by
Stealth other than for Cause and other than for disability or
death pursuant to Section 7(d) or 7(e) below, or in the event the
Employee terminates his employment hereunder for Good Reason, the
Employee shall be entitled to receive his base salary at the rate
in effect on the date of such termination of employment, until
the second anniversary of the Commencement Date, plus his cash
bonus in respect of each of the First Bonus Period and the Second
Bonus Period, which shall be determined and paid in the manner
and at the times provided in Sections 4(b) and 4(c) hereof
irrespective of such employment termination, plus all other
benefits provided for in this Agreement (or at Stealth's election
the reasonable equivalent thereof in cash payments); and the
Options that have vested prior to such termination shall remain
vested and exercisable irrespective of such employment
termination. In the event that the Employee's employment shall
have been terminated by Stealth other than for Cause and other
than for disability or death pursuant to Section 7(d) or 7(c)
below, then the Options that were not previously vested shall
automatically become fully vested on the date immediately
preceding the date of such termination.
The term "Good Reason" shall mean (i) any breach by Stealth
or Micronetics of any of the terms of this Agreement or the Plan
that is not cured within thirty (30) days following receipt of
written notice from the Employee, or that is so cured but
thereafter repeated, and/or (ii) the occurrence of any
Acceleration Event (as defined in the Earnout Agreement).
(b) Voluntary Termination. In the event that the
Employee shall terminate his employment voluntarily for any
reason other than Good Reason, the Employee shall be entitled to
receive his base salary at the rate in effect on the date of such
termination of employment through the date of such termination
and no other benefits, including, without limitation, those
provided for under Section 4(b) of this Agreement (except those
that cannot be divested pursuant to the Employee Retirement
Income Security Act of 1974, as amended or other applicable law),
provided the Employee shall also be entitled to receive any then
unpaid expense reimbursement pursuant to Section 6 hereof and any
unpaid amount of the cash bonus payable pursuant to Section 4(b)
in respect of the First Bonus Period if the date of such
termination occurs after the end of the First Bonus Period. The
Employee's rights with respect to all unexercised options granted
pursuant to Section 4(d) hereof shall terminate upon the
termination of employment pursuant to this Section 7(b).
(c) Termination for Cause. If at any time during the
term of this Agreement, Stealth shall terminate the employment of
the Employee for Cause (as hereinafter defined) the Employee
shall be entitled to receive only his base salary to the date of
such termination and no other benefits, including, without
limitation, those provided for under Section 4(b) of this
Agreement (except those that cannot be divested pursuant to the
Employee Retirement Income Security Act of 1974, as amended or
other applicable law), provided the Employee shall also be
entitled to receive any then unpaid expense reimbursement
pursuant to Section 6 hereof and any unpaid amount of the bonus
payable pursuant to Section 4(b) in respect of the First Bonus
Period if the date of such termination occurs after the end of
the First Bonus Period. The Employee's rights with respect to
all unexercised options granted pursuant to Section 4(d) hereof
shall terminate upon the termination of employment pursuant to
this Section 7(c).
The term "Cause" shall mean the Employee being convicted of
a felony, or the Employee being convicted of committing an act of
intentional dishonesty or fraud against, or the misappropriation
of property belonging to, Stealth or Micronetics, but only once
any such conviction becomes final and non-appealable.
(d) Disability. In the event that the Employee shall
sustain a disability and be unable to perform the essential
functions of his position, with or without reasonable
accommodation, as shall have been certified by at least one (1)
duly licensed and qualified physician approved by the Board of
Directors of Stealth, Stealth shall continue to pay to the
Employee while such disability continues the full amount of his
base salary as set forth in Section 4(a) hereof for the period
between the date upon which such disability shall have been so
certified and the date upon which the employee shall first
receive regular periodic disability payments under Stealth's
group disability insurance policy. Thereafter, if the Employee's
disability shall continue (as evidenced by the continued absence
of the Employee from his duties), the employment of the Employee
under this Agreement shall terminate and all obligations of the
Employee shall cease provided the Employee shall be entitled to
receive only the payment of any amounts of the Employee's base
salary then remaining to be paid under Section 4(a) hereof
through the date of the termination of the Employee's employment,
plus any unpaid amount of the cash bonus for the First Bonus
Period if such termination occurs after the end of the First
Bonus Period and a pro-rated portion (based upon the number of
days of the applicable bonus period that have elapsed prior to
the date of his death) of the Employee's cash bonus in respect of
the bonus period hereunder during which the employee's disability
occurred, determined and paid in the manner and at the time
provided in Sections 4(b) and 4(c) hereof, plus any then unpaid
expense reimbursement pursuant to Section 6 hereof; and the
Options that have vested prior to such termination shall remain
vested and exercisable irrespective of such employment
termination. Any physician certification regarding whether the
Employee is disabled pursuant to this Section shall be binding
upon Stealth and the Employee.
(e) Death. In the event of the Employee's death
during the term of this Agreement, the Employee's employment
hereunder shall immediately terminate and, in such event, the
Employee's estate shall be entitled to receive the Employee's
base salary to the last day of the month during which the
Employee's death shall have occurred, plus any unpaid amount of
the cash bonus for the First Bonus Period if such termination
occurs after the end of the First Bonus Period and a pro-rated
portion (based upon the number of days of the applicable bonus
period that have elapsed prior to the date of his death) of the
Employee's cash bonus in respect of the bonus period hereunder
during which the employee's death occurred, determined and paid
in the manner and at the time provided in Sections 4(b) and 4(c)
hereof, plus any then unpaid expense reimbursement pursuant to
Section 6 hereof; and the Options that have vested prior to such
termination shall remain vested and exercisable irrespective of
such employment termination.
8. Noncompetition and Non-Solicitation. (a) The Employee
agrees that until July 14, 2007, he shall not:
(i) compete with Stealth by developing,
producing, distributing, marketing, selling or
assisting any Person to develop, produce, distribute,
market or sell, a product or service which is known by
him to be competitive with the products or services of
Stealth then existing or planned (as evidenced by
Stealth's business records) for the future; nor, for
the same period, for any reason, will he accept
employment from or have any other relationship with any
Person which is known by him to be competitive with the
products or services of Stealth then existing or which
were known by him to be planned (as evidenced by
Stealth's business records) for the future; it being
agreed that, in view of the global nature of Stealth's
business, the foregoing restrictions shall apply
worldwide.
(ii) employ or solicit, or receive or accept the
performance of any services by, any employee,
consultant or contractor known by him to be employed by
and/or engaged by Stealth, or any such person whose
employment or engagement with Stealth is known by him
to have terminated within the six (6) month period
prior to July 14, 2007.
(iii) solicit, entice away or divert any person
or entity who is then a customer or supplier of, or
provider of services to Stealth and who was a customer
or supplier of, or provider of services to, Stealth at
any time within the twelve (12) month period prior to
the July 14, 2007.
(b) If any provision contained in this Section 8 will
for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability
will not affect any other provisions of this Section 8, but
this Section 8 will be construed as if such invalid, illegal
or unenforceable provision had never been contained herein.
It is the intention of the parties that if any of the
restrictions or covenants contained herein is held to cover
a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be
too broad or to any extent invalid, such provision will not
construed to be null, void and of no effect, but to the
extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction will
construe and interpret or reform this Section 8 to provide
for a covenant having the maximum enforceable geographic
area, time period and other provisions (not greater than
those contained herein) as will be valid and enforceable
under such applicable law. The Employee acknowledges that
Stealth would be irreparably harmed by any breach of this
Section 8 and that there would be no adequate remedy at law
or in damages to compensate Stealth for any such breach.
The Employee agrees that Stealth will be entitled to
injunctive relief requiring specific performance by the
Employee of this Section 8, and the Employee consents to the
entry thereof.
The provisions of this Section 8 shall automatically
terminate with respect to the Employee in the event that Stealth
fails to make any payment in full to him when due pursuant to
this Agreement, or terminates the Employee's employment hereunder
without Cause, or the Employee terminates his employment
hereunder for Good Reason, or Micronetics breaches any of its
obligations arising under or in relation to Section 4(d) hereof,
in each case if such default is not cured within fifteen (15)
days following the giving of notice by him any such of default.
9. Binding Effect. This Agreement shall be binding upon
Stealth, the Employee and, in relation to Sections 4(d), 7 and 9
through 14 hereof, Micronetics, and shall inure to the benefit
of Stealth, Micronetics and the Employee and their respective
heirs, executors, administrators, legal representatives,
successors and assigns.
10. Notices. All notices required or permitted hereunder
shall be in writing and deemed effectively given upon personal
delivery or upon deposit in the United States mails, by
registered or certified mail, postage prepaid, addressed to the
other party hereto at the address set forth in the introductory
paragraph of this Agreement, or at such other address or
addresses as either party shall designate to the other in
accordance with this Section 10.
11. Entire Agreement. This Agreement (together with the
relevant provisions of the Plan) constitutes the entire agreement
between the parties, and supersedes all prior agreements and
understandings, relating to the subject matter of this Agreement.
12. Amendment. This Agreement may be amended or modified
only by a written instrument executed by both Stealth and the
Employee.
13. Headings. The Paragraph and subparagraph headings used
in this Agreement are for convenience only and shall not be
deemed to be a party of this Agreement.
14. Governing Law; Jurisdiction. This Agreement shall be
construed, interpreted and enforced in accordance with the
internal laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
STEALTH MICROWAVE, INC.
By:Xxxxx Xxxxxxx
its Vice President
EMPLOYEE:/s/Xxxxxxx X. Xxxxxxxxxx, Xx.
Xxxxxxx X. Xxxxxxxxxx Xx.
The undersigned, being the holder of all of the issued and
outstanding shares of the capital stock of Stealth, hereby joins
and becomes a party to the foregoing Employment Agreement for
purposes of Sections 4(d), 7 and 9 through 14 thereof.
MICRONETICS, INC.
By: /s/Xxxxx Xxxxxxx
Xxxxx Xxxxxxx,
Its President and CEO
Exhibit A
Additional Option Provisions
a. The term "Shares" shall be deemed to include any other
equity securities that may be issued by the Company in
substitution therefor. The number of Shares to be received upon
the exercise of the options may be adjusted from time to time as
hereinafter set forth. The term "Company" means and includes
Micronetics as well as (i) any successor corporation resulting
from the merger or consolidation of such corporation with another
corporation, or (ii) any corporation to which such corporation
has transferred its property or assets as an entirety or
substantially as an entirety.
b. The options, to the extent vested, may be exercised in
whole or in part at any time or from time to time until the fifth
anniversary of the date of the grant, except as otherwise
provided in Section 7 hereof.
c. The Company shall at all times reserve for issuance and
delivery all Shares issuable upon the maximum exercise of the
options. All Shares issued to the Employee shall be duly
authorized and, when issued upon exercise in compliance with the
terms of this Agreement, shall be validly issued, fully paid and
non-assessable. No fractional shares or script representing
fractional shares shall be issued upon the exercise of the
options, but the Company shall pay the Employee an amount equal
to the applicable exercise price multiplied by such fraction in
lieu of each fraction of a share otherwise called for upon any
exercise of the options.
d. The number of Shares that the Employee has the option
to acquire and the exercise price shall be deemed automatically
adjusted equitably and proportionately to reflect any stock
dividend, stock split, reverse stock dividend or reverse stock
split or any recapitalization of the Company.
e. Subject to the terms of the Plan with respect to the
Incentive Options, if the Company is a party to a merger, sale of
all or substantially all of its assets, share exchange or other
similar business combination transaction, the options shall
pertain and apply to the securities and/or other property to
which the number of Shares covered by the options would have been
entitled had the options then been exercised in whole.
f. In case the Company shall establish a record date for
the holders of its Shares for the purpose of entitling them to
receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or to receive any other
right;
of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any
consolidation or merger of the Company with or into another
corporation, any share exchange for shares of capital stock of
another corporation or any conveyance of all or substantially all
of the assets of the Company to another corporation;
of any voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
the Company shall enter into a letter of intent or agreement
with respect to a transaction by which all of the outstanding
shares of Common Stock of the Company are to be acquired by a
third party;
then the Company shall mail or cause to be mailed to the
Employee at the time outstanding a notice specifying, as the case
may be, (i) the date on which a record is to be taken for the
purpose of such dividend, distribution or rights, and stating the
amount and character of such dividend, distribution or rights,
(ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding up is to take place, and the time, if any is to be fixed,
as to which the holders of record of Shares shall be entitled to
exchange their shares for securities or other property
deliverable upon the completion of such transaction, or (iii) the
closing of the acquisition by a third party of all of the
outstanding Shares. Such notice shall be mailed as soon as
practicable after the occurrence or likelihood of such event is
publicly disclosed.
g. The Options and the right to purchase Common Stock
hereunder are personal to the holder and shall not be transferred
to any other person, other than by will or the laws of descent
and distribution.
h. The provisions of this subparagraph (h) shall remain in
effect only until the Shares have been registered with the
Securities and Exchange Commission pursuant to the provisions of
Section 4(d)(vii) of this Agreement, and such registration has
become effective, whereupon the provisions of this subparagraph
(h) shall terminate and shall be of no further force and effect.
The Employee, by acceptance hereof, represents and warrants
as follows:
(i) The Employee has been advised and understands that
the Options have been issued in reliance upon exemptions from
registration under the Securities Act and applicable state
statutes; the exercise of the Options and resale of the Options
and the Common Stock have not been registered under the
Securities Act or applicable state statutes and must be held and
may not be sold, transferred, or otherwise disposed of for value
unless they are subsequently registered under the Securities Act
or an exemption from such registration is available; except as
set forth herein, the Company is under no obligation to register
the Options or the Shares under the Securities Act or the
applicable state statutes; in the absence of such registration,
the sale of the Options or the Shares may be practicably
impossible; the Company's registrar and transfer agent will
maintain stop-transfer instructions against registration or
transfer of the Options and the Shares and any certificate issued
upon exercise of the Options representing the Shares will bear on
its face a legend in substantially the following form restricting
the sale of the Shares:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") AND ARE
"RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE
144 PROMULGATED UNDER THE SECURITIES ACT. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING
WITH RULE 144 IN THE ABSENCE OF EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE
SECURITIES ACT.
(ii) Prior to one year from the date the Options
have been exercised and the Shares fully paid for, the
Company may refuse to transfer the Shares unless the holder
thereof provides an opinion of legal counsel reasonably
satisfactory to the Company or a "no action" letter or
interpretive response from the staff of the Securities and
Exchange Commission to the effect that the transfer is
proper; further, unless such opinion letter or response
states that the Shares are free of any restrictions under
the Securities Act, the Company may refuse to transfer the
Shares to any transferee who does not furnish in writing to
the Company the same representations and agree to the same
conditions with respect to such Shares as are set forth
herein. Notwithstanding any of the foregoing, the Company
may refuse to transfer the Shares if any circumstances are
present reasonably indicating that the transferee's
representations are not accurate.
(iii) After one year but prior to two years from
the date the Options have been exercised and the Shares
fully paid for, the Company may refuse to transfer the
Shares unless the holder either (a) meets the requirements
of subparagraph (ii) above; or (b) sells such Shares in
accordance with Rule 144 and furnishes to the Company
written assurances of compliance therewith in the form of a
copy of the Notice of Form 144 and appropriate letters of
compliance from the holder of such Shares and the securities
broker-dealer to or through which such Shares are being
sold. No opinion of counsel for the holder of the Shares
shall be required respecting sales in reliance on Rule 144
pursuant to clause (b) of this subparagraph (iii).
(iv) After two years from the date the Options
have been exercised and the Shares fully paid for, the
Company shall, upon the written request of any persons who
have held the Shares for two years (excluding any tolling
period provided for by Rule 144) and who is not, and has not
been during the preceding three months, an affiliate of the
Company, reissue to such holder in such names and
denominations as the holder shall request, one or more
certificates for the Shares without any restriction
whatsoever on their further transfer and cancel any and all
stop transfer instructions regarding such Shares on the
books and records of the Company.
(j) The Employee understands that a portion of the
Options granted hereunder are not incentive stock options,
as defined in Section 422 of the Internal Revenue Code of
1986, as amended, or that some of the Options may, under
certain conditions be disqualified from treatment as such
Incentive Stock Options. The Employee further understands
that Grantee's exercise of the Options which are not
entitled to treatment as Incentive Stock Options may result
in his recognition of ordinary income for income tax
purposes in the year of such exercise in the amount of the
difference between the exercise price and the fair market
value of the shares as of the date of exercise.
