STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 13 , 2000 (this "Agreement"), by
and between HIDENET SECURE ARCHITECTURES, INC., a New Jersey corporation with an
address at 103 Medinat Xxxxxxxxx Xxxxxx, Xxxxxxx 00000 Xxxxxx (the "Grantor"),
and NP PARTNERS, LLC, a New York limited liability company with an address c/o
Xxxx X. Xxxxxx, 00 Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000 (the "Grantee").
RECITALS
WHEREAS, simultaneous with the execution of this Agreement, the
Grantee and XxxxxxxXxxxxxx.xxx, Inc., a Delaware corporation which is owned by
the Grantor ("NPI"), are entering into a Stock and Option Purchase Agreement
(the "Stock and Option Purchase Agreement") pursuant to which, among other
things, NPI is issuing to the Grantee Series A Convertible Preferred Stock (the
"Preferred Stock"); and
WHEREAS, in consideration for the payment of the Purchase Price (as
such term is defined in the Stock Purchase Agreement), the Grantee is to receive
the Preferred Stock and an option to acquire common stock of the Grantor; and
WHEREAS, the Grantor desires to grant to the Grantee, and the
Grantee desires to acquire from the Grantor, the irrevocable right and option to
purchase shares of common stock of the Grantor, upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and undertakings contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Grantor and the Grantee hereby
agree as follows:
ARTICLE I
GRANT OF OPTION
SECTION 1.1 Grant of Option for Shares.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, the Grantor hereby grants to the Grantee the irrevocable right and
option (the "Option") to purchase the Shares. "Shares" shall mean (i) 873,336
shares of common stock of the Grantor if the Grantee purchases 160,000 shares of
Preferred Stock or (ii) 436,668 shares of common stock of the Grantor if the
Grantee purchases 80,000 shares of Preferred Stock and an appropriately pro
rated number of shares of Common Stock of the Grantor if the Grantee purchases
between 80,000 and 160,000 shares of Preferred Stock, subject in any event to
adjustment as provided in Section 1.2.
(b) At any time after the date hereof, the Grantee may exercise the
Option by sending to the Grantor written notice of its exercise thereof and the
stock certificate evidencing the Preferred Stock. Within two business days from
the receipt thereof (the "Option Closing Date"), the Grantor shall deliver to
the Grantee the stock certificate(s) evidencing the Shares, duly endorsed in
blank or accompanied by stock powers duly executed in blank, in proper form for
transfer and with all required stock transfer tax stamps affixed.
(c) Notwithstanding anything contained herein to the contrary, the Option
shall, without any action taken by the Grantor, the Grantee, NPI or any other
party, immediately expire and be of no force and effect upon the conversion of
the Preferred Stock.
SECTION 1.2 Option Exercise; Anti-Dilution.
(a) In order to exercise the Option, the Grantee must deliver to the
Grantor or its duly appointed agent, the stock certificate evidencing the
Preferred Stock, duly endorsed in blank or accompanied by stock owners duly
executed in blank. Upon exercise of the Option, the Preferred Stock shall be
cancelled. Notwithstanding anything contained herein to the contrary, the Option
may be exercised in whole or in part and from time to time, and if exercised in
part, the number of shares of Preferred Stock deliverable to exercise the Option
and the number of Shares to be issued hereunder shall be adjusted accordingly,
and this Option shall continue in full force and effect to the extent not so
exercised, or, at the request of the Grantee, a new Option shall be issued for
the remaining number of Shares.
(b) In the event of any change in the number of issued and
outstanding shares of common stock of the Grantor by reason of any stock
dividend, subdivision, merger, recapitalization, combination, conversion or
exchange of shares, or any other change in the corporate or capital structure of
the Grantor which would have the effect of diluting or otherwise adversely
affect the Grantee's rights and privileges under this Option, the number and
kind of the Shares and the consideration payable in respect of the Shares shall
be appropriately adjusted to restore to the Grantee its rights and privileges
under the Option. Without limiting the scope of the foregoing, in any such
event, at the option of the Grantee, the Option shall represent the right to
purchase, in addition to the number and kind of Shares which the Grantee would
be entitled to purchase pursuant to the immediately preceding sentence, whatever
securities, cash or other property the Shares subject to such Option shall have
been converted into or otherwise exchanged for, together with any securities,
cash or other property which shall have been distributed with respect to such
Shares.
(c) Adjustments for Dilutive Issues. Notwithstanding anything
contained herein to the contrary, the number of Shares shall be subject to
adjustment if (x) the number of shares of common stock of NPI issuable upon
conversion of the Preferred Stock is increased pursuant to Section 3(g) of the
Certificate of Designations, Rights and Preferences of the Preferred Stock (the
"Certificate of Designation"), in which case the number of Shares shall be
increased by a percentage equal to the percentage increase in the number of
shares of common stock of NPI issuable upon conversion of the Preferred Stock,
or (y) the Grantor shall, with respect to itself, consummate any of the events
described in Section 3(d), (e), (f) or (g) of the Certificate of Designation, in
which case the number of Shares shall be increased in accordance with the
provisions of such Sections, applied to the Grantor, mutatis mutandis, provided
that for purposes hereof the Conversion Price and Original Issue Price shall be
deemed to be $2.29 per share of common stock of Grantor and the number of Shares
shall be increased accordingly. For purposes of illustration only, if the
Grantee invests $2 million in NPI at $12.50 per share of Preferred Stock
(160,000 shares of Preferred Stock; i.e., 873,336 Shares hereunder) and (X) NPI
subsequently issues additional shares of common stock at $6.25 per share for an
aggregate consideration of more than $2 million, or (Y) the Grantor issues
additional shares of common stock at $1.145 per share for an aggregate
consideration of more than $2,000,000, the number of Shares, in either such
case, would be increased by an additional 873,336 shares of Grantor.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
The Grantee hereby represents and warrants to the Grantor the
following, which representations and warranties shall be true and correct on the
date of this Agreement and on the Option Closing Date:
SECTION 2.1 Ownership of Shares. The Grantee is the sole record and
beneficial owner of the Preferred Stock and has good and marketable title to the
Preferred Stock, free and clear of any Lien, other than pursuant to the Rights
Agreement.
SECTION 2.2 Investment Intent. With respect to the Shares to be
received by the Grantee:
(i) The Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities
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Act"), and have not been registered or qualified
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under the securities laws of any state of the United
States. Grantee acknowledges that it has no right to
require the Grantor to register the Shares under the
Securities Act or to register or qualify the Shares
under the securities laws of any state of the United
States, other than pursuant to the Investor Rights
Agreement;
(ii) The Grantee agrees that it will not, directly or
indirectly, offer, transfer, sell or otherwise
dispose of any of the Shares (or solicit any offers
to buy, purchase or otherwise acquire any of the
Shares), except in compliance with the Securities Act
and the rules and regulations thereunder. The Grantee
further understands, acknowledges and agrees that
none of the Shares may be transferred, sold or
otherwise disposed of unless (x) such disposition is
pursuant to an effective registration statement under
the Securities Act, or (y) the Grantee shall have
delivered to the Grantor an opinion, from counsel and
in form and substance reasonably satisfactory to the
Grantor, to the effect that such disposition is
exempt from the provisions of Section 5 of the
Securities Act;
(iii) The Grantee is acquiring the Shares for its own account,
for investment purposes only and not with a view to or
for sale in connection with any distribution thereof;
(iv) The Grantee must continue to bear the economic risk
of the investment in the Shares unless they are
subsequently registered under the Securities Act or
an exemption from such registration is available. If
any of the Shares are disposed of in accordance with
Rule 144 under the Securities Act, the Grantee shall
deliver to the Grantor at or prior to the time of
such disposition an executed copy of Form 144 (if
required by Rule 144) and such other documentation as
the Grantor may reasonably require in connection with
such disposition;
(v) The Grantee acknowledges that the market value of the
Shares will fluctuate from their value on the date
hereof and, at the time that the Grantee disposes of the
Shares, such shares may not be worth such value;
(vi) The Grantee has such knowledge and experience in
business matters to be able to evaluate the merits
and risks of an investment in the Shares and to make
an informed decision with respect to its acceptance
of the Shares. The Grantee has adequate means of
providing for its current financial needs and
contingencies, is able to bear the substantial
economic risks of an investment in the Shares for an
indefinite period of time, has no need for liquidity
thereof, and could afford a complete loss of the
Purchase Price;
(vii) The Grantee has had an opportunity to discuss the
business, operations and conditions (financial and
otherwise) of the Grantor with representatives of the
Grantor. In accepting the Shares on the Option Closing
Date, no oral representations or written representations
(other than those specifically made herein) will have
been made to the Grantee; and
(viii) The Grantee is an "accredited investor", as that term is
defined in Regulation D under the Securities Act.
SECTION 2.3 Legend. The certificate or certificates representing the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF UNLESS (A) SUCH DISPOSITION IS
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) THE HOLDER HEREOF SHALL HAVE
DELIVERED TO THE COMPANY AN OPINION, FROM COUNSEL AND IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THAT
ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REGISTRATION RIGHTS AND RESTRICTIONS ON TRANSFER, AS SET FORTH IN AN
INVESTOR RIGHTS AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THIS CERTIFICATE, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND
MARKET STANDOFF PROVISION ARE BINDING ON TRANSFEREES OF THESE
SHARES."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE GRANTOR
Grantor hereby represents and warrants to the Grantee the following,
which representations and warranties shall be true and correct on the date of
this Agreement and on the Option Closing Date:
SECTION 3.1 Authority. Grantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
Grantor has full corporate power and authority to execute and deliver this
Agreement and all documents and instruments specified herein, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Grantor, and assuming
due authorization, execution and delivery by the Grantee, constitutes a legal,
valid and binding obligation of the Grantor, enforceable against the Grantor in
accordance with its terms.
SECTION 3.2 No Default. The execution, delivery and performance of
this Agreement by the Grantor does not and will not (x) conflict with or violate
Grantor's Articles of Incorporation or By-laws or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award applicable to
the Grantor or (y) result in any breach of, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument to which the
Grantor is a party.
SECTION 3.3 Approval of Transaction. The execution and delivery of
this Agreement by the Grantor does not, and the performance of this Agreement by
the Grantor will not, require any consent, approval, authorization or other
action by, or filing with or notification to, any person, entity, governmental
authority or regulatory authority.
SECTION 3.4 Claims; Litigation. No actions, suits, claims,
litigation, arbitration proceedings, administrative proceeding or investigations
are pending or, to the Grantor's knowledge, threatened against the Grantor which
could adversely affect the consummation of this transaction.
SECTION 3.5 Shares. The Shares have been duly authorized and, upon
issuance therefor in accordance with the provisions of the Option, will be
validly issued, fully paid and non-assessable. From and after the date hereof,
the Grantor shall at all times reserve and keep available for issuance upon
exercise of the Option such number of its authorized but unissued shares of
common stock as will be sufficient to permit the exercise in full of the Option.
SECTION 3.6 No Material Facts Omitted. No representation or warranty
of the Grantor in this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein not misleading.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1 Entire Agreement. This Agreement contains, and is
intended as, a complete statement of all of the terms of the arrangements and
understandings between the parties with respect to the matters provided for, and
supersedes any previous agreements and understandings between the parties with
respect to those matters.
SECTION 4.2 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of New York
without regard to its principles of conflicts of law. All actions and
proceedings arising out of, or relating to, this Agreement shall be heard and
determined in any state or federal court sitting in New York, New York. The
undersigned, by execution and delivery of this Agreement, expressly and
irrevocably (i) consents and submits to the personal jurisdiction of any of such
courts in any such action or proceeding; (ii) consents to the service of any
complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to such party as set forth in Section 4.3 below
governing the giving of notices; and (iii) waives any claim or defense in any
such action or proceeding based on any alleged lack of personal jurisdiction,
improper venue or forum non conveniens or any similar basis. Each of the
undersigned hereby waives for himself and itself, as the case may be, and its
respective permitted successors and assigns, the right to trial by jury in any
action or proceeding instituted in connection with this Agreement.
SECTION 4.3 Notices. All notices and other communications under this
Agreement shall be in writing and shall be hand delivered, mailed by registered
or certified mail, return receipt requested (with a copy simultaneously by
ordinary mail), or recognized overnight delivery service to the parties at the
following addresses (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision):
If to the Grantor, to:
Hidenet Secure Architectures, Inc.
103 Medinat Xxxxxxxxx Xxxxxx
Xxxxxxx 00000 Xxxxxx
Attn: Xxx Xxxxxxx
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
Xxx Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx, Esq.
If to the Grantee, to:
NP Partners, LLC
c/o Xxxx X. Xxxxxx
00 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
with a copy to:
Xxxxxxxx Xxxxx Singer & Winston, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx, Esq.
Each such notice shall be deemed given at the time delivered by
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
business day delivery.
SECTION 4.4 Amendment; Waiver. No provision of this Agreement may be
amended or modified except by an instrument or instruments in writing signed by
the parties hereto. No waiver of any provision hereof shall be construed as a
waiver of any other provision. Any waiver must be in writing.
SECTION 4.5 Assignment and Binding Effect. None of the parties
hereto may assign any of its rights or delegate any of its duties under this
Agreement without the prior written consent of the others. This Agreement shall
be binding on, and shall inure to the benefit of, the parties hereto and their
successors and assigns.
SECTION 4.6 No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and their respective successors and assigns and they shall
not be construed as conferring and are not intended to confer any rights on any
other persons.
SECTION 4.7 Further Assurances. From and after the date hereof, the
Grantor and the Grantee agree to execute and deliver such further documents and
instruments and to do such other acts and things any of them, as the case may
be, may reasonably request in order to effectuate the transactions contemplated
by this Agreement.
SECTION 4.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and each party thereto
may become a party hereto by executing a counterpart hereof. This Agreement and
any counterpart so executed shall be deemed to be one and the same instrument.
[Remainder of Page Intentionally Omitted;
Signatures to Follow]
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Stock Option Agreement as of the date first written above.
HIDENET SECURE ARCHITECTURES, INC.
By: /s/ Xxx Xxxxxxx
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Name: Xxx Xxxxxxx
Title: President
NP PARTNERS, LLC
/s/ Xxxx X. Xxxxxx
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Name: Xxxx X. Xxxxxx
Title: Manager
