EXHIBIT 10.9
OPTION AGREEMENT
BETWEEN
EISI ACQUISITION CO., INC.
and
Xxxx Xxxxxxx
("Employee")
Dated as of March 4, 1994
THIS AGREEMENT MAY NOT BE ASSIGNED OR OTHERWISE TRANSFERRED WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMPANY, AND ANY PURPORTED TRANSFER
WITHOUT SUCH CONSENT SHALL BE VOID. NEITHER THE OPTION REPRESENTED BY
THIS AGREEMENT NOR THE SHARES OBTAINABLE ON ITS EXERCISE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES
LAWS (THE "STATE ACTS"). THE OPTION AND THE OPTION SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE STATE ACTS OR
EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS
(INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE EXEMPTION AFFORDED
BY RULE 144).
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OPTION AGREEMENT
Effective as of the 4th day of March 1994, EISI Acquisition Co., Inc.,
a California corporation (the "Company"), and Xxxx Xxxxxxx ("Employee") , agree
as follows:
SECTION 1. Purchase and Sale of Option. The company hereby issues to
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Employee the non-transferable right and option ("Option") to purchase up to 176
shares (subject to adjustment as set forth herein) of its Common Stock at a
purchase price of $.10 per share without commission or other charge pursuant to
the terms hereof. The shares of Common Stock issuable an the exercise of the
option are referred to herein as the "Option Shares."
SECTION 2. Restrictions on Transfer. This Option Agreement is not
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assignable or otherwise transferable except with the prior written consent of
the Company, and any purported transfer without such consent shall be void. The
Option Shares cannot be sold, pledged, hypothecated or otherwise transferred
except pursuant to the terms of the Shareholders Agreement among the
Shareholders of the Company. Employee agrees that prior to exercise of the
Option, Employee must first execute the then current Shareholders Agreement
among the Shareholders of the Company. The certificate to be issued for the
Option Shares may bear substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES
LAWS (THE "STATE ACTS"), HAVE BEEN ACQUIRED FOR INVESTMENT AND ARE
SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN A SHAREHOLDERS
AGREEMENT AMONG THE SHAREHOLDERS OF THE COMPANY.
SECTION 3. Representations and Warranties of Employee. Employee
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hereby represents and warrants to the Company that it is entering into this
Option Agreement and acquiring the Option and, upon the exercise of the Option,
will acquire the Option Shares for investment purposes only and not with the
view to the resale or distribution thereof, and that it has no present intention
of selling, negotiating or otherwise disposing of the Option or the Option
Shares. Employee represents that it has consulted with its own legal,
accounting, tax, investment and other advisors, that it is not relying an
representations made or information provided by the Company or its Affiliates in
deciding to enter into this Option Agreement or to make the investments
described herein, that it understands that no governmental agency has made any
determination as to the fairness of any such investments, and it has made or
will make its own investigation of the advisability of such investments, and
assumes the risk of a total loss of its investment. Employee understands that
the securities to be issued will be offered and sold subject to restrictions on
transfer, that they will not be registered or qualified under the Securities
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Act or state "blue sky" laws and that they may bear legends restricting or
prohibiting their transferability. Employee represents that it is an
"accredited investor" as such term is defined in Rule 501(a) of Regulation D
under the Securities Act.
Employee has obtained or effected all required consents, approvals or
authorizations of or designations, declarations or filings with any governmental
authority required on the part of Employee in connection with the valid
execution, delivery and performance of this Agreement by Employee, and the
consummation by Employee of any other transaction contemplated hereby.
SECTION 4. Exercise and Termination of Option.
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(a) Exercise. Employee may exercise this Option in whole or in part
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at anytime prior to 5:00 p.m. Pacific time, December 31, 2003. This Option
expires at 5:00 p.m. Pacific time, December 31, 2003 (the "Final Expiration
Date").
Upon any partial exercise of this Option, this Option shall thereafter
represent the right to purchase only such Option Shares as remain unexercised.
To exercise the Option, Employee shall deliver to the Company at the
address designated for such purpose in Section 8 hereof the form of Election to
Purchase attached hereto as Exhibit A along with payment of the Exercise Price
in current and immediately available funds for the number of Option Shares which
Employee wishes to purchase hereunder. The Company will not be obligated to
issue fractions of shares of Common Stock.
Upon such delivery of the Election to Purchase and payment of the
Exercise Price the Company shall issue and cause to be delivered with all
reasonable dispatch to Employee a certificate or certificates for the number of
Option Shares issuable upon the exercise of such Options. The Option Shares,
when issued and delivered in accordance with this Agreement, will be duly and
validly authorized and issued, fully paid and nonassessable, and, assuming the
accuracy of Employee's representations set forth in Section 3, issued in
accordance with all applicable state and federal securities laws. The Company
will pay any documentary stamp taxes attributable to the initial issuance of
Option Shares upon the exercise of Options.
(b) Termination. This Option may not be exercised to any extent by
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anyone after the first to occur of the following events:
(i) The Final Expiration Date; or
(ii) The expiration of three months from the date of the
Optionee's termination of employment for any reason, unless the Optionee
dies within said three-month period; or
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(iii) The expiration of one year from the date of the Optionee's
death; or
(iv) The effective date of either the merger or consolidation of
the Company with or into another corporation, or the acquisition by another
corporation or person (excluding any employee benefit plan of the Company
or any trustee or other fiduciary holding securities under an employee
benefit plan of the Company) of all or substantially all of the Company's
assets or 51% or more of the Company's then outstanding voting stock, or
the liquidation or dissolution of the Company, unless the Company waives
this provision in connection with such transaction. At least ten days
prior to the effective date of such merger, consolidation, acquisition,
liquidation or dissolution, the Company shall give the Optionee notice of
such event if the Option has then neither been fully exercised nor become
unexercisable under this Section 4 (b).
SECTION 5. Optionee Put. The Company agrees that, in the event that
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the Optionee's employment with the Company is terminated by the Company for any
reason other than Good Cause or he resigns his employment for "Good Reason," the
Optionee shall have the right to require the Company to purchase, for $50,000:
(i) all, but not less than all, of Optionee's rights under this Option
Agreement, in the event Optionee has not exercised the Option; or (ii) all, but
not less than all, of Optionee's Option Shares, in the event Optionee has
exercised the Option. Optionee shall notify the Company of his intent to
exercise his rights under this Section 5 not more than 60 days after the
effective date of the termination of his employment with the Company. Optionee's
rights under this Section 5 shall be subject to and consummated in compliance
with the requirements of applicable laws and regulations, including without
limitation the requirements of the federal securities laws and state securities
or blue sky laws. The parties hereto agree to use all reasonable efforts to
take, or cause to be taken and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the provisions of this Section 5.
For the purposes of this Option Agreement, "Good Cause" shall mean (x)
the Employee's willful misconduct or habitual neglect of his duties as an
employee, (y) dishonest or illegal conduct by the Employee or (z) the Employee's
conviction of any felony or a misdemeanor involving moral turpitude. "Good
Reason" shall mean the occurrence of any of the following events without the
Employee's express written consent:(a) the assignment to the Employee of duties
inconsistent with the position and status held by the Employee on the date of
this Option Agreement, or a substantial alteration in, the nature, status or
prestige of the Employee's responsibilities (other than any such alteration
primarily attributable to a medical or physical infirmity of the Executive which
the Company has attempted to accommodate); or (b) a substantial reduction by the
Company in the Employee's compensation from that provided on the date of this
Option Agreement (unless other employees of the Company are subject to a similar
reduction due to the financial condition of the Company).
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SECTION 6. Reservation of Option Shares. The Company will, until the
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Final Expiration Date, reserve and keep available, free from preemptive rights,
out of the aggregate of its authorized but unissued Common Stock or its
authorized and issued Common Stock held in its treasury, for the purpose of
enabling it to satisfy any obligation to issue Option Shares upon exercise of
this Option, the maximum number of shares of Common Stock which may then be
deliverable upon the exercise of this Option.
SECTION 7. Adjustment of Exercise Price and Number of Option Shares
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Issuable. The Exercise Price and the number of Option Shares issuable upon the
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exercise of each Option are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 7.
(a) Adjustment for Change in Common Stock.
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If the Company:
(i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(iii) combines its outstanding shares of Common Stock
into a smaller number of shares;
then the number of Option Shares and the Exercise Price in effect immediately
prior to such action shall be proportionately adjusted so that, if Employee
thereafter exercises this Option, it may receive the aggregate number and kind
of shares of capital stock of the Company which it would have owned immediately
following such action if this Option had been exercised immediately prior to
such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision or combination.
(b) Notice of Adjustment.
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The Company shall provide Employee with written notice of any of the
foregoing adjustments at least 15 days before the effective date of the
adjustment.
(c) Reorganization of Company.
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If the Company consolidates or merges with or into, or transfers or
leases all or substantially all its assets to, any person, upon consummation of
such transaction the Option
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shall automatically become exercisable for the kind and amount of securities,
cash or other assets which the holder of a Option would have owned immediately
after the consolidation, merger, transfer or lease if the holder had exercised
the Option immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the Corporation formed
by or surviving any such consolidation or merger if other than the Company, or
the person to which such sale or conveyance shall have been made, shall enter
into a supplemental Option Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section. The successor Company shall mail to
Employee a notice describing the supplemental Option Agreement.
If the issuer of securities deliverable upon exercise of Options under
the supplemental Option Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Option Agreement.
If this subsection (c) applies, subsections (a) and (b) of this
Section 7 do not apply.
SECTION 8. Notices to Company and Employee. Unless otherwise
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provided herein, all notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand, or sent by certified mail, return receipt requested, with
proper postage prepaid, in each case addressed as follows:
EISI Acquisition Co., Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Employee
X.X. Xxx 000
Xx Xxxxx, XX 00000
Either party may designate a different address for notice purposes by
written notice to the other.
SECTION 9. Governing Law, Dispute Resolution. This Agreement shall
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be deemed to be a contract made under the laws of the State of California and
for all purposes shall be construed in accordance with the internal laws of said
State without reference to the choice of law provisions thereof. All disputes,
controversies or differences which may arise between-the parties out of or in
relation to or in connection with this Agreement shall be finally settled by
arbitration conducted before the American Arbitration Association in Santa Xxxxx
County, California. Judgment upon the award rendered may be entered in any
court having jurisdiction or application may be made to such court for a
judicial acceptance of the award and an order of enforcement. Each party shall
bear its own expenses of the arbitration, but the arbitrator's fees and costs
shall be borne equally between the parties participating in the arbitration.
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SECTION 10. Benefits of This Agreement. Nothing in this Agreement
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shall be construed to give to any person or corporation other than the Company
and Employee any legal or equitable right, remedy or claim under this Agreement.
This Agreement shall be for the sale and exclusive benefit of the Company and
Employee.
SECTION 11. Counterparts. This Agreement may be executed in any
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number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
SECTION 12. No Employment Agreement. The Employee and the Company
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agree that this Option Agreement shall not constitute an employment agreement
and that, subject to rights granted above, the Employee's employment with the
Company shall be terminable at the will of either party at any time, without
notice, for any or no reason, with or without Good Cause.
SECTION 13. Integration. This Agreement constitutes the complete,
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final and exclusive statement of the terms of the agreement between the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions of the parties. No modification or
rescission of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
EISI Acquisition Co., Inc.
By /s/ DON ESTERS
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Title Chairman
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/s/ XXXX XXXXXXX
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EMPLOYEE
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EXHIBIT A
(Form of Election to Purchase)
(To Be Executed Upon Exercise Of Option)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Election Certificate, to receive __________ shares of Common
Stock and herewith tenders payment for such shares to EISI Acquisition Co., Inc.
in the amount of $______ in accordance with the terms of the Option Agreement
between EISI Acquisition Co., Inc. and the undersigned dated as of March __,
1994.
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Employee
Date:
Signature Guaranteed:
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