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EXHIBIT 10.16
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (the "Agreement") is made as of November
13, 1998, by and among Xx. Xxxx Xxxxx Xxxxx ("Holder"), Xx. Xxxxx X. Xxxx ("Dr.
Zwan") and Digital Lightwave, Inc. (the "Company").
WHEREAS Holder and Dr. Zwan have entered into a Settlement Agreement
with respect to certain litigations that Holder has brought against Dr. Zwan and
the Company and others, and a Mutual General Release; and
WHEREAS Dr. Zwan has agreed as part of the Settlement Agreement to
xxxxx Xxxxxx the option set forth in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements set
forth in this Agreement, the Settlement Agreement and the Mutual General
Release, Holder, Dr. Zwan and the Company agree as follows.
1. Grant of Option. Dr. Zwan grants to Holder as of the Grant Date (as
defined in the second paragraph of this Section 1), subject to the terms and
provisions set forth hereinafter, the right and option to purchase two million
(2,000,000) shares of the common stock of the Company (the "Common Stock"),
which Common Stock has a par value of $.0001 and is the only class of common
stock outstanding as of the date of execution of this Agreement,
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at the purchase price of One Dollar ($1.00) per share (the option hereby granted
being hereinafter referred to as the "Option" and the shares of Common Stock
purchased upon exercise of the Option being referred to herein as the "Option
Shares"). The Option shall be a non-qualified option and shall not be an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
The Option shall not be considered granted or become exercisable unless
and until Holder delivers to Dr. Zwan and the Company a fully executed
counterpart hereof. Thereafter, the Option shall be exercisable in accordance
with Sections 2 and 3 hereof. The date on which Holder delivers a fully executed
counterpart of this Agreement to Dr. Zwan is referred to herein as the "Grant
Date".
2. Exercise of Option. Holder may exercise the Option, at any time and
from time to time, on or before October 20, 2008, in whole or in part. Except as
otherwise provided in the notice provisions of Sections 7 and 8 of this
Agreement, in the event that Holder wishes to exercise the Option in whole or in
part, Holder shall send a written notice to Dr. Zwan specifying a date not less
than thirty (30) days nor more than one hundred twenty (120) days from the date
such notice is mailed for the closing of such
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purchase; provided, however, that Dr. Zwan shall not be obligated to close such
purchase during any Blackout Period previously established by the Company or any
time during the months of November and December in any year.
3. Payment and Delivery of Certificate. At any closing pursuant to
this Agreement, Holder shall make payment to Dr. Zwan of the aggregate price for
the Option Shares that he is purchasing by certified or bank check payable to
Dr. Zwan or by wire transfer of immediately-available federal funds to a bank
and account designated by Dr. Zwan, and Dr. Zwan shall deliver to Holder a
duly-executed certificate representing the Option Shares that Holder has
purchased containing no restrictive legend other than as contemplated by Section
5(h) of this Agreement.
4. Representations and Warranties of Dr. Zwan and the Company.
(a) Dr. Zwan represents and warrants to Holder that as of the date
of this Agreement and again as of the date of any closing pursuant to this
Agreement:
(i) Dr. Zwan has power and authority to enter into and perform all of
his obligations under this Agreement, and this Agreement constitutes a legal,
valid and binding obligation of Dr. Zwan enforceable against him in accordance
with its terms;
(ii) The execution, delivery and performance of this Agreement by Dr.
Zwan in his individual capacity will
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not require the consent of any other person or constitute a violation of,
conflict with or result in a default under any (A) agreement to which Dr. Zwan
is a party or by which Dr. Zwan is bound; or (B) judgment, decree, order,
statute, rule or governmental regulation applicable to Dr. Zwan;
(iii) The Option Shares are owned beneficially and of record by Dr.
Zwan, are fully paid and non-assessable and are free and clear of all adverse
claims, liens, encumbrances and security interests (except for the transfer
restrictions set forth in this Agreement or as set forth on the legend on the
certificate representing such shares of Common Stock to which Section 5(h) of
this Agreement refers);
(iv) Upon purchase of the Option Shares, such Option Shares will be
fully-paid and non-assessable and Holder will receive good and marketable title
to the Option Shares, free of all adverse claims, liens, encumbrances and
security interests, other than such of the foregoing as may have been created by
or through Holder or as set forth on the legend on the certificate representing
the Option Shares as permitted by Section 5(h) of this Agreement.
(b) The Company represents and warrants to Holder that as of the date
of this Agreement and again as of the date of any closing pursuant to this
Agreement:
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(i) The Company has power and authority to enter into and perform all
of its obligations under this Agreement and this Agreement constitutes a legal,
valid and binding obligation of the Company enforceable against it in accordance
with its terms;
(ii) The execution, delivery and performance of this Agreement by the
Company will not require the consent of any other person or constitute a
violation of, conflict with or result in a default under any (A) agreement to
which the Company is a party or by which the Company is bound; or (B) judgment,
decree, order, statute, rule or governmental regulation applicable to the
Company.
5. Representations and Warranties of Holder. Holder represents and
warrants to Dr. Zwan and the Company that as of the date of this Agreement and
again as of the date of any closing pursuant to this Agreement:
(a) Holder has power and authority to enter into and perform all of
his obligations under this Agreement and this Agreement constitutes a legal,
valid and binding obligation of Holder enforceable against him in accordance
with its terms;
(b) The execution, delivery and performance of this Agreement by
Holder will not require the consent of any other person or constitute a
violation of, conflict with or result in a default under any (i) agreement to
which Holder
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is a party or by which Holder is bound; or (ii) judgment, decree, order,
statute, rule or governmental regulation applicable to Holder;
(c) Holder will not offer to sell or otherwise dispose of any Option
Shares in violation of the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "1933 Act") or any other applicable federal or state
securities laws;
(d) Holder understands that (i) the Option and the Option Shares have
not been, and, except as provided for in this Agreement, will not be, registered
under the 1933 Act on the ground that the grant and the sale provided for in
this Agreement are exempt under the 1933 Act and regulations issued thereunder;
(ii) the reliance of Dr. Zwan on such exemption is predicated on the
representations of Holder set forth in this Agreement; and (iii) the Option
Shares may not be sold, transferred or otherwise disposed of without
registration under the 1933 Act or an exemption therefrom;
(e) Holder has such knowledge and experience in financial and business
matters and with respect to investments in securities as to be capable of
evaluating the merits and risks of ownership of the Common Stock and he is able
to bear the risk of such investment for an indefinite period and to afford a
complete loss thereof;
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(f) Holder is familiar with the business of the Company and, in
formulating a decision to enter into this Agreement, Holder has relied solely
upon an independent investigation of the Company's business and upon
consultations with his legal and financial advisers with respect to this
Agreement and the nature of his investment, and in entering into this Agreement
no reliance was placed upon any representations or warranties other than those
contained herein;
(g) Upon exercise of the Option, Holder will purchase the Option Shares
for investment only and not with a view to distribution in violation of
applicable securities laws;
(h) Holder acknowledges that the certificate evidencing the Option
Shares purchased by him will bear the following legend: THE SHARES OF COMMON
STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM;
(i) Holder is aware that the Option and the Option Shares have not been
approved or disapproved by the Securities and Exchange Commission or any state
securities agency; and
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(j) Holder is an "accredited investor" as such term is defined under
Rule 501 of Regulation D under the 1933 Act.
6. Adjustment upon Changes in Capitalization. In the event of any
change in the number or classification of shares of outstanding Common Stock,
the kind and number of securities subject to the Option shall be adjusted in the
same manner as that for all other shareholders and the purchase price per share
shall be adjusted correspondingly. The existence of the Option granted hereunder
shall not affect in any way the right or power of the Board or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities having any priority or preference with respect to or affecting
Common Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part of
its assets or business or any other corporate act or proceeding, without
prejudice to the right of Holder set forth above in this Section 6.
7. Registration Rights. (a) If the Company at any time proposes to
sell any shares of Common Stock pursuant to an offering of securities registered
under the
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1933 Act (other than a registration on (i) Form S-4 or S-8 under the 1933 Act or
(ii) any successor form) and such registered offering would include Common Stock
to be sold by Dr. Zwan, the Company shall give reasonable written notice thereof
(the "Public Offering Notice") to Holder. If a Public Offering Notice is given,
then, no later than ten (10) days after the receipt of the Public Offering
Notice, Holder may exercise the Option (the closing of which shall take place as
soon as practicable) and present a request (the "Request") to the Company
specifying the number of Option Shares intended to be sold or disposed of by
Holder and describing the method of disposition thereof (if the offering
described in the Public Offering Notice is to be underwritten, the Holder shall
be required to make his offering through the same underwriters and to sign the
underwriting agreement). The Company will, at its expense (excluding commissions
and a pro rata share of expenses payable to underwriters and the fees of any
counsel or other advisors engaged by Holder), use its best efforts to cause the
registration under the 1933 Act of the shares stated in Holder's Request or, if
less, the Share for Share Number of Holder's Option Shares, for disposition in
accordance with the intended method of disposition as stated in Holder's Request
(except as provided above), and to cause such registration to become effective
under the 1933 Act and such
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disposition to be qualified or exempt from qualification under "blue sky" laws
of such states as Holder may reasonably request. However, the Company (i) may at
any time delay, abandon or withdraw any such registration or registration
statement (in which case it shall not be required to register any of Holder's
shares otherwise required to be included in such registration) and (ii) shall
not be required to register Holder's Option Shares pursuant to this Section 7 in
connection with any proposed registration to the extent that, in the opinion of
the managing underwriter, the inclusion of such Holder's Option Shares would
adversely affect the offering. As used in this Section 7, the term "Share for
Share" shall mean the number of shares of Common Stock being offered by Dr. Zwan
that are to be registered. Notwithstanding any of the foregoing, if Holder has
Option Shares available for registration and has presented a Request, Dr. Zwan
shall not register more shares of Common Stock than the number of shares of
Common Stock for which Holder has the opportunity to register.
(b) If any registration of Common Stock shall be in connection with an
underwritten public offering, and if Holder is participating in such offering,
Holder agrees not to effect any public sale or distribution, including any sale
pursuant to Rule 144, or any successor provision, under the 1933 Act, of any
shares of Common Stock and not to effect any such public sale or distribution of
any other
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equity security of the Company or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such underwritten public offering) during the seven
days prior to, and during the 180-day period (or such lesser period agreed to by
the Company, Dr. Zwan and Holder with any underwriters for such registration of
Common Stock) which begins on, the effective date of such registration statement
(except as part of such registration).
(c) Holder agrees that, upon receipt of any notice from the Company of
the happening of any event that causes the Company to supplement, amend or
withdraw the prospectus included in any registration statement relating to an
offering of Common Stock in which Holder is participating, Holder shall
discontinue disposition of Common Stock pursuant to the registration statement
covering such Common Stock until Holder's receipt of copies of a supplemented or
amended prospectus from the Company, and, if so directed by the Company, Holder
shall deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in Holder's possession, of the unsupplemented,
unamended or withdrawn prospectus.
8. Acquisition or Sale of the Company. In the event that any person or
entity (including without limitation a "group" as contemplated by Section
13(d)(3) of
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the Securities Exchange Act of 1934, as amended (the "1934 Act") but excluding
the Company, its affiliates, any employee benefit plan maintained by the
Company, or an underwriter temporarily holding securities pursuant to an
offering of such securities), other than Dr. Zwan, proposes to obtain beneficial
ownership (as determined pursuant to Regulation 13d-3 under the 0000 Xxx) of
ninety percent (90%) or more (based on voting power) of the Company's
outstanding capital stock (such transaction a "Proposed Sale"), the Company
shall give notice thereof (the "Sale Notice") to Holder describing the terms of
the proposed sale in reasonable detail, including the identity of the proposed
purchasers and the number of shares to be sold. Holder shall then have the right
to exercise the Option and the closing shall take place within ten (10) days
following the receipt of the Sale Notice. If Holder elects not to exercise the
Option, the Option shall expire and be of no further force or effect upon
consummation of the Proposed Sale identified in the Sale Notice. If Holder
exercises the Option in accordance with the provisions above, Holder shall sell
all the Option Shares held by Holder and such Option Shares shall be purchased,
simultaneously with, and conditioned upon, the closing of the Proposed Sale, at
the price (whether in cash or other consideration) per share of Common Stock and
on the other terms of the Proposed Sale.
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9. Miscellaneous.
(a) Non-Assignability. The rights and obligations of the Holder under
this Agreement shall not be transferable or assignable, other than by will or
the laws of descent and distribution, and the Option shall be exercisable,
during Holder's lifetime, only by him or, during periods of legal disability, by
his legal representative. The Option shall not be subject to execution,
attachment or similar process. Notwithstanding the foregoing, the Option shall
not be assigned by Holder without the written consent of Zwan, other than to HBH
Assets, Ltd., an Ohio limited liability company controlled by Holder. In the
event that Holder shall cease to own at least seventy-five percent (75%) of HBH
Assets, Ltd., the Option automatically shall revert to Holder. If Holder assigns
the Option, the Option shall remain subject to the terms and conditions of this
Agreement. This Agreement shall be binding upon and shall inure to the benefit
of the legal representatives, heirs, successors and assigns of the Holder.
(b) Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written instrument
executed by each of Holder, Dr. Zwan and the Company.
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(c) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by delivery, by
facsimile or by mail (registered or certified mail, postage pre-paid, return
receipt requested) to the respective parties as follows:
If to Dr. Zwan: c/o Digital Lightwave, Inc., Attention Xxxxx X. Xxxx,
Fifth Floor, 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx 00000, Facsimile: (813)
467-0702;
If to Holder: H. Xxxxx Xxxxx, c/o Law Office of Xxxx X. Xxxxx Co.,
L.P.A., Xxxxx 000, 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxx 00000. If to the
Company: c/o Digital Lightwave, Inc., Attention Xxxxx X. Xxxx, Fifth Floor, 000
Xxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx 00000, Facsimile: (000) 000-0000; or to
such other address as a party may have furnished to the others in writing in
accordance with this Agreement, except that notices of change of address shall
be effective only upon receipt.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive law of the State of Ohio without giving effect
to the principles of conflict of laws of the State of Ohio.
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(e) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(f) Effect of Headings. The section headings in this Agreement are for
convenience only and shall not affect the construction of the language of this
Agreement.
(g) Rights of Holder in Stock. Neither Holder, nor his successor in
interest, shall have any of the rights of a shareholder of the Company with
respect to the shares for which the Option is exercised until after any closing
pursuant to the Agreement.
(h) Contra Proferentem Inapplicable. The general rule that ambiguities
are to be construed against the drafter shall not apply to this Agreement. In
the event that any language in this Agreement is found or claimed to be
ambiguous, each party shall have the same opportunity to present evidence as to
the actual intent of the parties with respect to any such ambiguous language
without any inference or presumption being drawn against the drafter.
(i) Successors of the Company. This Agreement shall be binding upon and
shall inure to the benefit of any successor of the Company.
(j) Zwan shall, for the term of this Agreement, at all times own,
control and keep available for exercise of
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the option contemplated by this Agreement, at least 2,000,000 shares of Common
Stock, free and clear of all encumbrances.
IN WITNESS OF this Agreement, Holder, Dr. Zwan and, after having been
duly authorized, the Company have signed this Agreement on the lines below.
/s/Xxxx Xxxxx Xxxxx
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XXXX XXXXX XXXXX
Sworn to before me and subscribed in my presence on November 13, 1998.
/s/ Xxxx X. Xxxx
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Notary Public
Attorney-at-Law
Lifetime Commission
/s/ XXXXX X. XXXX
-----------------------------
XXXXX X. XXXX
Sworn to before me and subscribed in my presence on November 13, 1998.
/s/ Xxxx X. Xxxx
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Notary Public
Attorney-at-Law
Lifetime Commission
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DIGITAL LIGHTWAVE, Inc.
By /s/ Xxxxx X. Xxxx
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Its Chief Executive Officer
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Sworn to before me and subscribed in my presence on November 13, 1998.
/s/ Xxxx X. Xxxx
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Notary Public
Attorney-at-Law
Lifetime Commission
