SALE OPTION AGREEMENT
SALE OPTION AGREEMENT, dated as of January 22, 1997 (this
"Agreement"), by and between COGNITIVE COMMUNICATIONS, LLC, a Delaware limited
liability company (the "Company"), and XXXXX XXXXXX (the "Optionee").
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Limited Liability Company Operating Agreement of the Company
dated as of January 22, 1997, as the same may be amended from time to time (the
"Operating Agreement").
R E C I T A L S:
WHEREAS, the Company desires to grant to the Optionee an
option (the "Option") on the terms and conditions set forth herein and Optionee
desires to accept such Option.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Company and the
Optionee hereby agree as follows:
Section 1. Grant of Option; Reservation of Shares.
(a) The Company hereby grants to the Optionee an Option
exercisable for the period and upon the terms hereinafter set forth, to purchase
an aggregate of 450,000 Shares and a Capital Account which represents a portion
of the Capital Accounts of all of the Shares outstanding immediately following
such exercise which is proportionate to the number of Shares being purchased by
the Optionee as of such date, at an aggregate exercise price of $1.00 for all
Shares purchasable hereunder (the "Exercise Price").
(b) The Company represents and agrees that all Shares which
may be issued upon the exercise of the Option, upon issuance and payment of the
Exercise Price in accordance with the terms hereof, will be fully paid and
nonassessable, and free of all taxes, liens and charges with respect
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to the issuance thereof. The Company agrees that, at all times during the Term
(as hereinafter defined), it shall reserve and keep available, out of its
aggregate authorized but unissued Shares, the number of Shares deliverable upon
the exercise of this Option.
Section 2. Vesting.
(a) Subject to the provisions of Section 3, the Option shall
be exercisable during the Term (as hereinafter defined) in the event of a
transfer or other disposition (a "Transfer") by Manhattan Transfer/Edit, Inc., a
Delaware corporation ("MTE"), of all or a portion of its Shares; provided,
however, that in the event of a Transfer by MTE of only a portion of its Shares,
the number of Shares purchasable hereunder shall be pro rated so that for every
three (3) Shares Transferred by MTE, the Option shall be exercisable with
respect to one (1) Share. The Company shall give the Optionee prior written
notice of a Transfer. Any pledge by MTE of any of its Shares shall not be deemed
a "Transfer", and any transfer by MTE of any of its Shares to any of its
subsidiaries or affiliates also shall not be deemed a "Transfer"; provided,
however, that any subsequent Transfer by such subsidiary or affiliate of any
Share (other than to any subsidiary or affiliate of such subsidiary or
affiliate) shall be deemed a Transfer by MTE for the purposes hereof.
(b) Notwithstanding the foregoing, the Option shall be deemed
exercised by the Optionee upon the exercise by the Optionee of the put right
granted to the Optionee pursuant to the Put Agreement with the Company dated as
of the date hereof (the "Put Agreement") solely for valuation purposes
thereunder.
(c) The Company further agrees to furnish prompt written
notice to the Optionee of any event outlined in Section 8 hereof.
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Section 3. Term of the Option.
The term (the "Term") of the Option(s) granted hereunder shall
commence upon the date hereof.
Section 4. Non-Transferability.
The Optionee may not transfer the Option except by will or the
laws of descent and distribution. Subject to the terms of this Agreement, the
Option may not be otherwise transferred, assigned, pledged, hypothecated or
disposed of in any way, whether by operation of law or otherwise, and may be
exercised during the Optionee's lifetime only by the Optionee; provided, that
upon the Optionee's death or Disability prior to the termination of the Option,
such Option may be exercised by the Optionee's legal guardian or other
representatives in accordance with the terms of this Agreement.
Section 5. Manner of Exercise.
The Option may be exercised in whole or in part. The Optionee
shall purchase Shares upon exercise of the Option by making a cash payment to
the Company, equal to the product of (a) the Exercise Price therefor and (b) the
number of Shares to be purchased at that time. At any time during which the
Shares or any securities for which the Shares have been exchanged (collectively,
the "Registrable Securities") are registered under the Securities Exchange Act
of 1934, as amended, the Optionee may exercise her/his right to purchase some or
all of the Registrable Securities subject to such Option, on a net basis, such
that, without the exchange of any funds, the Optionee receives that number of
Registrable Securities subscribed to pursuant to such Option less that number of
shares of Registrable Securities having an aggregate Fair Market Value (as
hereinafter defined) at the time
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of exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the Optionee for the number of Registrable Securities subscribed to
pursuant to such Option.
As used herein, the term "Fair Market Value", for any given
day, means (i) the last sale price reported in the Wall Street Journal or other
trade publication regular way or, in case no such reported sale takes place on
such date, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the
Registrable Securities are admitted to trading or listed if that is the
principal market for the Registrable Securities, or (iii) if not listed or
admitted to trading on any national securities exchanges or if such national
securities exchange is not the principal market for the Registrable Securities,
the last sale price as reported by the National Association of Securities
Dealers, Inc. Automated Quotation National Market System ("NASDAQ") or its
successor, if any, or (iii) if the Registrable Securities are not so reported,
the average of the reported bid and asked prices in the over-the counter market,
as furnished by the National Quotation Bureau, Inc., or if such firm is not then
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business and selected by the Managers of the Company
or, if there is no such firm, as furnished by any NASD member selected by the
Managers of the Company. The Option may be exercised by written notice to the
Company, substantially in the form annexed hereto as Exhibit A, stating that the
representations and warranties contained in Section 7 hereof are true and
correct at the time of the exercise and setting forth the number of Shares to be
purchased and the date on which that purchase shall occur, which date shall be
at least five (5) days after the giving of the aforementioned written notice,
unless an earlier date shall have been agreed upon between the Optionee and the
Company. On the date scheduled for the closing of a purchase, the Optionee shall
deliver to the Company (A) an executed
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counterpart signature page to the Operating Agreement, if not previously
executed, pursuant to which the Optionee shall be bound by all provisions of the
Operating Agreement and (B) full payment for the Shares to be purchased at that
time, together with all amounts which, under federal, state or local law, the
Company is required to withhold upon exercise of the Option, in cash or by check
payable to the Company, and the Company shall (x) duly record on its books the
issuance of the Shares to Optionee and (y) establish the Optionee's Capital
Account in accordance herewith. Without limiting the generality of the
foregoing, the Company may require an opinion of counsel acceptable to it to the
effect that any subsequent transfer of Shares acquired on an Option exercise
does not violate the Securities Act of 1933, as amended (the "Act"), and may
issue stop-transfer orders covering such Shares. In the event the Option shall
be exercised by any person or persons other than the Optionee, the Company may
require appropriate proof of the right of such person or persons to exercise the
Option.
Section 6. Legend.
Certificates (if any certificates are to be issued which
determination shall be in the discretion of the Company) representing any Shares
shall have endorsed thereon the following legend:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES ACTS OF ANY STATE. SUCH SHARES
HAVE BEEN ACQUIRED BY THE REGISTERED HOLDER HEREOF FOR HER/HIS
OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING
SHARES UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES
LAWS OR THE RECEIPT BY THE COMPANY OF AN OPINION OF THE
REGISTERED HOLDER'S COUNSEL (REASONABLY SATISFACTORY TO
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THE COMPANY AND ITS COUNSEL), OR AN OPINION OF THE COMPANY'S
COUNSEL, THAT SUCH SALE, OFFER, TRANSFER OR DISPOSITION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT, AND APPLICABLE STATE SECURITIES
LAWS."
Section 7. Representations and Warranties.
(a) In connection with the granting of the Option and upon
each exercise of the Option, the Optionee agrees, represents and warrants for
himself and for all other persons that may be permitted to exercise the Option
hereunder as follows (subject to the provisions of the Put Agreement and the
tag-along rights granted in the Operating Agreement):
(i) The Optionee is acquiring the Option and, upon
exercise of the Option, the Shares, (the Option and the Shares
being referred to herein collectively as the "Securities"),
solely for her/his own account for investment without a view
to, or for resale in connection with, any distribution thereof
within the meaning of the Act. The Optionee further represents
that she/he does not have any present intention of selling,
offering to sell or otherwise disposing of or distributing the
Securities or any portion thereof; and that she/he is
purchasing the entire legal and beneficial interest in the
Securities for her/his own account and neither in whole nor in
part for the account of any other person.
(ii) The Company has disclosed to the Optionee that,
except as otherwise agreed between the Company and the
Optionee, the Shares, when issued, will not be registered
under the Act and must be held indefinitely unless the Shares
are subsequently registered under the Act or an exemption from
the registration
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requirements is available, and that, except as otherwise
agreed between the Company and the Optionee, the Company is
under no obligation to register the Shares when issued.
(iii) The Optionee understands that the rights,
preferences and powers of the Shares are set forth in the
Operating Agreement, and the Optionee acknowledges receipt of
a copy of the Operating Agreement from the Company.
(b) The Company represents and warrants that this Agreement has
been duly authorized, executed and delivered on behalf of the Company, that all
action required in connection with such authorization, execution and delivery
has been duly taken, that no consent of any third party is required in
connection with the authorization, execution and delivery of this Agreement and
that this Agreement, when executed, will be a legal, valid and binding
obligation of the Company, enforceable in accordance with its terms. The Company
has delivered to the Optionee a true, correct and complete copy of the Operating
Agreement and hereby agrees to deliver to the Optionee copies of each amendment
or supplement thereto promptly upon the execution and delivery thereof.
Section 8. Adjustments.
In the event that the outstanding Shares are changed into or
exchanged for a different number or kind of equity or other securities of the
Company, or of another entity, by reason of reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
issuance of equity or stock dividend or combination of equity units or shares or
similar event, the Company shall make an appropriate and equitable adjustment in
the Option. Nothing in this Section 8 shall prohibit the Company from issuing
additional Shares or options or warrants
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convertible into additional Shares after the date hereof without any adjustment
pursuant to this Section 8.
Section 9. Transfers in Violation of Agreement.
The Company shall not be required to transfer on its books any
Shares which have been sold or transferred in violation of any of the provisions
set forth in this Agreement or the Operating Agreement nor shall the Company be
required (a) to treat as the owner of any Shares, (b) to accord the right to
vote any Shares as the owner thereof to or (c) to pay distributions to, any
transferee to whom any Shares shall have been so transferred.
Section 10. Rights in Shares Before Issuance and Delivery.
No person shall be entitled to the privileges of ownership in
respect of any Shares issuable upon exercise of this Option, unless and until
such Shares have been issued to such person as fully-paid Shares in accordance
with the terms hereof; provided, however, that the Optionee shall be entitled to
all the rights of a member of the Company or of a minority stockholder, at law
and in equity (including the rights, if any, provided to limited liability
company members or minority stockholders under Delaware law or under the
Operating Agreement), other than the right to vote as a Member and the right to
receive distributions. Except as expressly provided in the Operating Agreement,
the Optionee shall only have such voting and distribution rights to the extent
she/he exercises the Option and owns Shares upon exercise thereof.
Section 11. Further Instruments.
The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
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Section 12. Notice.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one (1) day after deposit with
an overnight courier, or if mailed, five (5) days after the date of deposit in
the United States mails, as follows:
If to the Company, to:
Cognitive Communications, LLC
c/o International Post Limited
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Fax No.: (000) 000-0000
with a copy to:
Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
If to the Optionee, to:
Xxxxx Xxxxxx
0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxxx Xxxxxxx,XX 00000
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Section 13. Entire Agreement.
This Agreement contains the entire Agreement between the
parties hereto with respect to the matters contemplated herein and supersedes
all prior agreements or understandings among the parties related to such
matters.
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Section 14. Binding Effect.
Subject to the restrictions on transfer herein set forth,
this Agreement shall be binding upon and inure to the benefit of the Company and
its successors and assigns and upon the Optionee and her/his assigns, heirs,
executors, administrators and legal representatives. "Successors and assigns"
shall mean, in the case of the Company, any successor pursuant to a merger,
consolidation, or sale, or other transfer of all or substantially all of the
assets of the Company.
Section 15. Amendment or Modification; Waiver.
This Agreement may be amended, modified, superseded, canceled,
renewed or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by all of the parties hereto or, in the case of a
waiver, by the party waiving compliance. Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
Section 16. Governing Law.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of Delaware, without giving effect to the principles of conflicts of law
thereof.
Section 17. Headings.
Headings to the Sections in this Agreement are intended solely
for convenience and no provision of this Agreement is to be construed by
reference to the heading of any Section.
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Section 18. Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same Agreement.
Section 19. Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms and provisions of
this Agreement in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
COGNITIVE COMMUNICATIONS, LLC
By:
------------------------------
Xxxxxxx X. Xxxxxx
Vice President and Chief Financial Officer
OPTIONEE:
------------------------------
Xxxxx Xxxxxx
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EXHIBIT A
NOTICE OF EXERCISE
(To be executed upon exercise of an Option)
Cognitive Communications, LLC
c/o International Post Limited
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Ladies and Gentlemen:
I, the undersigned holder of an option (the "Option") granted
pursuant to the Option Agreement (the "Option Agreement") to which this Notice
of Exercise is attached, have irrevocably elected to exercise the right thereby
granted to purchase _______ Shares (the "Shares"), and (check one):
|_| have tendered $_______ as payment for such Shares to
the order of Cognitive Communications, LLC (the
"Company") in accordance with the terms of the Option
Agreement.
|_| authorizes the Company to withhold upon exercise of
the Option that number of Registrable Securities (as
defined in the Option Agreement) having a Fair Market
Price (as defined in the Option Agreement) equal to
$_________.
I hereby deliver to the Company an executed counterpart to the
Operating Agreement of the Company and agree to be bound by all provisions
thereof.
I hereby certify to the Company that the representations and
warranties set forth in Section 7 of the Option Agreement are true and correct
on the date hereof and are hereby made again to the Company as if set forth
herein in their entirety. I hereby agree to indemnify the Company against, and
hold it free and harmless from, any loss, damage, expense or liability resulting
to the Company arising out of or based upon the breach or inaccuracy of any such
representation or warranty.
Very truly yours,
Dated: ------------------------
OPTIONEE
Dated: ------------------------
WITNESS
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