SYNOVA HEALTHCARE GROUP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement (the "AGREEMENT") is entered
into as of February 10, 2005 by and between Synova Healthcare Group, Inc., a
Nevada corporation (the "COMPANY") and Xxxxxxx X. Xxxx (the "EXECUTIVE").
INTRODUCTION
The Board of Directors of the Company (the "BOARD") has authorized the
grant of options to Executive to acquire shares of the Company's common stock
(the "Common Stock").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, intending to be legally bound the
Company and the Executive agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the meanings indicated:
(A) "CAUSE." A termination by the Company of Executive's
employment, directorship, consulting, service or other relationship with the
Company shall be for "Cause" if the Board determines that the Executive: (i) was
guilty of fraud, gross negligence or willful misconduct in the performance of
his duties for the Company or its subsidiary, Synova Healthcare, Inc. ("SHI"),
(ii) willfully and continually failed to perform substantially the Executive's
duties with the Company or SHI (other than any such failure resulting from
incapacity due to Permanent Disability) after delivery of written demand for
substantial performance to the Executive by the Board that specifically
identified the manner in which the Board believed the Executive did not
substantially perform his or her duties, (iii) breached or violated, in a
material respect, any agreement between the Executive and the Company or SHI, or
any of the Company's or SHI's codes of conduct or corporate policies, including
policy statements regarding conflicts-of-interest, xxxxxxx xxxxxxx or
confidentiality, and non-competition/non-solicitation covenants contained in any
agreement executed by the Executive, (iv) committed a material act of dishonesty
or breach of trust, (v) acted in a manner that was inimical or injurious, in a
material respect, to the business or interests of the Company or SHI, or (vi)
was convicted of, or plead guilty or nolo contendere to, a felony or any other
crime involving moral turpitude which subjects, or if generally known, would
subject, the Company to public ridicule or embarrassment.
(B) "CHANGE IN CONTROL" shall mean (i) the sale, exchange,
liquidation or other disposition of all or more than 50% of the Company's and
its subsidiaries' business or assets; unless in any such case, the Board
reasonably determines, prior to the occurrence of such Change in Control, that
no Change in Control has or will have occurred; (ii) the occurrence of a
reorganization, merger, consolidation or other corporate transaction involving
the Company or SHI, in each case, with respect to which the Company's or SHI's,
as applicable, stockholders immediately prior to such transaction do not,
immediately after such transaction, own more than 50% of the combined voting
securities having the right to vote for the election of directors of the Company
or SHI, as applicable, or other corporation resulting from such transaction;
(iii) the approval by the Company's or SHI's stockholders of a complete
liquidation or dissolution of the Company or SHI; or (iv) any similar
transaction, circumstance or event which the Board determines to constitute a
Change in Control.
(C) "DISABILITY" or "PERMANENT DISABILITY" shall mean disability as
defined in Section 22(e)(3) of the Code or as otherwise determined by the Board.
(D) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
2. GRANT OF OPTION.
(A) GRANT OF OPTION. The Company hereby grants to the Executive an
option (the "OPTION") to purchase, subject to the terms and conditions of this
Agreement, an aggregate of up to 375,000 shares of the Company's Common Stock,
at a price of $0.25 per share. This Option is not intended to qualify as an
"incentive stock option" within the meaning of the Code.
(B) ADJUSTMENT. In the event of any stock dividend, stock split,
combination or exchange of equity securities, merger, consolidation,
recapitalization, reorganization, divestiture or other distribution (other than
ordinary cash dividends) of assets to stockholders, or any other event affecting
the Common Stock that the Board of Directors (the "BOARD") of the Company deems,
in its sole discretion, to be similar circumstances, the Board may make such
equitable adjustments as it may reasonably deem appropriate, in its discretion,
to: (i) the number of shares of Common Stock underlying the Option; or (ii) the
exercise price applicable to the Option. The Board may also make such
adjustments to take into account material changes in law or in accounting
practices or principles, mergers, consolidations, acquisitions, dispositions or
similar corporate transactions, or any other event, as the Board may reasonably
determine appropriate.
3. VESTING AND EXERCISE OF OPTION.
(A) VESTING; EXERCISE. Except as otherwise provided below, this
Option will vest according to the vesting schedule set forth on Exhibit A
attached hereto. Notwithstanding anything contained herein or in Exhibit A to
the contrary, if the Executive is an employee of the Company on the date of a
Change in Control, this Option will vest as to all unvested shares of Common
Stock covered hereby concurrently with the consummation of such Change in
Control. The Executive shall be entitled to exercise this Option to acquire
vested Common Stock at any time on or after the applicable date of vesting. If
the Executive's employment is terminated by the Company with Cause at any time
prior to a Change in Control, this Option shall terminate in its entirety and
shall become void as to all shares of Common Stock for which this Option is
unvested at the time of such termination.
(B) EXPIRATION DATE. In no event may this Option be exercised with
respect to any shares later than seventy-five (75) days after such shares become
vested in accordance with the terms hereof (the "EXPIRATION DATE").
Notwithstanding anything contained herein to the contrary, in no event may this
Option be exercised after April 1, 2007.
- 2 -
(C) EXERCISE PROCEDURE. Subject to the conditions set forth herein,
the Option may be exercised by the Executive's delivery of written notice to the
Company specifying the number of shares of Common Stock to be purchased and the
purchase price therefore, accompanied by payment in full.
4. PAYMENT OF PURCHASE PRICE. The price for Common Stock purchased
hereunder shall be paid by delivery to the Company of (a) cash or a check to the
order of the Company, (b) with the Company's prior approval, such shares of
Common Stock equal to the aggregate purchase price of the Common Stock to be
purchased divided by the fair market value of such Common Stock or (c) by any
combination of the foregoing methods of payment. If the purchase price is to be
paid with certificated shares of Common Stock, the certificates representing
such shares shall be accompanied by a stock power executed in blank, and shall
be suitable for transferring the Common Stock to the Company.
5. DELIVERY OF COMMON STOCK. The Company shall, upon receipt of payment
in full for Common Stock properly purchased hereunder, promptly deliver
certificates representing such Common Stock to the Executive. Notwithstanding
the foregoing, if the Company is required by law or by any securities exchange
on which the Common Stock is listed to take any action before the issuance of
such Common Stock, the date of delivery shall be extended for a reasonable
period of time to allow such action to be completed. The Company's obligation to
deliver Common Stock is also subject to the satisfaction of all applicable tax
withholding requirements, which shall be satisfied by the remittance by the
Executive to the Company of the required taxes prior to the delivery of the
Common Stock or in such other reasonable manner as may be acceptable to the
Company.
6. NON-TRANSFERABILITY OF OPTION. This Agreement is personal and the
rights granted hereunder may not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise), except that
the Option may be transferred to the Company or to the Executive's heirs or
estate upon the Executive's death, and may be exercised in accordance with its
terms by such transferees. Upon any transfer, assignment, pledge or
hypothecation in violation hereof, the Option shall, without any further action
on the part of the Company, become null and void.
7. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement shall
modify the Executive's employment status with the Company. Further, nothing
herein guarantees the Executive's employment for any specified period of time.
8. NO RIGHTS AS A STOCKHOLDER. The Executive shall have no rights as a
stockholder with respect to any shares of Common Stock which are subject to the
Option until the Executive has satisfied all legal and contractual obligations
which are conditions precedent to the Company's obligation to issue shares of
Common Stock that are subject to the Option and a certificate therefor is duly
issued and delivered to the Executive.
9. INVESTMENT REPRESENTATIONS AND LEGEND. The following two paragraphs
shall be applicable if, on the date of exercise of this option, the Common Stock
to be purchased pursuant to such exercise has not been registered under the
Securities Act of 1933, as amended, and under applicable state securities laws,
and shall continue to be applicable for so long as such registration has not
occurred:
- 3 -
(A) The Executive hereby agrees, warrants and represents that he
will acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The Executive further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of the Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to the Company to the effect that the
proposed transaction will be exempt from such registration. The Executive shall
execute such instruments, representations, acknowledgments and agreements as the
Company may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(B) The certificates for Common Stock to be issued to the Executive
hereunder shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable state
securities laws. The shares have been acquired for investment and may
not be offered, sold, transferred, pledged or otherwise disposed of
without an effective registration statement under the Securities Act of
1933, as amended, and under any applicable state securities laws or an
exemption from such registration requirements."
The foregoing legend shall be removed upon an opinion of counsel acceptable to
the Company that said registration is no longer required.
The sole purpose of the agreements, warranties, representations and
legend set forth in the two immediately preceding paragraphs is to prevent
violations of the Securities Act of 1933, as amended, and any applicable state
securities laws.
10. CONDITIONS PRECEDENT TO EXERCISE OF THE OPTION. Notwithstanding
anything to the contrary contained herein, this Option is not exercisable until
all the following events occur and during the following periods of time:
(A) During any period of time in which the Company deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause the Company to be legally obligated to
issue or sell more shares than the Company is legally entitled to issue or sell.
(B) Until the Executive has paid or made suitable arrangements to
pay (which may include payment through the surrender of Common Stock, unless
prohibited by the Board) (i) all federal, state and local income tax withholding
required to be withheld by the Company in connection with the option exercise
and (ii) the employee's portion of other federal, state and local payroll and
other taxes due in connection with the option exercise.
- 4 -
11. PROVISIONS FOLLOWING A TERMINATION OF EMPLOYMENT. If, prior to the
exercise of this Option, the Executive's employment with the Company is
terminated by the Executive for any reason (other than as a result of the
Executive's death or Disability), or by the Company with Cause, any and all
unvested shares of Common Stock shall immediately and without further action by
the Company or the Executive be returned to the Company.
12. MISCELLANEOUS.
(A) This Agreement constitutes the final and entire agreement with
respect to the matters contemplated hereby and replace and supercede all other
agreements and understandings relating hereto. This Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision hereof shall be prohibited or invalid under any such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating or nullifying the remainder of such provision
or any other provisions of this Agreement.
(B) Except as provided herein, this Agreement may not be amended or
modified except in a writing signed by the Company and the Executive. No waiver
of this Agreement or any provision hereof shall be binding upon the party
against whom enforcement of such waiver is sought unless it is made in writing
and signed by or on behalf of such party. The waiver by either party of a breach
of any provision of this Agreement by the other party shall not operate and be
construed as a waiver or a continuing waiver by that party of the same or any
subsequent breach of any provision of this Agreement by the other party. No
delay or omission by any party in exercising any right under this Agreement
shall operate as a waiver of that or any other right.
(C) All notices under this Agreement shall be sent by certified
mail, return receipt requested, or by recognized overnight delivery service, or
delivered by hand (i) if to the Company, to 0000 X. Xxxxxxxxxx Xxxx, Xxxxx 0000,
Xxxxxxxx 0, Xxxxx, XX 00000 Attn: Board of Directors, or, (ii) if to the
Executive, at the Executive's address set forth below or at such other address
as may be designated in writing by either of the parties to one another in
accordance with this Section 12.
(D) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
(E) For the purposes of this Agreement, when from the context it
appears appropriate, each term stated either in the singular or the plural shall
include the singular and the plural and pronouns stated either in the masculine,
the feminine or the neuter shall include the masculine, the feminine and the
neuter.
(F) This Agreement may be executed in counterparts, including
counterpart signature pages and counterparts by facsimile, each of which taken
together shall be deemed an original, but all of which shall constitute one and
the same instrument. The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
- 5 -
(G) The acquisition of the Common Stock pursuant to this Option may
result in adverse tax consequences. THE EXECUTIVE SHOULD CONSULT WITH HIS OR HER
TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE COMMON STOCK
SUBJECT TO THIS OPTION.
[ The remainder of this page is intentionally left blank. ]
- 6 -
IN WITNESS WHEREOF, this Option has been executed as of the date set forth
above.
SYNOVA HEALTHCARE GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------
Chief Operating Officer
The undersigned Executive hereby accepts this Option and agrees to
the terms and conditions thereof as of the date hereof.
/s/ Xxxxxxx X. Xxxx
----------------------------------
Xxxxxxx X. Xxxx
ADDRESS:
0000 Xxxxxxxxxx Xxxxx
----------------------------------
Xxxxxxx Xxxxxx, XX 00000
----------------------------------
EXHIBIT A
----------
VESTING SCHEDULE
The stock options will vest upon the Company meeting certain
performance goals, as follows: (i) if the Company and its subsidiaries (on a
consolidated basis) have gross revenues of at least $9,400,000 for fiscal year
2005, 187,500 shares shall vest and become available upon exercise; and (ii) if
the Company and its subsidiaries (on a consolidated basis) have gross revenues
of at least $27,000,000 for fiscal year 2006, an additional 187,500 shares shall
vest and become available upon exercise (such sales targets for fiscal years
2005 and 2006 hereafter referred to as the "Sales Targets"). If the gross
revenues of the Company and its subsidiaries (on a consolidated basis) in either
of 2005 or 2006 are less than the applicable Sales Target, but at least 80% of
the applicable Sales Target, then a pro rata number of shares (based on the
portion of the applicable Sales Target that was met for such year) shall vest.
