STOCK OPTION AGREEMENT
EXHIBIT
10.1
THIS
STOCK OPTION AGREEMENT (“Agreement”) is entered into as of October 23, 2006, by
and between Sparta Commercial Services, Inc., a Nevada corporation (the
“Company”), and Xxxxxxx Xxxx (the “Optionee”).
RECITALS
Whereas,
in recognition of services as Director, the Company grants to you stock options
on the terms and conditions set forth herein;
AGREEMENT
It
is
hereby agreed as follows:
1. GRANT
OF
OPTION. The Company grants Optionee the right, privilege, and option (the
“Options”) up to 500,000 shares of the Company’s common stock, par value $.001
per share (the “Common Stock”), in the manner and subject to the conditions
hereinafter provided. The time the Options shall be deemed granted, sometimes
referred to herein as the “date of grant,” shall be the date of execution of
this Agreement.
2. SERVICES
TO THE COMPANY. The exercisability of the Options are subject to certain
conditions of service of the Optionee to the Company. Nothing contained in
this
Agreement shall obligate the Company to employ or have another relationship
with
the Optionee.
3. OPTION
PERIOD. Subject to the vesting schedule herein, the Options shall be exercisable
at any time during the period commencing with the date of this Agreement and
expiring on the fifth year anniversary date of this Agreement, October 23,
2011,
unless earlier terminated pursuant to this Section and/or Section 14 of this
Agreement, or if said day is a day on which banking institutions are authorized
by law to close, then on the next succeeding day which shall not be such a
day,
by presentation and surrender hereof to the Company or at the office of its
stock transfer agent, if any, together with all Federal and state taxes
applicable upon such exercise, if any. The vesting schedule for the Options
is
as follows:
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October
23, 2006
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40%
vested
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October
23, 2007
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60
% vested
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October
23, 2008
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80%
vested
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October
23, 2009
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100%
vested
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provided,
however, that with respect to each vesting date, no vesting shall occur unless
the Optionee is a director serving on the Company’s Board of Directors on such
date. The unvested portion of the Options will terminate automatically and
without further notice immediately upon the Optionee ceasing (voluntary or
involuntary) to serve on the Company’s Board of Directors.
4. AMOUNT
OF
PURCHASE PRICE. The purchase price per Share for each share which the Optionee
is entitled to purchase under the Options shall be $0.12 (based on 110% of
the
closing price per share of the Company’s Common Stock on October 23, 2006 of
$0.11).
5. METHOD
OF
EXERCISE. The Options shall be exercisable by the Optionee by giving written
notice to the Company of the election to purchase and of the number of Shares
the Optionee elects to purchase, such notice to be accompanied by such other
executed instruments or documents as may be required by the Board of Directors
pursuant to this Agreement, and unless otherwise directed by the Board of
Directors, the Optionee shall at the time of such exercise tender the purchase
price of the Shares he has elected to purchase. The Optionee may purchase less
than the total number of Shares for which the Option is exercisable, provided
that a partial exercise of an Option may not be for less than One Hundred (100)
Shares. If the Optionee shall not purchase all of the Shares which he is
entitled to purchase under the Options, his right to purchase the remaining
unpurchased Shares shall continue until expiration of the Options. The Options
shall be exercisable with respect of whole Shares only, and fractional Share
interests shall be disregarded.
6. PAYMENT
OF PURCHASE PRICE. At the time of the Optionee’s notice of exercise of the
Options, the Optionee shall tender in cash or by certified or bank cashier’s
check payable to the Company, the purchase price for all Shares then being
purchased. If authorized by the Company’s Board of Director, alternative means
of payment may be permitted, to the extent such means are permissible under
federal securities laws.
7. ISSUANCE
OF STOCK CERTIFICATES. Upon receipt of the materials delivered by the Optionee
indicating exercise of the Options, the Company shall, as promptly as
practicable and in any event within five (5) business days thereafter, execute
and deliver, or cause to be executed and delivered, to the Optionee a
certificate or certificates representing the aggregate number of Shares
specified in such notice or form together with cash in lieu of any fractional
share as hereinafter provided. The certificate or certificates so delivered
shall be in such denomination or denominations as may be specified in such
notice or form and shall be registered in the name of the Optionee or such
other
name as shall be designated (together with an address) in such notice or form.
Such certificate(s) shall be deemed to have been issued and the Optionee or
any
other person so designated to be named therein shall be deemed to have become
a
holder of record of such Shares as of the exercise date. The Company shall
pay
all expenses and other charges payable in connection with the preparation,
issuance and delivery of share certificates under this Section except that,
in
the case such share certificates shall be registered in a name or names other
than the name of the Optionee, funds sufficient to pay all share transfer taxes
which shall be payable upon issuance of such share certificate or certificates
shall be paid by the Optionee at the time the notice of exercise hereinabove
is
delivered to the Company.
8. SHARES
FULLY PAID. All Shares shall be, when issued, duly authorized, validly issued
and non-assessable.
9. NO
IMPAIRMENT. The Company will not, by amendment of its charter or though
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Options, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Optionee of the Options against impairment. Notwitstanding
the
foregoing, in the event of a “change of control”, the Options shall vest
immediately in their entirety.
For
purpurposes hereof, a “change of control” shall be deemed to occur if and
when:
(i) any
person, including a “person” as such term is used in Section 14(d)(2) of the
1934 Act (a “Person”), is or becomes a beneficial owner (as such term is defined
in Rule 13d-3 under the Act), directly or indirectly, of securities of the
Company representing 35 percent (35%) or more of the combined voting power
of
the Company’s then outstanding securities;
(ii) any
plan
or proposal for the dissolution or liquidation of the Company is adopted by
the
stockholders of the Company;
(iii) individuals
who, as of the effective date of this Agreement,
constitute the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the effective date of this Agreement whose
election, or nomination for election by the Company’s stockholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board;
2
(iv) all
or
substantially all of the assets of the Company are sold, transferred or
distributed; or
(v) there
occurs a reorganization, merger, consolidation or other corporate transaction
involving the Company (a “Transaction”), in each case, with respect to which the
stockholders of the Company immediately prior to such Transaction do not,
immediately after the Transaction, own more than 50 percent (50%) of the
combined voting power of the Company or other corporation resulting from such
Transaction in substantially the same respective proportions as such
stockholders’ ownership of the voting power of the Company immediately before
such Transaction.
10. RESERVATION
OF SHARES. The Company hereby agrees that, during the time period the Options
are exercisable, there shall be reserved for issuance and/or delivery upon
exercise of the Options such number of shares of its common stock as shall
be
required for issuance or delivery upon exercise of the Options.
11. FRACTIONAL
SHARES. With respect to any fraction of a Share called for upon any exercise
hereof, the Optionee agrees to waive the Optionee’s right to such fractional
Shares. As such, no fractional Shares or scrip representing fractional Shares
shall be issued upon the exercise of the Options.
12. ADJUSTMENTS
UPON CHANGES IN CAPITALIZATION. As used herein, the term “Adjustment Event”
means an event pursuant to which the outstanding shares of the Company are
increased, decreased or changed into, or exchanged for a different number or
kind of shares or securities, without receipt of consideration by the Company,
through reorganization, merger, business combination, recapitalization,
reclassification, stock split, reverse stock split, stock dividend, stock
consolidation or otherwise. Upon the occurrence of an Adjustment Event, (i)
appropriate and proportionate adjustments shall be made to the number and kind
and exercise price for the shares subject to the Options, and (ii) appropriate
amendments to this Agreement shall be executed by the Company and the Optionee
if the Board of Directors in good faith determines that such an amendment is
necessary or desirable to reflect such adjustments. If determined by the Board
of Directors to be appropriate, in the event of an Adjustment Event which
involves the substitution of securities of a corporation other than the Company,
the Board of Directors shall make arrangements for the assumptions by such
other
corporation of the Options. Notwithstanding the foregoing, any such adjustment
to the Options shall be made without change in the total exercise price
applicable to the unexercised portion of the Options, but with an appropriate
adjustment to the number of shares, kind of shares and exercise price for each
share subject to the Options. The good faith determination by the Board of
Directors as to what adjustments, amendments or arrangements shall be made
pursuant to this Section, and the extent thereof, shall be final and conclusive,
provided that the Options herein are adjusted in a manner that is no less
favorable than the manner of adjustment used as to any other options issued
by
the Company to its employees, directors, consultants or in any transaction.
No
fractional Shares shall be issued on account of any such adjustment or
arrangement.
13. RIGHTS
OF
THE OPTIONEE. The Optionee shall not be entitled to the privileges of stock
ownership as to any Shares not actually issued and delivered to the Optionee.
No
Shares shall be purchased upon the exercise of any Options unless and until,
in
the opinion of the Company’s counsel, any then applicable requirements of any
laws, or governmental or regulatory agencies having jurisdiction, and of any
exchanges upon which the stock of the Company may be listed shall have been
fully complied with.
14. EFFECT
OF
DEATH OF THE OPTIONEE. If the Optionee dies, all Options shall expire six (6)
months thereafter. During such six (6) month period (or such shorter period
prior to the expiration of the Option by its own terms), such Options may be
exercised by the executor or administrator or the person or persons to whom
the
Option is transferred by will or the applicable laws of descent and
distribution, as the case may be, but only to the extent such Options were
exercisable on the date the Optionee died.
15. NONTRANSFERABILITY
OF OPTIONS. The Options, and any interest therein or in the Common Stock
underlying the Option, shall not be transferable, either voluntarily or by
operation of law, otherwise than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee’s lifetime only by
the Optionee. The Options, and any interest therein or in the Common Stock
underlying the Option, may not be assigned, transferred (except as provided
above), pledged, or hypothecated in any way, and shall not be subject to
execution, attachment, or similar process. Any attempted assignment, transfer,
pledge, hypothecation, or other disposition of the Options contrary to the
provisions hereof, and the levy of any execution, attachment, or similar process
upon the Options, shall be null and void and without effect.
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16. SECURITIES
LAWS COMPLIANCE. The Company will diligently endeavor to comply with all
applicable securities laws before any stock is issued pursuant to the Options.
Without limiting the generality of the foregoing, the Company may require from
the Optionee such investment representation or such agreement, if any, as
counsel for the Company may consider necessary in order to comply with the
Securities Act of 1933 as then in effect, and may require that the Optionee
agree that any sale of the Shares will be made only in such manner as is
permitted by the Board of Directors. The Optionee shall take any action
reasonably requested by the Company in connection with registration or
qualification of the Shares under federal or state securities laws.
17. SECURITIES
SUBJECT TO LEGEND. If deemed necessary by the Company’s counsel, all
certificates issued to represent the Options and/or the Shares purchased upon
exercise of the Options shall bear such appropriate legend conditions as counsel
for the Company shall require in substantially the following form:
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“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY BE TRANSFERRED
ONLY (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, OR
(B) IN ACCORDANCE WITH THE ACT AND SUBJECT TO RECEIPT OF AN OPINION
OF
COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER THAT THE PROPOSED TRANSACTION
IS EXEMPT FROM REGISTRATION UNDER THE
ACT.”
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18. REPRESENTATIONS
OF OPTIONEE.
(a) SOPHISTICATION
OF OPTIONEE. The Optionee acquired the Options for investment and not with
a
view to the sale or distribution thereof, and the Optionee has no commitment
or
present intention to liquidate the Company or to sell or otherwise dispose
of
the Options or the underlying Shares. The Optionee represents and warrants
that,
by reason of financial, tax and business sophistication, income, net assets,
education, background and business acumen, the Optionee has the experience
and
knowledge in business and financial matters to evaluate the risks and merits
attendant to an investment decision in the Company, either singly or through
the
aid and assistance of a competent professional, and is fully capable of bearing
the economic risk of loss of the total investment pursuant to this Agreement.
The Optionee represents and warrants to the Company that the Optionee has been
an employee of the Company and is fully familiar with its business and
oeprations and has been provided with, and has had access to, all material
information about the Company.
(b) LOCK-UP
RESTRICTIONS. The Optionee hereby agrees to any lockup of the Shares which
the
Board of Directors of the Company requests when requested by an investment
banker or underwriter providing financing to the Company.
19. MISCELLANEOUS.
(a) Binding
Effect. This Agreement shall bind and inure to the benefit of the successors,
assigns, transferees, agents, personal representatives, heirs and legatees
of
the respective parties.
(b) Further
Acts. Each party agrees to perform any further acts and execute and deliver
any
documents which may be necessary to carry out the provisions of this Agreement.
(c) Amendment.
This Agreement may be amended at any time by the written agreement of the
Company and the Optionee.
(d) Syntax.
Throughout this Agreement, whenever the context so requires, the singular shall
include the plural, and the masculine gender shall include the feminine and
neuter genders. The headings and captions of the various Sections hereof are
for
convenience only and they shall not limit, expand or otherwise affect the
construction or interpretation of this Agreement.
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(e) Choice
of
Law. The parties hereby agree that this Agreement has been executed and
delivered in the State of New York and shall be construed, enforced and governed
by the laws thereof. This Agreement is in all respects intended by each party
hereto to be deemed and construed to have been jointly prepared by the parties
and the parties hereby expressly agree that any uncertainty or ambiguity
existing herein shall not be interpreted against either of them.
(f) Severability.
In the event that any provision of this agreement shall be held invalid or
unenforceable, such provision shall be severable from, and such invalidity
or
unenforceability shall not be construed to have any effect on, the remaining
provisions of this agreement.
(g) Notices.
All notices and demands between the parties hereto shall be in writing and
shall
be served either by registered or certified mail, and such notices or demands
shall be deemed given and made forty-eight (48) hours after the deposit thereof
in the United States mail, postage prepaid, addressed to the party to whom
such
notice or demand is to be given or made, and the issuance of the registered
receipt therefor. If served by telegraph, such notice or demand shall be deemed
given and made at the time the telegraph agency shall confirm to the sender,
delivery thereof to the addressee. All notices and demands to the Optionee
or
the Company may be given to them at the following addresses:
| If to the Optionee: |
Xxxxxxx
Xxxx
|
| 00 Xxxxx Xxxxxxx Xxxxx |
| Xxxxxxxx, XX 00000 |
| Fax: 000-000-0000 |
| If to Corporation: | Sparta Commercial Services, Inc. |
| 000 Xxxxxxx Xxx, 00xx Xxxxx |
| Xxx Xxxx, XX 00000 |
| Fax: 000-000-0000 |
Such
parties may designate in writing from time to time such other place or places
that such notices and demands may be given.
(h) Entire
Agreement. This Agreement constitutes the entire agreement between the parties
hereto pertaining to the subject matter hereof, this Agreement supersedes all
prior and contemporaneous agreements and understandings of the parties, and
there are no warranties, representations or other agreements between the parties
in connection with the subject matter hereof except as set forth or referred
to
herein. No supplement, modification or waiver or termination 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 constitute a waiver
of
any other provision hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
(i) Attorneys’
Fees. In the event that any party to this Agreement institutes any action or
proceeding, including, but not limited to, litigation or arbitration, to
preserve, to protect or to enforce any right or benefit created by or granted
under this Agreement, the prevailing party in each respective such action or
proceeding shall be entitled, in addition to any and all other relief granted
by
a court or other tribunal body, as may be appropriate, to an award in such
action or proceeding of that sum of money which represents the attorneys’ fees
reasonably incurred by the prevailing party therein in filing or otherwise
instituting and in prosecuting or otherwise pursuing or defending such action
or
proceeding, and, additionally, the attorneys’ fees reasonably incurred by such
prevailing party in negotiating any and all matters underlying such action
or
proceeding and in preparation for instituting or defending such action or
proceeding.
[signature
page follows]
5
IN
WITNESS WHEREOF, the Company has caused this Stock Option Agreement to be duly
executed by its authorized agent on the day and year first above
written.
| SPARTA COMMERCIAL SERVICES, INC. | ||
| |
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| By: | /s/ Xxxxxxx X. Xxxxxx | |
| Name: Xxxxxxx X. Xxxxxx | ||
| Title: President | ||
Should
the foregoing be acceptable to you, please sign and return to the undersigned
a
copy of this Agreement bearing the date of your acceptance by October 31, 2006
Failure to do so will result in automatic cancellation of this Agreement.
| /s/ Xxxxxxx Xxxx | ||
| Xxxxxxx Xxxx (the “Optionee”) | ||
Dated:
October 23, 2006
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