OPTION AGREEMENT
SELF-HEATING CONTAINER CORPORATION OF CALIFORNIA
a California corporation
MANHATTAN WEST, INC.
a California corporation
OPTION AGREEMENT
This OPTION AGREEMENT ("Agreement"), is entered into and effective as of
July 15, 1996, ("Execution Date") by and between Self-Heating Container
Corporation of California, a California corporation ("SHC"or the "Company"), and
Manhattan West, Inc., a California corporation ("MWI").
ARTICLE 1
1. OPTION AGREEMENT
1.1 GRANT OF OPTION. Execution of this Agreement by both parties and
payment of the purchase price of the option shall create a binding agreement
whereby SHC shall grant MWI an option (the "Option") to purchase Nineteen
Thousand Three Hundred Forty (19,340) common shares of SHC (the "Shares") for
the total aggregate price of One Hundred Dollars ($100.00) ("Option Exercise
Price"), on the terms and conditions stated herein. MWI has no obligation to
exercise the Option.
1.2 OPTION PURCHASE CONSIDERATION. As consideration for the granting
of the Option described herein, MWI shall enter into a consulting agreement
with SHC of even date hereof ("Consulting Agreement"), and has paid to SHC the
sum of Ten Dollars ($10.00) the receipt and sufficiency of which is hereby
acknowledged by SHC.
1.3 TERM OF OPTION. The term of the Option ("Option Term") shall
commence on the Execution Date and unless the Option is exercised, it shall
expire at 5:00 p.m. Pacific Time eighteen (18) months from the Execution Date
("Option Exercise Deadline").
1.4 TERMINATION OF OPTION. If MWI fails to timely exercise the Option
as provided for in Section 2.1 herein before the Option Exercise Deadline, the
Option granted herein shall immediately terminate, and this Agreement shall have
no further force or effect.
ARTICLE 2
2. CONDITIONS PRECEDENT TO EXERCISE AND RIGHTS OF MWI
2.1 CONDITIONS PRECEDENT TO EXERCISE OF OPTION. The right of MWI to
exercise the Option and acquire any of the Shares is subject to the occurrence
of the following conditions precedent prior to or on the Option Exercise
Deadline:
1) Receipt by SHC of gross proceeds of not less than Three
Million Two Hundred Thousand Dollars ($3,200,000.00) from the successful
completion of an initial public offering of SHC securities pursuant to a firm
commitment underwriting upon such terms and conditions and with an underwriter
which are all reasonably acceptable to SHC in its sole discretion; and
1.4 2) Delivery to SHC by MWI of written notice of exercise of
the Option; and
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3) Payment to SHC by MWI of the Option Exercise Price of One
Cent per share ($193.40); and
4) Execution of such other documents in connection with the
exercise of the Option and issuance of the Shares as may be requested by SHC in
its reasonable discretion.
2.2 RIGHTS OF MWI. Prior to exercise of the Option, MWI shall not, by
virtue hereof, be entitled to any rights as a shareholder of SHC, either at law
or in equity. The rights of MWI are limited to those expressed in this Option
Agreement and are not enforceable against SHC except to the extent set forth
herein.
ARTICLE 3
3. REPRESENTATIONS AND WARRANTIES OF MWI
3.1 REPRESENTATIONS AND WARRANTIES OF MWI. MWI hereby represents and
warrants to, and agrees with, SHC as follows:
(a) This Option is being acquired for its own account, for
investment purposes only and not with a view to the resale or distribution of
any part thereof. MWI has no present intention of selling, granting any
participation in, or otherwise distributing the Option. MWI by reason of its
business or financial experience, or the business or financial experience of its
professional advisors who are unaffiliated with and not compensated by SHC, and
has the capacity to protect its own interests in connection with entering into
the Consulting Agreement and acquisition of the Option. MWI will not sell,
hypothecate or otherwise transfer the Option except in accordance with
applicable federal and state securities laws.
(b) Prior to its decision to enter into this Option Agreement,
MWI has been furnished with and has carefully reviewed all information regarding
SHC deemed material by MWI. In determining whether to enter into the Consulting
Agreement and acquire this Option, MWI has relied upon its own judgment and that
of its independent advisors.
(c) Prior to MWI entering into the Consulting Agreement and the
acquisition of the Option by MWI, SHC has made available to MWI all documents
and information that MWI has requested relating to SHC, and MWI has asked and
has received satisfactory answers to all questions MWI has relating to SHC.
(d) MWI recognizes SHC is a development stage company, that it
has an accumulated deficit and a working capital deficit, has not generated any
revenue from operations and is not expected to generate any revenue from
operations for some time and perhaps for years, and that proposed development
expenditures may result in substantial and increasing losses over at least the
next year, and possibly much longer. MWI understands investment in SHC
involves substantial risk, and MWI has entered into the Consulting Agreement and
acquired this Option understanding this level of risk, and MWI can afford the
complete loss of its investment.
(e) MWI has carefully considered all documentation and
information provided by SHC, including but not limited to this Option Agreement
and all related documents. SHC specifically disclaims any representations
regarding the legal, tax, or financial consequences of entering into the
Consulting Agreement, and acquisition of and the exercise of this Option, other
than the representation this is a high risk transaction.
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(f) All information which MWI has provided to SHC concerning MWI
and its business and investment experience, and its financial circumstances is
correct as of the date set forth therein, and if there should be any material
adverse change in such information prior to exercise of the Option, MWI will
immediately provide such information to SHC in writing and will promptly send
confirmation of such information to SHC.
(g) MWI's execution, delivery and performance of and under the
Consulting Agreement and this Option Agreement and all documents ancillary
hereto, and the consummation of the transactions contemplated hereby and thereby
have been duly authorized, and MWI is duly authorized to perform the services
referenced in the Consulting Agreement, and to execute and deliver this Option
Agreement and all other instruments executed and delivered on behalf of MWI in
connection with the issuance in its name of this Option. MWI has not been formed
for the specific purpose of acquiring the Option.
(h) MWI is an "Accredited Investor" as that term is defined in
Code Federal Regulations Section 230.501(a) (Regulation D) promulgated pursuant
to the Securities Act of 1933 (the "Securities Act").
(i) It never has been represented, guaranteed or warranted by any
broker, SHC, any of the officers, directors, shareholders, partners, employees
or agents of SHC or its advisors, or any other persons, whether expressly or by
implication, that the past performance or experience of the management of SHC,
or of any other person, in any way indicates the future results of the ownership
of the Option or of SHC's activities.
(j) MWI acknowledges it understands the meaning and legal
consequences of the representations and warranties contained in this Agreement,
and MWI hereby agrees SHC and each incorporator, officer, director, employee,
agent, legal counsel and controlling person thereof, past, present or future,
may rely on each such representations and warranties.
(k) Neither this Option nor any of MWI's interests herein shall
be assignable or transferable by MWI in whole or in part except by operation of
law.
(l) MWI is not purchasing the Option as a result of or subsequent
to any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
presented at any seminar, or any solicitation of a subscription by a person not
previously known to MWI.
(m) MWI's investment in this Option is not material when compared
to its total financial capacity.
(n) The foregoing representations and warranties shall be true
and accurate as of the date of the acceptance hereof by SHC and shall survive
the execution and delivery of this Option Agreement, the exercise of the Option,
and the issuance of the Shares.
(o) MWI shall indemnify and hold harmless SHC and/or any of its
officers, employees, directors, counsel, or control persons of any such entity
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any actual or
alleged misrepresentation or misstatement of facts or omission to represent or
state facts made by MWI to SHC concerning itself or its
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financial position in connection with the Option Agreement, which is not
remedied by timely notice to SHC as provided above, against losses, liabilities
and expenses for which SHC or any of its respective officers, employees, agents,
directors, legal counsel or control persons of any such entity which have not
otherwise been reimbursed (including attorneys' fees, judgments, fines and
amounts paid in settlement) as actually and reasonably incurred by such person
or entity in connection with such action, suit or proceeding.
(p) MWI agrees to provide SHC with payment in full by certified
funds or wire transfer for the Option Exercise Price, written notice of exercise
of the Option, and acknowledges the receipt and acceptance by SHC of such
documentation shall be a condition precedent to the exercise of the option and
the issuance of the shares of SHC.
(q) MWI understands the Option and the Shares are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from SHC in a transaction not involving a public offering,
and under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. In this connection, MWI acknowledges it is familiar with the
Securities and Exchange Commission ("SEC") Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.
(r) Without in any way limiting the representations set forth
above, MWI further agrees not to make any disposition of all or any portion of
the Option or the Shares unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition, and such disposition is
made in accordance with such registration statement; or
(ii) (a) MWI shall have notified SHC of the proposed
disposition and shall have furnished SHC with a detailed statement of the
circumstances surrounding the proposed disposition; and (b) MWI shall have
furnished SHC with an opinion of counsel, reasonably satisfactory to SHC and its
counsel, that such disposition will not require registration of such Option
and/or Shares under the Securities Act.
(s) It is understood the certificates evidencing the Shares may
bear one or all of the following legends:
(i) "These securities have not been registered under the
Securities Act. They may not be sold, offered for sale, pledged or hypothecated
in the absence of a registration statement in effect with respect to the
securities under the Securities Act or an opinion of counsel satisfactory to the
Company and its counsel that such registration is not required.
(ii) Any legend required by the laws of the State of
California or other jurisdiction, including any legend required by the
California Department of Corporations and Section 418 of the California
Corporations Code.
(t) Any legend endorsed on a certificate pursuant to Section (s)
hereof shall be removed (i) if the Option and/or Shares represented by such
certificate shall have been effectively registered under the Securities Act and
any applicable state securities laws, or otherwise have been lawfully sold in a
public transaction; (ii) if the Option and/or Shares may be transferred in
compliance with Rule 144(k) promulgated under the Securities Act; or (iii) if
MWI shall have provided SHC with an opinion
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of counsel, in form and substance acceptable to SHC and its counsel from
attorneys reasonably acceptable to SHC and its counsel, stating a public sale,
transfer, or assignment of the Option and/or Shares may be made without such
registration.
Any legend endorsed upon a certificate pursuant to Section
(s) hereof shall be removed if SHC receives an order of the appropriate state
authority authorizing such removal or if MWI provides SHC with an opinion of
counsel, in form and substance acceptable to SHC and its counsel and from
attorneys reasonably acceptable to SHC and its counsel, stating that such
state legend may be removed.
MWI further covenants it will not transfer the Option and/or
Shares in violation of the Securities Act, the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), or the rules of the Commission
promulgated thereunder, including Rule 144 under the Securities Act. Further,
MWI agrees MWI will not transfer any of the Option and/or Shares in a public
offering without SHC's prior consent, even if MWI is otherwise permitted to
transfer them pursuant to Rule 144(k), and MWI agrees to execute a lock-up
agreement with the Company and any underwriter on terms requested by the Company
or the Underwriter in connection with a public offering of SHC securities
agreeing not to sell, assign, or transfer the Option and/or Shares except in
accordance with the lock-up agreement.
ARTICLE 4
4. COVENANTS REGARDING THE OPTION AND THE SHARES
4.1 ANTI-DILUTION PROVISIONS. The number and kind of securities
purchasable upon the exercise of this Option shall be subject to adjustment from
time to time as follows:
(a) In case SHC shall (i) pay a dividend or make a distribution
on the outstanding common shares payable in common shares; (ii) subdivide the
outstanding common shares into a greater number of shares; (iii) combine the
outstanding common shares into a lesser number of shares; or (iv) issue by
reclassification of the common shares any common shares of SHC, MWI shall
thereafter be entitled, upon exercise, to receive the number and kind of shares
which, if this Option had been exercised immediately prior to the happening of
such event, MWI would have owned upon such exercise and been entitled to receive
upon such dividend, distribution, subdivision, combination, or reclassification.
Such adjustment shall become effective on the day next following the record date
of such dividend or distribution or the day upon which such subdivision,
combination, or reclassification shall become effective.
(b) In case SHC shall consolidate or merge into or with another
corporation, or in case SHC shall sell or convey to any other person or persons
all or substantially all the property of SHC, MWI or its assigns shall
thereafter be entitled, upon exercise, to receive the kind and amount of shares,
other securities, cash, and property receivable upon such consolidation, merger,
sale, or conveyance by a holder of the number of common shares which might have
been purchased upon exercise of this Option immediately prior to such
consolidation, merger, sale, or conveyance, and shall have no other conversion
rights. In any such event, effective provisions shall be made, in the
certificate or articles of incorporation of the resulting or surviving
corporation, in any contracts of sale and conveyance, or otherwise so that, so
far as appropriate and as nearly as reasonably may be, the provisions set forth
herein for the protection of the rights of MWI as the holder of this Option
shall thereafter be made applicable.
(c) No adjustment in the number of common shares which may be
purchased upon exercise of this Option shall be required unless such adjustment
would require an increase or decrease of
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more than 1/25 of a share in the number of shares of the common shares which may
be so purchased; provided, however, that any adjustment which by reason of this
Section 4 is not required to be made shall be carried forward cumulatively and
taken into account in any subsequent calculation. All calculations under this
Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
(d) In the event that at any time, as a result of an adjustment
made pursuant to this Section 4, MWI shall become entitled to receive upon
exercise of this Option cash, property, or securities other than shares, then
references to shares in this Section 4 shall be deemed to apply, so far as
appropriate and as nearly as may be, to such cash, property, or other
securities.
(e) Irrespective of any adjustments in the number or kind of
shares purchasable upon exercise of this Option, the form of Options theretofore
or thereafter issued may continue to express the same price and number and kind
of shares as are stated in this Option.
4.2 OFFICER'S CERTIFICATE. Whenever the number or kind of securities
purchasable upon exercise of this Option shall be adjusted as required by the
provisions of Section 4, SHC shall forthwith file with its Secretary or
Assistant Secretary at its principal office and with its stock transfer agent,
if any, an officer's certificate showing the adjusted number of kind of
securities purchasable upon exercise of this Option determined as herein
provided and setting forth in reasonable detail such facts as shall be necessary
to show the reason for and the manner of computing such adjustments. Each such
officer's certificate shall be made available at all reasonable times for
inspection by MWI, and SHC shall forthwith, after each such adjustment, mail by
certified mail a copy of such certificate to MWI.
4.3 SURVIVAL OF WARRANTIES. The representations and warranties given
by MWI in Article 3 and all obligations hereunder to be performed on or before
the Option Exercise Deadline, shall survive the Execution Date.
4.4 RESERVATION AND STATUS OF SHARES. SHC hereby agrees that at all
times up to the Option Exercise Deadline, there shall be reserved for issuance
and delivery upon exercise of this Option such number of its common shares as
shall be required for issuance and delivery upon exercise of this Option, and
that such shares, when issued in accordance with the terms of this Option, shall
be validly issued, fully paid, and non-assessable.
4.5 LOSS OF OPTION. Upon receipt by SHC of evidence satisfactory to it
of the loss, theft, destruction, or mutilation of this Option, and (in the case
of loss, theft, or destruction) of reasonably satisfactory indemnification and
(in the case of mutilation) upon surrender and cancellation of this Option, SHC
will execute and deliver a new Option, which shall constitute an additional
contractual obligation on the part of SHC, wither or not this Option so lost,
destroyed, stolen, or mutilated shall be at any time enforceable by anyone.
ARTICLE 5
5. GENERAL PROVISIONS
5.1 NOTICE. Notice to either party shall be in writing and either
personally delivered or sent by certified mail, postage prepaid, return receipt
requested, addressed to the party to be notified at the address specified
herein. Any such notice shall be deemed received on the date of personal
delivery to the party (or such party's authorized representative) or two (2)
business days after deposit with United Parcel Service, Federal Express, DHL, or
any other recognized United States overnight carrier.
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SHC'S ADDRESS FOR NOTICE: MWI'S ADDRESS FOR NOTICE:
Xxxxx X. Xxxxxxx Manhattan West, Inc.
SELF-HEATING CONTAINER CORPORATION 0000 Xxxxxx Xxx, Xxxxx 000
00000 Xxxxxxxxx Xxxxx, Xxxxx 000 Xxxxx Xxxxxx, XX 00000
Xxxxx, XX 00000 Attn: Xxxxxxx X. Xxxx
Facsimile (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Either party may change its address for notice by delivering written notice to
the other party as provided herein.
5.2 HEADINGS. The captions and paragraph headings used in this
Agreement are inserted for convenience of reference only and are not intended to
define, limit or affect the interpretation or construction of any term or
provision hereof.
5.3 GENDER, NUMBER. As used herein, the singular shall include the
plural and the masculine shall include the feminine, wherever the context so
requires.
5.4 EXHIBITS. All exhibits referred to herein are attached hereto and
incorporated by reference.
5.5 COUNTERPARTS. This Option Purchase Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
5.6 ENTIRE AGREEMENT. This Agreement, together with all exhibits
attached hereto and other agreements expressly referred to herein, constitutes
the entire agreement between the parties with respect to the purchase of the
Option and the underlying common stock. All prior or contemporaneous
agreements, understandings, representations, warranties and statements, oral or
written, are superseded.
5.7 NO OTHER INDUCEMENT. The making, execution and delivery of this
Agreement by the parties hereto has been induced by no representations,
statements, warranties or agreements other than those expressed herein.
5.8 MODIFICATION, WAIVER. No modification, waiver, amendment or
discharge of this Agreement shall be valid unless the same is in writing and
signed by both MWI and SHC.
5.9 SEVERABILITY. If any term, provision, covenant or condition of
this Option Purchase Agreement and Option Agreement is held to be invalid, void
or otherwise unenforceable to any extent by any court of competent jurisdiction,
the remainder of this Agreement shall not be affected thereby, and each term,
provision, covenant or condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
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5.10 TIME. Time is of the essence of this Agreement.
5.11 GOVERNING LAW AND VENUE. This Agreement shall be governed,
construed and enforced in accordance with the laws of the State of California.
Any litigation which may be initiated by either party in connection with this
Agreement shall take place in the appropriate court located in San Diego County,
California.
5.12 FURTHER ASSURANCES. The parties agree to take such further action
and execute such documents and instruments as may reasonably be required in
order to more effectively carry out the terms of this Agreement and the
intentions of the parties.
5.13 ATTORNEYS' FEES. If either party commences legal proceedings for
any relief against the other party arising out of this Agreement, the successful
or prevailing party (including a party who receives substantially the relief
sought, whether by voluntary compliance, settlement, dismissal, summary
judgment, judgment or otherwise) shall be entitled to recover from the other
party its legal costs and expenses, including, but not limited to, reasonable
attorneys' fees, expert witness fees and disbursements as determined by the
court.
5.14 PRESUMPTION. This Agreement or any section hereof shall not be
construed against any party due to the fact that said Agreement or any section
hereof was drafted by said party.
5.15 FINDERS FEES. Each party hereby represents that it is unaware of
any finders fees or commissions which are or might become due in connection with
this Option Agreement and the Option Purchase Agreement. Each party agrees to
indemnify, hold harmless and defend the other party from and against any
obligation or liability to pay any such commission or compensation arising from
the act or agreement of the indemnifying party.
IN WITNESS THEREOF, the parties have executed this Agreement as reflected by
their following signatures:
SELF-HEATING CONTAINER CORPORATION OF
CALIFORNIA
A CALIFORNIA CORPORATION
BY: /s/ Xxxxx X. Xxxxxxx
---------------------------------
XXXXX X. XXXXXXX
TITLE: PRESIDENT
MANHATTAN WEST, INC.
A CALIFORNIA CORPORATION
BY: /s/ Xxxxx X. Xxxx
---------------------------------
XXXXX XXXX
TITLE: PRESIDENT
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