Non-Qualified Stock Option Agreement
This
Non-Qualified Stock Option Agreement
(this
“Agreement”), dated as of January 4, 2008, is by and between Compliance Systems
Corporation, a Nevada corporation (the
“Corporation”), and
____________, an individual residing at ___________________ (the
"Optionee").
WHEREAS,
the
Optionee is a valued employee, director and/or officer of, and/or service
provider to, the Corporation; and
WHEREAS,
the
Corporation deems it desirable and in the Corporation’s best interests that
Optionee be given an opportunity to acquire shares (each, an “Option Share”) of
the common stock, par value $0.001 per share (the "Common Stock"), of the
Corporation upon the terms and subject to the conditions set forth in this
Agreement in order to provide further incentive to Optionee that is directly
linked to increases in stockholder value which will therefore inure to the
benefit of all stockholders of the Corporation.
NOW,
THEREFORE,
for
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and the mutual covenants and agreements contained in this
Agreement, the parties agree as follows:
1. |
Grant
of Option.
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(a) The
Corporation hereby grants to the Optionee the right, privilege and option (the
"Option") to purchase from the Corporation up to an aggregate of _______________
Option Shares (subject to adjustment as provided in section 6), on the terms
and
subject to the conditions set forth in this Agreement.
(b) The
purchase price payable upon any exercise of the Option is $0.026 per Option
Share, subject to adjustment as provided in section 6 (the “Purchase
Price”).
(c) Optionee
acknowledges and agrees that the Option is not intended to be an “Incentive
Stock Option” as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”).
2. |
Exercise
of the Option.
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(a) Subject
to the provisions of sections 3 and 4, the Option shall be exercisable, in
whole
or part and from time to time, by written notice of such exercise, delivered
to
the President or Secretary of the Corporation, at the Corporation’s principal
executive offices by either (i) personal delivery, against written receipt
therefor, or (ii) by pre-paid, certified or registered mail, return receipt
requested. Such notice shall specify the number of Option Shares for which
the
Option is being exercised (which number, if less than all of the Option Shares
then subject to exercise, shall be 100,000 or an integral multiple thereof;
provided,
however,
that,
in the event that less than 100,000 Options Shares remain then subject to
exercise, the Option may be exercised for such remaining Option Shares) and
shall be accompanied by (A) payment of the full aggregate Purchase Price for
the
Option Shares for which the Option is being exercised and (B) delivery of a
duly
executed representation letter of Optionee, in a form reasonably acceptable
to
the Corporation, (1) certifying that Optionee is acquiring such the Option
Shares for investment purposes only and not with a view to their sale or
distribution, (2) agreeing not to sell, pledge, hypothecate or otherwise
distribute the Option Shares, unless a registration statement including such
Option Shares is effective under the Securities Act of 1933, as amended (the
"Securities Act"), or there is available an applicable exemption thereunder
and
(3) agreeing that an appropriate legend may be placed on the stock
certificate(s) representing the Option Shares have not been registered under
the
Act and may only be disposed in accordance with the Act or an exemption
thereunder. As soon as practicable after receipt by the Corporation of such
notice, payment in full of the aggregate Purchase Price for all the Option
Shares with respect to which the Option is being exercised and duly executed
Representation Letter, the Corporation shall take all necessary actions to
cause
such Option Shares to be issued and a certificate or certificates representing
such Option Shares shall be delivered to the Optionee.
(b) The
form
of payment of the Purchase Price for Option Shares purchased pursuant to the
Option shall consist of: (i) cash; (ii) check (subject to collection); (iii)
in
the discretion of the Board of Directors (the"Board") of the Corporation, (A)
surrender to the Corporation of other shares of Common Stock owned by Optionee
which are then registered under the Securities Act or otherwise publicly
saleable under Rule 144 or other applicable exemption promulgated under the
Securities Act and have a fair market value on the date of surrender equal
to
the aggregate Purchase Price of the Option Shares being exercised, (B)
assignment to the Company of the net proceeds (to the extent necessary to pay
such aggregate Purchase Price) to be received from a registered broker upon
the
sale of all or a portion of such Option Shares or assignment of the net proceeds
(to the extent necessary to pay such aggregate Purchase Price) of a loan from
such broker in such amount or (C) such other consideration and method of payment
for the issuance of stock to the extent permitted under all applicable state
and
federal laws; or (iv) any combination of such methods of payment.
(c) No
Option
Shares shall be delivered upon exercise of the Option until all laws, rules
and
regulations which the Board may deem applicable have been complied
with.
(d) Optionee
shall not be considered a record holder of the Option Shares acquired upon
exercise of the Option for any purpose until the date on which Optionee is
actually recorded as the holder of such Option Shares on the records of the
Corporation.
3. |
Term
of the Option.
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(a) Subject
to the earlier termination as provided in this section 3, the Option shall
expire as of 5:00 P.M., Eastern Standard Time, on January 4, 2013 (the
“Termination Time”).
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(b) Notwithstanding
the provisions of paragraph 3(a), the Option, to the extent not previously
exercised, shall terminate upon the first to occur of the following
events:
(i) the
first
anniversary of Optionee's death;
(ii) the
date
of the termination of the Optionee's employment or other relationship with
the
Corporation for "cause";
(iii) the
first
anniversary of the date (A) on which the Optionee's employment or other
relationship with the Corporation is terminated without cause (except if such
termination be by reason of death or permanent and total disability of
Optionee); or (B) Optionee voluntarily terminates Optionee’s employment or other
relationship with the Corporation; or
(iv) the
first
anniversary of the date of Optionee's "permanent and total disability" (as
such
term is defined in Section 22(e) of the Code).
For
purposes of this paragraph 3(b), “cause” shall mean: (i) Optionee shall have
committed any material act of willful misconduct, dishonesty or breach of trust
which, directly or indirectly, causes the Corporation or any of the
Corporation’s subsidiaries to suffer a material loss, fine, civil penalty,
judgment, claim, damage or expense; or (ii) Optionee shall have been convicted
of, or shall have plead guilty or nolo contendere to, a felony involving the
Corporation or any of the Corporation’s subsidiaries (unless committed in the
reasonable, good faith belief that the Optionee’s actions were in the best
interests of the Corporation and the Corporation’s shareholders and would not
violate criminal law). All determinations that Optionee has been terminated
for
cause shall be made by the Board, whose determination shall be final, conclusive
and binding upon Optionee and the Corporation. If Optionee is a director of
the
Corporation, Optionee shall abstain from voting on any such
determination.
4. |
Availability
of Shares.
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(a) The
Corporation shall keep available for issuance such number of shares of Common
Stock as necessary in order for the Corporation to issue and deliver all Option
Shares upon the full exchange of the Option.
(b) The
Corporation shall utilize its best efforts to comply with the requirements
of
each regulatory commission or agency having jurisdiction in order to issue
and
sell the Option Shares upon exercise of the Option; provided,
however,
that
the Corporation shall not be required to register the Option Shares issuable
upon exercise of the Option under the Securities Act. Such compliance will
be a
condition precedent to the right to exercise the Option. The inability of the
Corporation to effect such compliance with any such regulatory commission or
agency which counsel for the Corporation, in its reasonable judgment, deems
necessary for the lawful issuance and sale of Option Shares shall relieve the
Corporation from any liability for failure to issue and sell the Option Shares
for such period of time as such compliance is not effectuated.
5. |
Restrictions.
Optionee hereby represents and warrants to the Corporation as
follows:
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(a) The
Option and the right to purchase the Option Shares is personal to the Optionee
and shall not be transferred to any other person, other than by will or the
laws
of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code, or
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or by the rules promulgated under the Code or ERISA. The Option
and
the
right to purchase the Option Shares shall
not
be collaterally assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to execution, attachment
or similar process. Any attempted transfer, assignment, pledge, hypothecation
or
other disposition of the Option or of any rights granted under this Agreement
contrary to the provisions of this section 5, or the levy of any attachment
or
similar process upon the Option or such right, shall be null and
void.
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(b) Notwithstanding
anything to the contrary contained in paragraph 5(a),
(i) in
the
event of Optionee's death, Optionee's executor(s), administrator(s) or the
person(s) to whom the Optionee's rights under the Option shall pass by will
or
applicable laws of decent and distribution, may exercise, within one year of
Optionee's death, the Option to the extent that Optionee was entitled to
exercise the Option on the date of Optionee's death; and
(ii) in
the
event of Optionee's permanent and total disability, Optionee's legally appointed
representative(s) may exercise, within one year of Optionee's permanent and
total disability, the Option to the extent that Optionee was entitled to
exercise the Option on the date of Optionee's permanent and total
disability.
(c) Optionee
has been advised and understands that:
(i) the
Option has been issued in reliance upon an exemption from registration under
the
Securities Act and applicable state statutes;
(ii) the
Option Shares have not been registered under the Securities Act or applicable
state statutes and must be held and may not be sold, transferred, or otherwise
disposed of for value unless the Option Shares are subsequently registered
under
the Securities Act or an exemption from such registration is
available;
(iii) the
Corporation is under no obligation to register the Option or the Option Shares
under the Securities Act or any applicable state statutes;
(iv) the
Corporation's registrar and transfer agent will maintain stop-transfer
instructions against registration or transfer of the Option Shares and any
certificate issued upon exercise of the Option representing any Option Shares
will bear on its face a legend in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SECURITIES
HAVE
BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD DISTRIBUTION
OR
RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH INTEREST UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF SUCH SECURITIES TO THE EFFECT THAT REGISTRATION
IS
NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.”
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6. |
Anti-Dilution
Provisions.
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(a) If
there
is any stock dividend, stock split or combination of shares of Common Stock,
the
number and amount of Option Shares then subject to the Options and the Purchase
Price shall be proportionately and appropriately adjusted as determined by
the
Board, whose determination shall be final, conclusive and binding upon Optionee
and the Corporation.
(b) If
there
is any other change in the Common Stock, including a recapitalization,
reorganization, sale or exchange of assets, exchange of shares, offering of
subscription rights, or a merger or consolidation in which the Corporation
is
the surviving corporation, an adjustment, if any, shall be made in the Option
Shares then subject to the Option as the Board may deem equitable, and whose
determination shall be final, conclusive and binding upon Optionee and the
Corporation. Failure of the Board to provide for an adjustment pursuant to
this
paragraph 6(b) prior to the effective date of any Corporation action referred
to
in this paragraph 6(b) shall be conclusive evidence that no adjustment is
required in consequence of such action.
(c) If
the
Corporation is merged into or consolidated with any other corporation and the
Corporation is not the surviving entity, or if the Corporation sells all or
substantially all of the Corporation’s assets to any other person or entity,
then the Corporation shall cause provisions to be made for the continuance
of
the Option after such event, or for the substitution for the Option of an option
covering the number and class of securities which Optionee would have been
entitled to receive in such merger or consolidation or by virtue of such sale
if
Optionee had been the holder of record of a number of shares of Common Stock
equal to the number of Option Shares covered by the unexercised portion of
the
Option immediately prior to such merger, consolidation or sale.
7. Certain
Rights Not Conferred by Option. Optionee shall
not, by virtue of holding the Option, be entitled to any rights of a stockholder
in the Corporation.
8. Expenses.
The
Corporation shall pay all original issue and transfer taxes with respect to
the
issuance of Option Shares and all other fees and expenses necessarily incurred
by the Corporation in connection with such issuance.
9. No
Employment Contract.
The
grant of the Option shall not confer upon Optionee any right to continued
employment or continuation of any other relationship with the Corporation
(whether as an officer, director, consultant, service provider or otherwise)
nor
shall interfere in any way with the right of the Corporation to terminate the
Optionee’s employment or other relationship with the Corporation at any
time.
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10. Validity
and Construction. The
validity and construction of this Option shall be governed by the laws of the
State of New York.
11. Binding
Effect.
This
Agreement shall inure to the benefit of and be binding upon the parties to
this
Agreement and their respective heirs, executors, administrators, successors
and
assigns.
IN
WITNESS WHEREOF,
this
Option Agreement has been executed by the parties as of the date first set
forth
above.
Corporation: | ||
Compliance Systems Corporation | ||
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By: | ||
Xxxx
Xxxxxxxxx, President
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Optionee: | ||
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By: | ||
[NAME
OF OPTIONEE]
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