Exhibit 10.2
800 TRAVEL SYSTEMS, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made and entered into as
of September 3, 1998 by and between 800 Travel Systems, Inc., a Delaware
corporation (the "Company"), and ZA Inc., a New York corporation ("Consultant"),
with respect to the following:
WHEREAS, Consultant and the Company have entered into a letter agreement,
dated as of July 16, 1998 (the "Engagement Agreement"), pursuant to which the
Company has engaged Consultant to create the Company's interactive web-site;
WHEREAS, as a result of cost overruns and time delays the parties have
renegotiated the compensation to be paid to Consultant and, as part of such
remuneration the Company has agreed to issue to Consultant options to purchase
up to One Hundred Twenty-Five Thousand (125,000) shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), as more fully described
herein;
NOW, THEREFORE, in consideration of the premises and the covenants and
conditions contained herein, the parties hereto agree as follows:
3. Grant of Options. The Company hereby grants to Consultant the right and
option, but not the obligation, to purchase an aggregate of up to One Hundred
Twenty-Five Thousand (125,000) shares of Common Stock, subject to adjustment as
provided herein, on the terms and conditions set forth herein (the "Options").
The Options are intended to be non-statutory options and not incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.
4. Exercise Periods; Exercise Prices. The Option shall become exercisable
cumulatively as follows:
a. The "Initial Options": as to 50,000 shares (the "Initial Option
Shares"), upon the execution of this Agreement for a period of three (3) years
from the date first set forth above (the "Initial Options Exercise Period"), at
an exercise price of $3.00 per share (the "Initial Options Exercise Price");
b. The "Additional Options": as to 50,000 shares (the "Additional
Option Shares"), upon the execution of this Agreement for a period of three (3)
years from the date first set forth above (the "Additional Options Exercise
Period"), at an exercise price of $4.00 per share (the "Additional Options
Exercise Price");
c. The "Contingent Options": as to 25,000 shares (the "Contingent
Option Shares"), upon the execution of this Agreement for a period of three (3)
years from the date first set forth above (the "Contingent Options Exercise
Period" and collectively, with the Initial Options Exercise Period and the
Additional Options Exercise Period, the "Exercise Periods"), at an exercise
price of $10.00 per share (the "Contingent Options Exercise Price" and
collectively, with the Initial Options Exercise Price and the Additional Options
Exercise Price, the "Exercise Prices"); provided, however, that the right to
exercise the Contingent Options shall vest only if the closing bid price of the
Common Stock (the "Closing Price") is at least $10.00 per share for any ten (10)
consecutive trading days during the period beginning the date
first set forth above and ending upon the expiration of the Contingent Options
Exercise Period (the "Redemption Period").
Notwithstanding the foregoing, all Options shall be forfeited in the event
that Consultant shall fail to complete the Project (as defined in the Engagement
Agreement) to the Company's reasonable satisfaction by February 29, 1999.
The Exercise Prices shall be subject to adjustment as provided herein.
5. Manner of Exercise. The Options may be exercised by written notice
delivered to the Secretary of the Company. Such notice shall state the number of
Option Shares with respect to which Options are being exercised and shall be
accompanied by payment of the purchase price in full in cash. As soon as
practicable after any such exercise of Options, the Company shall issue and
register in the name of and deliver to Consultant a certificate or certificates
for the Option Shares issuable upon such exercise.
6. Adjustment Provisions. If, at any time or from time to time during the
Exercise Periods, any of the following events shall occur, the Exercise Prices
and the number of and kind of Option Shares then subject to the Options shall in
each instance be adjusted as follows:
a. Stock Dividends, Split-Ups and Combinations. If a change is
effected in the number of outstanding shares of Common Stock by a stock dividend
in Common Stock or by a subdivision or combination of such shares, the Exercise
Prices shall be proportionately reduced or increased, as the case may be, so
that it will bear the same ratio to the Exercise Prices in effect immediately
before such change as the number of shares outstanding immediately before such
change bears to the number outstanding immediately thereafter. Upon any
adjustment of the Exercise Price as provided above, the number of Option Shares
subject to the Options shall be increased or decreased, as appropriate, so that
it will bear the same ratio to the number of Option Shares subject to the
Options immediately before such change as the number of shares outstanding
immediately after such change bears to the number of outstanding immediately
prior thereto.
b. Other Changes in Capital Structure. In the case of any
reclassification or other change in the outstanding Common Stock not covered by
the foregoing provisions, other than a change in par value or in the case of any
consolidation or merger of the Company with or into another corporation (other
than a merger in which the Company is the continuing corporation and which does
not result in any reclassification or change of outstanding shares of the
Company), or in the case of any sale or conveyance to another corporation of the
property of the Company as an entirety, or substantially as an entirety,
Consultant shall have the right, upon exercise of the Options and payment
therefor, to receive solely a like amount and kind of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as Consultant would have been entitled
to receive if the Options, to the extent not previously exercised, had been
exercised in full immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance.
c. Notice of Adjustment. Upon any adjustment of the Exercise Prices
and change in the number of Option Shares or other securities purchasable
hereunder, the Company shall give written notice thereof to Consultant, stating
the new price and the increased or decreased number of Option Shares or other
securities purchasable upon exercise of the Options and setting forth in
reasonable detail the method of calculation and the pertinent facts upon which
such calculation is based.
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7. Optional Redemption.
a. Redemption. Notwithstanding the Contingent Options Exercise
Period provided in Section 3 above, the Company shall have the right, but not
the obligation, to redeem any part or all of the Contingent Options at a
redemption price of $.05 per Contingent Option (the "Redemption Price") if and
to the extent that the Closing Price is at least $10.00 per share for any ten
(10) consecutive trading days (in addition to the ten (10) consecutive trading
days referred to in Section 2 (c)) at any time during the Redemption Period.
b. Manner of Exercise by the Company. The Company shall exercise its
right of redemption by delivering to Consultant a written notice of redemption
(the "Redemption Notice") with respect thereto. The Redemption Notice shall
state (i) the number of Contingent Options to be redeemed, (ii) the Contingent
Exercise Price thereof, (iii) the Closing Price of the Common Stock during the
applicable ten (10) day trading period, and (iv) the applicable redemption date
therefor(the "Redemption Date"), which shall be not less than ten (10) nor more
than twenty (20) days following the delivery date of the Redemption Notice.
Consultant shall be entitled to exercise any or all of the Contingent Options
called for redemption at any time through the Redemption Date therefor.
Thereafter, Consultant's right to exercise such Contingent Options shall cease
and its sole right with respect thereto shall be to receive payment of the
Redemption Price therefor.
8. Representations of Consultant. Consultant acknowledges that it has been
informed that the Option Shares subject to the Options, if and when issued, will
not be registered under the Securities Act of 1933, as amended (the "Securities
Act"). Consultant understands that the Company is granting the Options in
reliance upon exemptions contained in the Securities Act and the General Rules
and Regulations under the Securities Act as promulgated and from time to time
amended by the Securities and Exchange Commission on the grounds that the grant
of the Options and the issuance and sale of the Option Shares subject thereto
are transactions not involving any public offering and that, consequently, such
transactions are exempt from registration under the Securities Act by virtue of
the provisions of Section 4(2) thereof and Regulation D promulgated thereunder.
Consultant acknowledges that reliance upon this exemption is predicated in part
upon its representation that any Option Shares acquired upon exercise of the
Options will be acquired for the account of the holder and for investment only.
In addition, Consultant specifically authorizes the Company to place an
appropriate legend on the Option Shares in the form set forth in Section 8
below.
9. Representation of the Company. The Company represents and warrants that
the Option Shares issuable upon any exercise of the Options, when purchased and
paid for as herein provided, will be validly issued, fully paid and
non-assessable.
10. Legend. The certificates representing the Option Shares issued upon
any exercise of the Options granted hereby shall bear the following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER, IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER, SUCH
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OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION
OR IS OTHERWISE IN COMPLIANCE WITH THE SECURITIES ACT AND SUCH LAWS.
11. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be personally delivered,
transmitted by facsimile, telex or cable, or transmitted by postage prepaid,
registered or certified mail with return receipt requested, or by FedEx or other
similar overnight delivery service, addressed as follows:
If to Consultant, to it at:
ZA Inc.
00 Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Chief Executive Officer
If to the Company, to it at:
800 Travel Systems, Inc.
0000 Xxxx Xxxxxxx
Xxxxx, Xxxxxxx
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx, Chief Executive Officer
With a copy to:
Xxxxxxxx Xxxxx Xxxxxxxx Xxxx & Ballon LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx XxXxxx, Esq.
Notices shall be deemed to have been given: (i) on the fifth business day after
posting, if mailed first class, (ii) on the date of receipt if delivered
personally, or (iii) on the next business day after transmission if transmitted
by facsimile, telex or cable (and appropriate answerbacks have been received) or
overnight delivery service. Either party hereto may change its address for
purposes hereof by notice to the other party in accordance with this Section 9.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
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IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement
as of the date first above written.
ZA INC.
By:
---------------------------------
Xxxx Xxxxxx
Chief Executive Officer
800 TRAVEL SYSTEMS, INC.
By:
---------------------------------
Xxxx X. Xxxxxxxx
Chief Executive Officer
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