RAINBOW BRIDGE SERVICES. INC.
OPTION AGREEMENT #2
DATED AUGUST 22, 1997
RECITALS
WHEREAS, The Xxxxxxxxx Group, Inc. (the "Holder") has an option no. 2
(the "ACC Option") to purchase 2% of the common stock of American Custom
Components, a California corporation, ("ACC") at a price of $.01 per share;
and
WHEREAS, the terms of such option gives Holder certain anti-dilution
rights which are not thought to be beneficial in the event of public
financing; and
WHEREAS, concurrently herewith, ACC is entering into an Agreement and
Plan of Reorganization with Rainbow Bridge Services, Inc. a public
corporation, (the "Company"), and the Company, ACC and the Holder wish to
provide for the mutually satisfactory conversion of the ACC Options (with
anti-dilution rights) into an option to purchase Company common stock, on the
premise that anti-dilution rights will only extend up to the first 10,000,000
shares of the Company common stock outstanding.
NOW THEREFORE, in consideration of the foregoing, the Company hereby
grants to Holder a option (the "Option") to purchase 200,000 shares of the
Company's Common Stock (the "Shares") at the purchase price and on the terms
set forth herein. The Holder agrees that an acceptance hereof any ACC Option
is terminated.
1. EXERCISE.
(a) PURCHASE PRICE. This Option, or any portion hereof is
exercisable at a purchase price of $0.01 per Share (the "Purchase Price").
(b) TIME OF EXERCISE. Subject to Section 2(c), this Option may
be exercised in whole or in part (but not as to a fractional shares) at the
office of the Company, at any time or from time to time, commencing on the
date first written above, provided, however, that this Option shall expire
and be null and void if not exercised in the manner herein provided, by 5:00
p.m., local time, three years from the date of this Option (the "Expiration
Date").
(c) MANNER OF EXERCISE. This Option is exercisable at the
Purchase Price, payable, in cash or by check, to the order of the Company,
subject to adjustment as provided in Section 2 hereof. Upon surrender of this
Option, or a portion hereof, with the annexed Subscription Form duly
executed, together with parent of the Purchase Price for the Shares purchased
(and any applicable transfer taxes) at the Company's principal executive
offices, the Holder shall be entitled to receive a certificate or
certificates for the Shares so purchased.
(d) DELIVERY OF STOCK CERTIFICATES. As soon as practicable, but
not exceeding 30 days, after complete or partial exercise of this Option, the
Company, at its expense, shall cause to be issued in the name of the Holder
(or upon payment by the Holder of any applicable transfer taxes, the Holder's
assigns) a certificate or certificates for the number of fully paid and
non-assessable Shares to which the Holder shall be entitled upon such
exercise, together with such other stock or securities or property or
combination thereof to which the Holder shall be entitled upon such exercise,
determined in accordance with Section 2 hereof.
(e) RECORD DATE OF ISSUANCE OF SHARES. Irrespective of the date
of issuance and delivery of certificates for any stock or securities issuable
upon the exercise of this Option, or any portion hereof, each person
(including a corporation or partnership) in whose name any such certificate
is to be issued shall for all purposes be deemed to have become the holder of
record of the stock or other securities represented thereby immediately prior
to the close of business on the date on which a duly executed Subscription
Form containing notice of exercise of this Option, or any portion hereof, and
payment of the Purchase Price is received by the Company.
2. ADJUSTMENTS.
(a) ADJUSTMENT FOR SUBDIVISIONS, COMBINATIONS OR DIVIDENDS. In
case the Company shall, at any time or from time to time, subdivide or
combine the outstanding shares of Common Stock or declare a dividend payable
in Common Stock, the exercise price of this Option in effect immediately
prior to the subdivision, combination or record date for such dividend
payable in Common Stock shall forthwith be proportionately increased, in the
case of combination, or decreased, in the case of subdivision or dividend
payable in Common Stock, and each share of Common Stock purchasable upon
exercise of the Option shall be changed to the number determined by dividing
the then current exercise price by the exercise price as adjusted after the
subdivision, combination or dividend payable in Common Stock.
(b) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Company, at any time or from time to time, makes or fixes a record
date for the determination of holders of Common Stock, entitled to receive a
dividend or other distribution payable in securities of the Company, other
than shares of Common Stock, then and in each such event provisions shall be
made so that the Holder shall receive upon exercise of the Option, or any
portion hereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Company which the
Holder would have received had its Option, or any portion hereof, been
exercised into common Stock on the date of such event and had it thereafter,
during the period from the date of such event to and including the date of
exercise, retained such securities receivable by it as aforesaid during such
period, subject to all other adjustments called for during such period under
this Section 2 with respect to the rights of the Holder of the Option.
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(c) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If the Common Stock issuable upon the exercise of the Option, or any portion
hereof, is changed into the same or a different number of shares of any class
or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock
dividend or a reorganization, merger, consolidation or sale of assets,
provided for elsewhere in this Section 2), then and in any such event the,
Holder shall have the right thereafter, upon exercise of the Option, or any
portion hereof, to receive the kind and amount of stock and other securities
and property receivable upon such recapitalization, reclassification or other
change, in an amount equal to the amount that the Holder would have been
entitled to had the Holder exercised the Option, or any portion hereof,
immediately prior to such recapitalization, reclassification or other change,
but only to the extent the Option, or any portion hereof, is actually
exercised, all subject to further adjustment as provided herein.
(d) REORGANIZATIONS. MERGERS. CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time there is a capital reorganization
of the Common Stock (other than a subdivision, combination, recapitalization,
reclassification or exchange of the Common Stock provided for elsewhere in
this Section 2) or merger or consolidation of the Company with or into
another corporation, or a sale of all or substantially all of the Company's
properties and assets to any other person then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so
that the Holder shall thereafter be entitled to receive, upon exercise of the
Option, or any portion hereof, (and only to the extent the Option is
exercised), the number of shares of stock or other securities or property of
the Company, or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock, or other
securities, deliverable upon the exercise of this Option, or any portion
hereof, would otherwise have been entitled on such capital reorganization,
merger, consolidation, or sale.
3. RESTRICTION ON TRANSFER.
(a) The Holder, by its acceptance hereof, represents, warrants,
covenants and agrees that (i) the Holder has knowledge of the business and
affairs of the Company, and (ii) this Option and the Shares issuable upon the
exercise of this Option, or any portion hereof, are being acquired for
investment and not with a view to the distribution hereof, and that absent an
effective registration statement under the Securities Act of 1933 ("Act"),
covering the disposition of this Option, or any portion hereof, or the Shares
issued or issuable upon exercise of this Option, or any portion hereof, they
will not be sold, transferred. assigned. hypothecated or otherwise disposed
of without first providing the Company with an opinion of counsel (which may
be counsel for the Company) or other evidence, reasonably acceptable to the
Company, to the effect that such sale, transfer, assignment, hypothecation or
other disposal will be exempt from the registration and prospectus delivery
requirements of the Act. The Holder consents to the making of a notation in
the Company's records or giving to any transfer agent of the Option or the
Shares an order to implement such restriction on transferability.
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This Option and the Shares issuable upon the exercise of this Option1
or any portion hereof, shall bear the following legend or a legend of similar
import, provided, however, that such legend shall be removed, or not placed
upon the Option or the certificate or other instrument representing the
Shares, as the case may be, if such legend is no longer necessary to assure
compliance with the Act:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION ION OR THE SECURITIES COMMISSION OF
ANY STATE BECAUSE THEY ARE BELIEVED TO BE EXEMPT FROM REGISTRATION
UNDER SECTION 4(2) OF THE ACT. THE SECURITIES ARE "RESTRICTED AND MAY
NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER TEE SECURITIES
ACT OF 1933, AS AMENDED PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.
4. PAYMENT OF TAXES. All Shares issued upon the exercise of this
Option, or any portion hereof, shall be validly issued, fully paid and
non-assessable and the Company shall pay all taxes and other governmental
charges (other than income tax) that may be imposed in respect of the issue
or delivery thereof. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer involved in the
issue of any certificate for Shares in any name other than that of the Holder
surrendered in connection with the purchase of such Shares, and in such case,
the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to
the Company's satisfaction that no tax or other charge is due.
5. RESERVATION OF COMMON STOCK. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the exercise of this Option, or any
portion hereof such number of shares of Common Stock as shall be issuable
upon the exercise hereof. The Company covenants and agrees that, upon
exercise of this Option, or any portion hereof, and payment of the Purchase
Price thereof, all shares of Common Stock issuable upon such exercise shall
be duly and validly issued, fully paid and non-assessable.
6. NOTICES TO HOLDER. Nothing contained in this Option shall be
construed as conferring upon the Holder hereof the right to vote or to
consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter or as having
any rights whatsoever as a shareholder of the Company. All notices, requests,
consents and other communications hereunder shall be in writing and shall be
deemed to have been duly made when delivered or mailed by registered or
certified mail, postage prepaid, return receipt requested:
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(a) If to the Holder, to the address of such Holder as shown on
the books of the Company; or
(b) If to the Company, to ITS address of its principal
executive offices.
7. REPLACEMENT OF OPTION. Upon receipt of evidence reasonably
satisfactory to the Company of the ownership of and the loss, theft,
destruction or mutilation of this Option and (in case of loss, theft or
destruction) upon delivery of an indemnity agreement in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender
and cancellation of the mutilated Option, the Company will execute and
deliver, in lieu thereof, a new Option of like tenor.
8. REGISTRATION. The Company agrees to file a Form S-B Registration
Statement registering the Shares underlying the Options within 6 months of
the date hereof. In addition, the Company grants the following additional
registration rights:
(a) The Company shall advise the Holder or its transferee,
whether the Holder holds the Option or has exercised the Option and holds any
Shares underlying the Options, by written notice ten days prior to the filing
of any Registration Statement or post-effective amendment thereto under the
Act covering any securities of the Company, for its own account or for the
account of others, and will until August 31, 2001, upon the request of the
Holder, include in any such post-effective amendment or registration
statement, such information as may be required to permit a public offering of
the Shares; provided, however, that if the managing underwriter of the
offering believes that the inclusion of the shares would materially adversely
effect the commercial feasibility of the offering. The Company shall not be
obligated to include the shares in such offering. The Company shall supply
prospectuses and such other documents as the Holder may request in order to
facilitate the public sale or other disposition of the Shares, use its best
efforts to register and qualify any of the Shares for sale in such states as
such Holder designates and do any and all other acts and things which may be
necessary or desirable to enable such Holders to consummate the public sale
or other disposition of the Shares. The Holder shall furnish information and
indemnification as set forth in Section 9.
(b) If any 50% holder (as defined below) shall give notice to
the Company at any time to the effect that such Holder desires to register
under the Act the Common Stock underlying the Option under such circumstances
that a public distribution (within the meaning of the Act) of any such
securities will be involved then the Company will promptly. but no later than
120 days after receipt of such notice, file a registration statement pursuant
to the Act, to the end that the Shares may be publicly sold under the Act as
promptly as practicable thereafter and the Company will use its best efforts
to cause such registration to become and remain effective (including the
taking of such steps as are necessary to obtain removal of any stop order);
provided, that such holder shall furnish the Company with appropriate
information in connection therewith as the Company may reasonably request in
writing. The 50% holder may, at its option, request the filing of a
registration statement under the Act on one occasion.
The cost of the registration shall be borne by the Company.
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9. INDEMNIFICATION. The Distributing Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed said registration statement and such amendments and supplements thereto,
each person, if any, who controls the company (within the meaning of the Act)
against any losses, claims, damages or liabilities to which the Company or any
such director, officer or controlling person may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities arise out
of or are based upon any untrue or alleged untrue statement of any material fact
contained in said registration statement, said preliminary prospectus, said
final prospectus, or said amendment or supplement, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in said registration statement, said preliminary prospectus, said final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Distributing Holder for use in the
preparation thereof; and will reimburse the Company or any such director,
officer or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action.
10. SUCCESSORS. All the covenants, agreements, representations and
options contained in this Option shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
11. CHANGE; WAIVER. Neither this Option nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
12. HEADINGS. The section headings in this Option are inserted for
purposes of convenience only and shall have no substantive effect.
13. LAW GOVERNING. This Option shall for all purposes be construed and
enforced in accordance with, and governed by the internal laws of the State
of California, without giving effect to principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Option to be signed by
its duly authorized officer and this Option to be dated as of the date first
above written.
RAINBOW BRIDGE SERVICES, INC.
By: /s/ Xxxxxx Xxxx Walk
-----------------------------------
Name: Xxxxxx Xxxx Walk
Title: President
Accepted by Holder as of the date written
above:
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