STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT, dated as of December 3, 1996 (the
"Agreement"), by and between Oak Tree Medical Systems, Inc., a Delaware
corporation (the "Company"), and Xxxxxx Xxxxxx (the "Optionee").
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the Company's best interests to grant the Optionee
options to purchase common stock of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties intending to be legally
bound hereby agree as follows:
1. DEFINITIONS.
1.1 "Affiliate" of a person or other entity shall mean a person or other
entity that directly or indirectly controls, is controlled by, or is under
common control with the person or other entity specified (including without
limitation any investment entity managed by the person or other entity specified
or a person or entity that directly or indirectly controls, is controlled by, or
is under common control with the person or other entity specified).
1.2 "Cause" shall mean:
(a) The Optionee is convicted of a felony involving moral turpitude;
or
(b) The Optionee is guilty of willful gross neglect or willful gross
misconduct in carrying out his duties under a written employment
agreement between the Company and the Optionee (the "Optionee
Employment Agreement"), resulting, in either case, in material
economic harm to the Company, unless the Optionee believed in
good faith that such act or nonact was in the best interests of
the Company.
1.3 "Change in Control" shall mean the occurrence of any one of the
following events:
(a) Any "person," as such term is used in Sections 3(a)(9) and 13(d)
of the Securities Exchange Act of 1934 (including any group),
other than Xxxxx Xxxxxx, becomes a "beneficial owner," as such
term is used in Rule 13d-3 promulgated under such Act, of 35% or
more of the Voting Stock of the Company or any "person" who
currently owns 35% or more of the Voting Stock of the Company
acquires an additional 3% or more of the Voting Stock of the
Company;
(b) The majority of the Board consists of individuals other than
Incumbent Directors, which term means the members of the Board on
the date of this Agreement; provided that any person becoming a
director subsequent to such date whose election or nomination for
election was supported by two-thirds of the directors who then
comprised the Incumbent Directors shall be considered to be an
Incumbent Director;
(c) The Company adopts any plan of liquidation providing for the
distribution of all or substantially all of the assets of the
Company on a consolidated basis;
(d) All or substantially all of the assets or business of the Company
is disposed of pursuant to a merger, consolidation or other
transaction (unless the shareholders of the Company immediately
prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the
same proportion as they owned the Voting Stock of the Company,
all of the Voting Stock or other ownership interests of the
entity or entities, if any, that succeed to the business of the
Company); or
(e) The Company merges or combines with another company and,
immediately after the merger or combination, the stockholders of
the Company immediately prior to the combination hold, directly
or indirectly, (1) in the event the Company is the surviving
corporation, 50% or less of the Voting Stock of the combined
company, or (2) in the event the Company is not the surviving
corporation, 50% or less of the Voting Stock or other ownership
interests of the entity or entities, if any, that succeed to the
business of the Company.
1.4 "Disability" shall mean the Optionee's inability to substantially
perform the Optionee's duties and responsibilities as contemplated under the
Optionee Employment Agreement for a period of more than six (6) months, whether
or not continuous, during any 365-day period, due to physical or mental
incapacity or impairment.
1.5 "Good Reason" shall mean the Optionee's termination of his employment
upon notice to the Company following assignment to the Optionee duties
materially inconsistent with the Optionee's position as described in the
Optionee Employment Agreement or the Optionee's being removed from such
position, in either case without the Optionee's consent, provided such
termination shall only be effective thirty (30) days after prompt notice of such
circumstances by the Optionee to the Company, if such circumstances have not
been cured prior to such date.
1.6 "Voting Stock" shall mean capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
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2. Grant of Options.
2.1 The Company hereby grants to the Optionee options (the "Options") to
purchase 375,000 shares of common stock, par value $0.01 per share, of the
Company ("Common Stock") at an exercise price (the "Exercise Price") of $1-11/16
per share. The number and kind of shares issuable upon exercise of the Options
and the Exercise Price shall be appropriately adjusted upon the occurrence of
any stock split, reverse stock split, stock dividend, recapitalization,
reorganization or similar transaction.
2.2 The Options shall vest and become exercisable upon the earliest to
occur of the following: (i) a fiscal year in which the Company has (y)
$10,000,000 in gross revenue and (z) either $750,000 in pre-tax income
(including extraordinary gains) or $500,000 in pre-tax income (excluding
extraordinary gains), as reflected on the Company's audited financial statements
for such fiscal year; (ii) a fiscal year in which the Company has $15,000,000 in
gross revenue, as reflected on the Company's audited financial statements for
such fiscal year; and (iii) the fifth anniversary of the date hereof; provided,
however, that the Options shall not be exercisable at any time unless the
Optionee becomes an employee of the Company within six (6) months of the date of
this Agreement. Notwithstanding the foregoing, the Options shall immediately
vest and become exercisable upon the occurrence of a Change of Control, if the
Optionee, after becoming an employee within the aforesaid six month period, is
terminated by the Company other than for Cause or terminates his employment for
Good Reason.
2.3 Except as provided below, the Options granted hereby shall expire on
the tenth anniversary of the date of this Agreement. Upon termination of the
Optionee's employment, the Options shall expire as follows: If the Company
terminates the employment of the Optionee for Cause, the Options shall expire
immediately upon termination. If the Optionee terminates his employment without
Good Reason, the Options shall expire three (3) months following such
termination. If the Optionee's employment shall terminate upon the expiration of
the term of his employment with the Company (as provided in the Optionee
Employment Agreement) or upon the death or Disability of the Optionee or if the
Company shall terminate the Optionee without Cause or if the Optionee shall
terminate his employment for Good Reason, the Options shall expire one year from
the date of such termination.
2.4 The Company shall promptly file with the Securities and Exchange
Commission a registration statement on Form S-8 registering the shares of Common
Stock issuable upon the exercise of the Options by the Optionee and shall keep
such registration statement effective for as long as any of the Options are
outstanding.
3. Method of Exercise.
The Options or any part thereof may be exercised only by the giving of
written notice to the Company on such form and in such manner as the Board shall
prescribe. Such written notice of exercise shall be accompanied by payment of
the full purchase price of the number of shares being purchased. Such payment
may be made by cash, certified check or check acceptable to the Company. The
date of exercise (the "Exercise Date") of the Options
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shall be the date on which written notice of exercise is received by the
Company, during normal business hours, at its address as provided in Article 5
of this Agreement. On the Exercise Date, the Optionee shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the transfer books of the Company shall then be closed or
certificates representing such shares shall not then have been actually
delivered to the Optionee. As soon as practicable after the Exercise Date, the
Company shall issue and deliver to the Optionee a certificate or certificates
for the number of shares issuable upon such exercise, registered in the name of
the Optionee.
4. Nonassignability.
No options granted to the Optionee under this Agreement shall be
assignable or transferable other than by will or by the laws of descent and
distribution or by qualified domestic relations orders (as defined in the
Internal Revenue Code).
5. Notices.
Any and all notices or other communications required or permitted to be
given under any of the provisions of this Agreement shall be in writing and
shall be deemed to have been duly given and received when delivered personally
or three (3) days after mailing, if mailed by registered or certified mail,
return receipt requested; as to the Optionee, at the address set forth beneath
his signature hereto, or at such other address as the Optionee may hereafter
designate to the Company by notice as provided herein, and as to the Company,
addressed to the Chief Executive Officer of the Company at Oak Tree Medical
Systems, Inc., 0 Xxxxxxx Xxxxx, Xxxxx 000, Xxxxx Xxxxxx, Xxx Xxxx 00000, or at
such other address as the Company may hereafter designate to the Optionee by
notice as herein provided.
6. Miscellaneous.
6.1 Authority. This Agreement has been duly authorized on behalf of the
Company by the Board. The Optionee represents that he is free to enter into this
Agreement and that his entering into this Agreement does not violate any
obligation that he has to any other person or legal entity.
6.2 Severability. In the event that any provision of this Agreement would
be held to be invalid or unenforceable for any reason unless narrowed by
construction, this Agreement shall be construed as if such invalid or
unenforceable provision had been more narrowly drawn so as not to be invalid or
unenforceable. If, notwithstanding the foregoing, any provision of this
Agreement shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall attach only to such provision and shall not
affect or render invalid or unenforceable any other provision of this Agreement.
6.3 Entire Agreement. This Agreement sets forth the entire understanding of
the Company and the Optionee with respect to the subject matter hereof and
cannot be amended or modified except by a writing signed by both parties.
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6.4 Successors and Assigns. Except as otherwise expressly provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto, and their respective successors and assigns, heirs and personal
representatives.
6.5 Governing Law. This Agreement shall be interpreted, construed and
administered in accordance with the laws of the State of New York without regard
to choice of law provisions.
6.6 Arbitration. With respect to any suit, action or proceeding initiated
by a party to this Agreement arising out of, under or in connection with this
Agreement, the parties hereto each hereby submits to the exclusive, final and
binding arbitration of the before the American Arbitration Association of New
York City in accordance with their Commercial Arbitration Rules. Judgment upon
the award rendered by the arbitrator may be entered in any court of record of
competent jurisdiction in any country, or application may be made to such court
for a judicial acceptance of the award and an order of enforcement, as the law
of such jurisdiction may require or allow. In the event the Optionee is
successful in pursuing any claim arising out of this Agreement, the Company
shall pay all of the Optionee's attorneys' fees and costs, including the
compensation and expense of the Arbitrator. In all other cases, the expenses of
arbitration will be borne among the parties as determined by the arbitrator.
6.7 Counterparts. This Agreement may be executed in counterparts which,
taken together, shall constitute a single original document.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
OAK TREE MEDICAL SYSTEMS, INC.
By:
---------------------------------
Name:
Title:
OPTIONEE
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Name: Xxxxxx Xxxxxx
Address:
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Social Security Number
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