EX-10
Employment Agreement
55
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of November 16, 1999,
between XXXXXX.XXX, Inc., a Delaware corporation (the "Company"), and XXXXXX
XXXXXX (the "Executive")
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to accept such employment, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties set forth herein, and for other good and valuable consideration,
it is hereby agreed as follows:
Employment. The Company hereby agrees to employ the Executive, and the
Executive hereby accepts such employment, upon the terms and conditions set
forth herein.
Term. Subject to the provisions of Section 8 hereof, the term of the
Executive's employment under this Agreement (the "Term") shall commence on the
date hereof (the "Commencement Date") and shall end on the third anniversary of
the Commencement Date; provided, however, that at the end of the Term and each
subsequent anniversary thereafter (each, a "Renewal Date"), the Term shall be
automatically extended by one (1) additional year unless, at least one hundred
twenty (120) days prior to any such Renewal Date, the Company shall deliver to
the Executive or the Executive shall deliver to the Company written notice that
the Term will not be further extended.
Position and Duties.
(a) During the Term, the Executive shall serve as the President, Chief Executive
Officer and as a Director of the Company and shall have such duties consistent
with such offices as from time to time may be prescribed by the Board of
Directors of the Company (the "Board").
(b) During the Term, the Executive shall perform and discharge the duties that
may be assigned to him by the Board from time to time in accordance with this
Agreement, and the Executive shall devote his best talents, efforts and
abilities to the performance of his duties hereunder.
(c) During the Term, the Executive shall perform his duties hereunder on a
substantially full-time basis. Notwithstanding the foregoing, the Executive
shall be permitted to engage in the same or similar outside business, investment
and/or other activities as the Executive is engaged on the date hereof,
including (i) serving as Of Counsel to Xxxx Marks & Xxxxx LLC or another law
firm, (ii) working as a consultant to Xxxxxxxx Capital Management, Inc. or other
money management firm, and (iii) service on charitable or other boards of
directors including Variety - The Children's Charity; provided that such
activities do not materially interfere with the Executive's performance of his
duties hereunder.
56
Compensation. For the Executive's services hereunder, the Company shall
pay the Executive an initial annual salary (as the same shall be increased from
time to time, the "Base Salary") of $200,000, subject to such increases or
bonuses as the Board shall authorize, which shall be payable semi-monthly in
accordance with the customary payroll practices of the Company.
Benefits. During the Term, the Company shall provide the Executive
with the following benefits:
(a) Stock Options. The Executive is hereby granted non-qualified options (the
"Options") to purchase 1,955,750 shares of the Company's common stock, $.001 par
value per share, as follows: 977,875 shares at $1.30 per share, 488,938 shares
at $1.50 per share, and 488,937 shares at $1.75 per share. Except as set forth
in Section 8 hereof, providing for the earlier vesting of the Options, one-third
of the Options shall vest on the date hereof, one-third of the Options shall
vest on the first anniversary of the date hereof, and one-third of the Options
shall vest on the second anniversary of the date hereof. For the purposes
hereof, Options shall be deemed to vest in order of ascending exercise price.
All Options granted hereunder that are vested shall be exercisable for a period
constituting the greater of the Term hereof or five years. The provisions hereof
shall be incorporated into a Stock Option Agreement to be entered into between
the Executive and the Company as of the date hereof.
(b) Medical and Health Insurance Benefits. The Company shall, at its own
expense, provide the Executive and his eligible dependents with medical, health
and dental insurance coverage generally provided by the Company to its other
executive employees.
(c) Life Insurance. The Company will reimburse the Executive for such premium
expense, not in excess of standard insurance rates, that the Executive may incur
in maintaining term life insurance on the Executive's life with a face value of
up to $1 million.
(d) 401(k) Plan. If the Company establishes a 401(k) Plan or other retirement or
pension plan, the Executive shall be entitled to participate in such plan in
accordance with its terms and conditions.
(e) Disability and Accident Insurance Benefits. The Company shall provide the
Executive with long term disability insurance (providing 100% Base Salary
replacement coverage), business travel accident and accidental death and
dismemberment insurance coverage.
(f) Other Benefits. The Company shall make available to the Executive any and
all other employee or fringe benefits (in accordance with their terms and
conditions) which the Company may generally make available to its other
executive employees.
Reimbursement of Expenses. During the Term, the Company shall pay or
reimburse the Executive for all reasonable travel, entertainment and other
business expenses incurred or paid by the Executive in the performance of his
duties hereunder upon presentation of expense statements and/or such other
supporting information as the Company may reasonably require of the Executive.
57
Vacations. The Executive shall be entitled to four (4) weeks of paid
vacation during each full calendar year of the Term (and a pro rata portion
thereof for any portion of the Term that is less than a full calendar year).
Unused vacation for one year may be carried over to the next successive year.
Termination. The employment hereunder of the Executive may be
terminated by the Company prior to the expiration of the Term only in the
manner described in this Section 8.
(a) Termination by the Company for Good Cause. The Company shall have the right
to immediately terminate the employment of the Executive for Good Cause (as such
term is defined herein) by written notice to the Executive specifying the
particulars of the circumstances forming the basis for such Good Cause.
(b) Termination Upon Death. The employment of the Executive hereunder shall
terminate automatically upon his death.
(c) Voluntary Resignation by the Executive. The Executive shall have the right
to voluntarily resign his employment hereunder for other than Good Reason (as
such term is defined herein) by written notice to the Company. In such event,
for a period of six months following such resignation, the Executive shall not,
in the geographic area in which the Company conducts its business (i.e., New
York City), directly or indirectly, as a partner, officer, employee, director,
stockholder, proprietor, other equity owner, consultant, representative, agent
or otherwise, own or operate any business or Person, or otherwise become or be
interested in, or associate with or render assistance to, any Person (other than
the Company), engaged in a business which is otherwise in direct competition
with the business of the Company. The foregoing shall not, however, prohibit the
Executive from making passive investments.
(d) Termination by the Company Without Good Cause. The Company shall have the
right to terminate the Executive's employment hereunder without Good Cause upon
ninety (90) days prior written notice to the Executive.
(e) Termination Upon Disability. If the Executive becomes physically or mentally
disabled (a "Disability") during the Term so that he is unable to perform the
services required of him pursuant to this Agreement for a period of three
successive months, or an aggregate of four months in any twelve-month period
(the "Disability Period"), the Company may, at its option, terminate the
Executive's employment hereunder by giving written notice thereof to the
Executive. During the Disability Period, the Executive shall continue to receive
his full compensation and other benefits provided herein.
(f) Resignation by the Executive for Good Reason. The Executive shall have the
right to terminate his employment for Good Reason by written notice to the
Company specifying the particulars of the circumstances forming the basis for
such Good Reason.
58
(g) Termination Date. The "Termination Date" is the date as of which the
Executive's employment with the Company terminates. Any notice of termination
given pursuant to the provisions of this Agreement shall specify the Termination
Date
(h) Certain Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(i) "Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture, entity,
court or government (or political subdivision or agency thereof).
(ii) "Change of Control" with respect to the Company, means the occurrence of
any of the following: (A) the acquisition directly or indirectly (in one or more
related transactions) by any Person (other than the Executive, Cakewalk LLC or
Dylan LLC), or two or more Persons (other than the Executive, Cakewalk LLC or
Dylan LLC) acting as a group, of beneficial ownership (as that term is defined
in Rule l3d-3 under the Securities Exchange Act of 1934) of more than 20% of the
outstanding capital stock of the Company entitled to vote for the election of
directors ("Voting Shares"); provided, however, that the consummation of the
transactions contemplated in that certain Contribution Agreement, dated as of
October 29, 1999, between Cakewalk LLC and the Company shall not constitute a
Change of Control for purposes of this Agreement; (B) the merger or
consolidation of the Company with one or more other corporations as a result of
which the holders of the outstanding Voting Shares of the Company immediately
before the merger hold less than 80% of the Voting Shares of the surviving or
resulting corporation; (C) the sale of all or substantially all of the assets of
the Company; (D) the Company or any of its shareholders enters into any
agreement providing for any of the foregoing and the transaction contemplated
thereby is ultimately consummated; or (E) individuals who as of the date of this
Agreement constitute the Board of Directors of the Company cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of a majority of the directors then still in office who were
directors as of the date of this Agreement.
(iii) "Good Cause" shall exist if, and only if, the Executive (A) willfully or
repeatedly fails in any material respect to perform his obligations hereunder as
provided herein, provided that such Good Cause shall not exist unless the
Company shall first have provided the Executive with written notice specifying
in reasonable detail the factors constituting such material failure and such
material failure shall not have been cured by the Executive within 30 days after
such notice or such longer period as may reasonably be necessary to accomplish
the cure; or (B) has been convicted of a crime which constitutes a felony under
applicable law or has entered a plea of guilty or nolo contendere with respect
thereto.
(iv) "Good Reason" means the occurrence of any of the following events:
(A) the assignment to the Executive of any duties inconsistent in any material
respect with the Executive's then position (including status, offices, titles
and reporting relationships), authority, duties or responsibilities, or any
other action or actions by the Company which when taken as a whole results in a
significant diminution in the Executive's position, authority, duties or
responsibilities, excluding for this purpose any isolated, immaterial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
59
(B) a material breach by the Company of one or more provisions of this
Agreement, provided that such Good Reason shall not exist unless the Executive
shall first have provided the Company with written notice specifying in
reasonable detail the factors constituting such material breach and such
material breach shall not have been cured by the Company within thirty (30) days
after such notice or such longer period as may reasonably be necessary to
accomplish the cure;
(C) the Company requiring the Executive to be based at any location other than
within New York, New York, except for requirements of temporary travel on the
Company's business to an extent substantially consistent with the Executive's
business travel obligations existing immediately prior to the date of this
Agreement;
(D) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; and
(E) a Change of Control of the Company, provided that the Termination Date
occurs no later than one year following such Change of Control.
9. Obligations of Company on Termination. Notwithstanding anything in this
Agreement to the contrary, the Company's obligations upon termination of the
Executive's employment shall be as described in this Section 9, and the
Executive shall not be entitled to any payment or benefit unless specifically
set forth herein.
(a) Obligations of the Company in Case of Termination for Death, Disability or
for Good Cause. Upon termination of the Executive's employment upon death,
disability or for Good Cause, the Company shall have no payment obligations to
the Executive, except for the payment, within sixty (60) days of the Termination
Date (or such shorter period as may be prescribed by law), of any accrued and
unpaid Base Salary and the reimbursement of any unreimbursed expenses, less any
obligations outstanding of the Executive. In the case of death, the Executive's
estate shall have one year from the date of death within which to exercise any
or all vested Options. In the case of disability, the Executive (or his
representatives) shall have a period of ninety days after the event within which
to exercise any or all vested Options.
(b) Obligations of the Company in the Case of Termination Without Good Cause or
Resignation by the Executive for Good Reason or Upon a Change of Control. Upon
termination of Executive's employment by the Company without Good Cause or as a
result of Executive's resignation for Good Reason or upon a Change of Control,
the Company shall provide the Executive with the following:
(i) The greater of (A) the Base Salary otherwise payable to the Executive for
the remaining duration of the current Term, or (B) two times (2x) the
Executive's Base Salary and last year's bonus, if any;
(ii) All Options granted but not yet vested at the time of the Executive's
termination under this subparagraph 9(b) shall be immediately vested and
exercisable;
60
(iii) The Company shall, at its sole expense, provide the Executive (and his
dependents) with coverage under (and in accordance with the terms and conditions
of) the Company's medical and health insurance plans, as in effect from time to
time, for the otherwise remaining duration of the Term; provided that to the
extent such coverage may be unavailable under such medical and health insurance
plans due to restrictions imposed by the insurer(s) under such plans, the
Company shall take such action as may be required to provide equivalent benefits
from other sources;
(iv) The Company shall continue, for the otherwise remaining duration of the
Term, to reimburse the Executive for the cost of any term life insurance on his
life, to the extent provided in Section 6(c) of this Agreement, as though his
employment hereunder had not terminated; and
(v) The Company shall provide to the Executive, during the twelve (12) month
period commencing on the Termination Date, at the Company's expense, executive
outplacement services (commensurate with such services customarily utilized by
similarly situated persons of the Executive's title or position).
10. Excise Taxes. In the event that any payments made and/or benefits
provided to the Executive under this Agreement (including, without limitation,
the Options) (hereinafter called the "Payments") are subject to any excise
taxes, including, without limitation, excise taxes imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") (the "Excise Taxes"),
the Company shall pay the Executive such additional cash payment(s) (hereinafter
collectively called the "Gross Up Payment") such that the net amount that the
Executive would retain after deduction and/or payment of any Excise Taxes on the
Payments, and any interest and/or penalties assessed by the Internal Revenue
Service with respect to the Excise Taxes, and taking into account the tax
consequences of all additional cash payments made by the Company pursuant to
this Section 10, shall be equal to the aggregate value of Payments. The
determination of whether such Excise Taxes are payable and the amount thereof
shall be based upon the opinion of counsel selected by the Executive and
acceptable to the Company. Any such additional cash payment by the Company shall
be paid by the Company to the Executive in one lump sum cash payment within
thirty (30) days following the date such opinion of counsel is rendered. If such
opinion is not accepted by the Internal Revenue Service, then the Executive
shall determine and notify the Company of the appropriate adjustments in the
Gross Up Payment (taking into account any and all Excise Taxes, interest,
penalties and the tax consequences of all additional cash payments made by the
Company pursuant to this Section 10) and the Company shall pay the Executive the
difference between the final amount of the Gross Up Payment and the amount
previously paid, if any, to the Executive by the Company pursuant to this
Section 10 (hereinafter called the "Adjustment Payment"). Any such Adjustment
Payment shall be paid by the Company to the Executive in one lump sum cash
payment within ten (10) days following such notification.
11. Severability. Should any provision of this Agreement be held, by a
court of competent jurisdiction, to be invalid or unenforceable, such invalidity
61
or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each other provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
12. Successors and Assigns.
(a) This Agreement and all rights under this Agreement are personal to the
Executive and shall not be assignable; provided, however, that any rights to
compensation upon Death or Disability hereunder shall inure to the benefit of
the Executive's heirs, personal representatives, designees or other legal
representatives, as the case may be.
(b) This Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. Any Person succeeding to the business of the
Company by merger, purchase, consolidation or otherwise may assume by contract
or operation of law the obligations of the Company under this Agreement.
13. Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without regard to the conflicts
of laws thereof.
14. Notices. All notices, requests and demands given to or made upon the
respective parties hereto shall be deemed to have been given or made three
business days after the date of mailing when mailed by registered or certified
mail, postage prepaid, or on the date of delivery if delivered by hand, or on
the date of delivery by Federal Express or other reputable overnight delivery
service, addressed to the parties at their addresses set forth below or to such
other addresses furnished by notice given in accordance with this Section 14:
(a) if to the Company, to XXXxxx.xxx, Inc., 00 X. 00 Xx., 0xx Xxxxx, and (b) if
to the Executive, to Xxxxxx Xxxxxx, 000 X. 00 Xx. #0X, Xxx Xxxx, X.X. 00000,
with a copy to Xxxx Marks & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000,
Attn: Xxxx X. Xxxxxx, Esq.
15. Withholding. All payments required to be made by the Company to the
Executive under this Agreement shall be subject to withholding taxes, social
security and other payroll deductions in accordance with applicable law and the
Company's policies applicable to employees of the Company.
16. Complete Understanding. Except as expressly provided below, this Agreement
supersedes any prior contracts, understandings, discussions and agreements
relating to employment between the Executive and the Company, and constitutes
the complete understanding between the parties with respect to the subject
matter hereof. No statement, representation, warranty or covenant has been made
by either party with respect to the subject matter hereof except as expressly
set forth herein.
17. Modification; Waiver.
(a) This Agreement may be amended or waived if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by the Company and
the Executive or in the case of a waiver, by the party against whom the waiver
is to be effective. Any such waiver shall be effective only to the extent
specifically set forth in such writing.
62
(b) No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
18. Headings. The headings in this Agreement are for convenience of reference
only and shall not control or affect the meaning or construction of this
Agreement.
19. Counterparts. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument. This Agreement shall become
effective when each party hereto shall have received counterparts hereof signed
by the other party hereto.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed in its corporate name by one of its officers duly authorized to enter
into and execute this Agreement, and the Executive has manually signed his name
hereto, all as of the day and year first above written.
XXXXXX.XXX, INC.
By:_______________________________
Name:
Title:
-----------------------------------
Xxxxxx Xxxxxx
63
Exhibit A
XXXxxx.xxx, Inc.
NONQUALIFIED STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of November 16,
1999, between XXXxxx.xxx, Inc., a Delaware corporation (the "Company"), having
an address at 00 X. 00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 and Xxxxxx
Xxxxxx having an address at 000 Xxxx 00xx Xxxxxx, Xxxxxxxxx #0X, Xxx Xxxx, Xxx
Xxxx 00000, the ("Grantee").
In accordance with Section 5(a) of the Employment Agreement, dated
as of November __, 1999, by and between the Company and the Grantee (the
"Employment Agreement"), the Company hereby grants to the Grantee a nonqualified
stock option (the "Option") to purchase all or any part of an aggregate of
1,955,750 shares of the Company's common shares, $.001 par value per share (the
"Shares"). This Option is a nonqualified stock option and is not intended to be
an incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
To evidence the Option and to set forth its terms, the Company and
the Grantee agree as follows:
1. Confirmation of Grant. The Company hereby evidences and confirms its grant of
the Option to the Grantee on the date of this Agreement (the "Date of Grant").
2. Number of Shares. This Option shall be for an aggregate of 1,955,750
Shares.
3. Exercise Price. The per share exercise price shall be determined in
accordance with the following schedule (the "Exercise Price").
Number of Shares Exercise Price Total
977,875 1.30 $1,271,238
488,938 1.50 $733,407
488,937 1.75 $855,640
1,955,750 $2,860,285
4. Medium and Time of Payment. The Option shall be exercised by a written notice
signed by the Grantee which identifies this Agreement and states the number of
Shares then being purchased (the "Exercise Notice"), delivered to the attention
of the Company's Secretary at the Company's principal office in New York. The
exercise date shall be the date such notice is received by the Company. Such
notice shall be accompanied by (i) cash payment or certified check equal to the
Exercise Price; or (ii) a certificate representing Company stock owned by the
64
Grantee, if not subject to any restrictions, with a Fair Market Value equal to
the Exercise Price; or (iii) instructions for the Company to withhold from the
purchased shares an amount with a Fair Market Value equal to the Exercise Price.
"Fair Market Value" of a share of common stock of the Company as of a specified
date shall mean the closing price of a share of the common stock on the
principal securities exchange (including but not limited to the Nasdaq Stock
Market or the Nasdaq National Market) on which such shares are traded on the day
immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if no
shares were traded on such immediately preceding day, or if the shares are not
traded on a securities exchange, Fair Market Value shall be deemed to be the
average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded. If the shares are not publicly
traded, Fair Market Value of a share of common stock shall be determined in good
faith by the Board of Directors (the "Board") of the Company. In no case shall
Fair Market Value be determined with regard to restrictions other than
restrictions which, by their terms, will never lapse. Upon acceptance of the
Exercise Notice and receipt of payment in full, the Company shall cause to be
issued a certificate representing the shares of common stock so purchased.
5. Term and Exercise of the Option. The Options shall be exercisable for a
period constituting the greater of the Term of the Employment Agreement (as
provided for in Section 2 of the Employment Agreement) or five years from the
date of this Agreement (the "Expiration Date") and may be exercised in whole or
in increments in accordance with the following schedule:
On or After This Option Shall Be Exercisable as to:
(i) Date of Grant One-third of the Shares
(ii) [ ], 0000 Xxx-third of the Shares
(iii) [ ], 2001 The balance of the Shares
For the purposes hereof, Options shall be deemed to vest in order of
ascending Exercise Price.
6. Nontransferability. The Option may be transferred only by will or the laws of
descent and distribution, and the Option may be exercised during the Grantee's
lifetime only by the Grantee (or by the Grantee's legal representative under the
circumstances described in Section 7 hereof).
7. Rights in the Event of the Grantee's Disability. If the Grantee's employment
with the Company and any parent or subsidiary corporation (within the meaning of
Section 424(e) and (f) of the Code (each an "Affiliate")) is terminated on
account of disability, the Grantee or the Grantee's legal representative (or the
Grantee's estate if the Grantee dies after termination of employment) may
exercise the Option, to the extent exercisable on the date of the Grantee's
termination of employment, at any time within ninety days after termination of
65
employment but in no event after the expiration of the term of the Option. The
Grantee's "estate" means the Grantee's legal representative or any person who
acquires the right to exercise the Option by reason of the Grantee's death.
8. Rights in the Event of the Grantee's Death. If the Grantee dies while an
employee of the Company or any Affiliate but while he still has the right to
exercise this Option, his estate may exercise the Option, to the extent
exercisable at the date of the Grantee's death, any time within one year after
the Grantee's death, but in no event after the expiration of the term of the
Option.
9. Rights in the Event of Termination of Employment. If Grantee's employment
with the Company or any Affiliate is terminated involuntarily for "Good Cause"
(as such term is defined in the Employment Agreement) the Grantee's Option shall
expire as of the date of termination of employment. If the Grantee's employment
is terminated pursuant to the provisions of Section 9(b) of the Employment
Agreement, then all of the Grantee's Options shall be immediately vested and
exercisable and shall remain exercisable until the later of the Expiration Date
or one year from the date of termination of employment. If the Grantee's
employment is terminated for any reason other than death, disability, or as
described in the preceding sentences of this Section, the Grantee (or the
Grantee's estate, if the Grantee dies after the termination) may exercise the
Option, to the extent exercisable before the termination, within ninety days
after the termination, but in no event after the expiration of the term of the
Option.
10. Extension If Grantee Subject to Section 16(b) of the 1934 Act.
Notwithstanding the foregoing paragraphs 7, 8 and 9, if the exercise of the
Option within the applicable time periods set forth above would subject the
Optionee to suit under Section 16(b) of the Securities Act of 1934, as amended,
the Option shall remain exercisable to the extent permitted by law until the
earliest to occur of (i) the 10th day following the date on which the Grantee
would no longer be subject to such suit; (ii) the 190th day after the Grantee's
termination of employment; provided such termination was not for cause; or (iii)
the Expiration Date; provided that no additional vesting of the Option shall
occur during such periods. The Grantee agrees to consult with the Grantee's own
tax advisors as to the tax consequences to the Grantee of any such delayed
exercise.
11. Representations and Warranties of Grantee.
(a) Grantee represents and warrants that this Option is being acquired by
Grantee for Grantee's personal account, for investment purposes only, and not
with a view to the distribution, resale or other disposition thereof.
(b) Grantee acknowledges that the Company may issue Shares upon the exercise of
the Option without registering such Shares under the Securities Act of 1933, as
amended (the "1933 Act"), on the basis of certain exemptions from such
registration requirement. Accordingly, Grantee agrees that his or her exercise
of the Option may be expressly conditioned upon his or her delivery to the
Company of an investment certificate including such representations and
66
undertakings as the Company may reasonably require in order to assure the
availability of such exemptions, including a representation that Grantee is
acquiring the Shares for investment and not with a present intention of selling
or otherwise disposing thereof and an agreement by Grantee that the certificates
evidencing the Shares may bear a legend indicating such non-registration under
the 1933 Act and the resulting restrictions on transfer. Grantee acknowledges
that, because Shares received upon exercise of an Option may be unregistered,
Grantee may be required to hold the Shares indefinitely unless they are
subsequently registered for resale under the 1933 Act or an exemption from such
registration is available.
(c) Grantee hereby acknowledges that, in addition to certain restrictive legends
that the securities laws of the state in which Optionee resides may require,
each certificate representing the Shares may be endorsed with the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933; THEY HAVE BEEN ACQUIRED
BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAW
OF RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER THAT REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW
IS NOT REQUIRED.
12. Adjustment in the Shares. If the Shares, as presently constituted, shall be
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares, or otherwise) or if the number of Shares shall be
increased through the payment of a share dividend, the Grantee shall receive
upon exercise of the Option the number and kind of shares or other securities
into which each outstanding Share shall be so changed, or for which each such
Share shall be exchanged, or to which each such Share shall be entitled, as the
case may be. The exercise price and other terms of the Option shall be
appropriately amended to reflect the foregoing events. If there shall be any
other change in the number or kind of the outstanding Shares, or of any shares
or other securities into which the Shares shall have been changed, or for which
the Shares shall have been exchanged, then, if the Board of Directors shall, in
its sole discretion, determine that such change equitably requires an adjustment
in the Option, such adjustment shall be made in accordance with that
determination. Notice of any adjustment shall be given by the Company to the
Grantee.
13. Stop-Transfer Notices. Grantee understands and agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
67
14. No Limitation on Rights of the Company. The grant of this Option shall not
in any way affect the right or power of the Company to make adjustments,
reclassifications, or changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
15. Rights as a Shareholder. The Grantee shall have the rights of a shareholder
with respect to the Shares covered by the Option only upon becoming the holder
of record of those Shares.
16. Compliance with Applicable Law. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to cause to be issued or delivered
any certificates for Shares pursuant to the exercise of the Option, unless and
until the Company is advised by its counsel that the issuance and delivery of
such certificates is in compliance with all applicable laws, regulations of
governmental authority, and the requirements of any exchange upon which Shares
are traded. The Company shall in no event be obligated to register any
securities pursuant to the 1933 Act (as now in effect or as hereafter amended)
or to take any other action in order to cause the issuance and delivery of such
certificates to comply with any such law, regulation or requirement. The Board
may require, as a condition of the issuance and delivery of such certificates
and in order to ensure compliance with such laws, regulations, and requirements,
that the Grantee make such covenants, agreements, and representations as the
Board, in its sole discretion, considers necessary or desirable.
17. No Obligation to Exercise Option. The granting of the Option shall impose no
obligation upon the Grantee to exercise the Option.
18. Agreement Not a Contract of Employment. This Agreement is not a contract of
employment, and the terms of employment of the Grantee or the relationship of
the Grantee with the Company or any Affiliate shall not be affected in any way
by this Agreement except as specifically provided herein. The execution of this
Agreement shall not be construed as conferring any legal rights upon the Grantee
for a continuation of employment or relationship with the Company or any
Affiliate, nor shall it interfere with the right of the Company or any
subsidiary thereof to discharge the Grantee and to treat him without regard to
the effect which that treatment might have upon him as a Grantee.
19.Withholding. The Company shall have the right to deduct and withhold from
payments or distributions of any kind otherwise due to the Grantee any federal,
state or local taxes of any kind required by law to be so deducted and withheld
with respect to any shares issued upon exercise of the Option. Subject to the
prior approval of the Company, which may be withheld by the Company in its sole
discretion, the Grantee may elect to satisfy such obligations, in whole or in
part by (i) causing the Company to withhold Shares otherwise issuable pursuant
to the exercise of the Option, (ii) delivering to the Company shares of common
68
stock already owned by the Grantee, or (iii) delivering to the Company cash or a
check to the order of the Company in an amount equal to the amount required to
be so deducted and withheld. The shares delivered in accordance with method (ii)
above or withheld in accordance with method (i) above shall have a Fair Market
Value equal to such withholding obligation as of the date that the amount of tax
to be withheld is to be determined. The Grantee who has made (with the Company's
approval) an election pursuant to method (i) or (ii) of this Section 19 may only
satisfy his or her withholding obligation with shares of common stock which are
not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.
20. Notices. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally or sent by certified,
registered, or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally or, if mailed, four days after the date of
deposit in the United States mails, to each party at its address set forth above
or to such other address as may be designated in a notice given in accordance
with this Section.
21. Governing Law. Except to the extent preempted by Federal law, this Agreement
shall be construed and enforced in accordance with, and governed by, New York
law.
22. Entire Agreement. This Agreement contains all of the understandings and
agreements between the Company and its Affiliates, and the Grantee concerning
this Option and supersedes all earlier negotiations and understandings, written
or oral, between the parties with respect thereto. The Company, its Affiliates
and the Grantee have made no promises, agreements, conditions or understandings
either orally or in writing, that are not included in the Agreement.
23. Headings. The headings of Sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Agreement.
24. Amendments. The Agreement may be amended or modified at any time by an
instrument in writing signed by the parties hereto.
69
IN WITNESS WHEREOF, the Company and the Grantee have duly executed
this Agreement as of the date first written above.
XXXxxx.xxx, Inc.
COMMUNICATIONS, INC.
--------------------------
By:___________________________
Witness Xxxx Xxxxxxxx
-------------------------- ------------------------------
Witness Xxxxxx Xxxxxx,Grantee
70
