Exhibit 10.12
Form 10-SB
Xx. Xxxxxxxxxxx'x Original Formulas Inc.
File No.:
XX. XXXXXXXXXX'X ORIGINAL FORMULAS, INC.
STOCK INCENTIVE AGREEMENT
XX. XXXXXXXXXXX'X ORIGINAL FORMULAS, INC., a New Jersey
corporation (the "Company"), hereby grants effective as of July
1, 2000, to Xxxxxx Xxxxx (the "Employee"), an option to purchase
a maximum of 500,000 shares of its Common Stock, $.001 par value
per share, at the price of $1.00 per share, on the following
terms and conditions:
1. Grant Under 2000 Stock Incentive Plan. This option is
granted pursuant to and is governed by the Company's 2000 Stock
Incentive Plan (the "Plan") and, unless the context otherwise
requires, terms used herein shall have the same meaning as in the
Plan. Determinations made in connection with this option pursuant
to the Plan shall be governed by the Plan as it exists on this
date.
2. Grant as Incentive Stock Option; Other Options. This option
is intended to qualify as an incentive stock option under Section
422A of the Internal Revenue Code of 1986, as amended (the
"Code"). This option is in addition to any other options
heretofore or hereafter granted to the Employee by the Company. A
duplicate original of this instrument shall not effect the grant
of another option.
The foregoing rights are cumulative and, while the Employee
continues to be employed by the Company, may be exercised up to
and including the date which is ten years from the date this
option is granted. All of the foregoing rights are subject to
Sections 3 and 4, as appropriate, if the Employee ceases to be
employed by the Company or dies or becomes disabled while in the
employ of the Company.
3. Vesting. The shares allocated and earned hereunder to the
Holder shall vest; i.e. become non-forfeitable, in four (4) equal
portions for each twelve (12) month period of service by the
Holder with the Company over a forty eight (48) month period
commencing four (4) years after the date of this agreement. In
the event the Holder should, for any reason, terminate his
consulting or employee relationship with the Company prior to the
completion of sixty (60) months of service in such capacity, then
the unvested portion of the shares, allocated hereunder, shall be
forfeited.
4. Termination of Employment. Except as provided in Section 20
hereof, if the Employee ceases to be employed by the Company,
other than by reason of death or disability as defined in Section
5, no further installments of this option shall become
exercisable and this option shall terminate the date employment
ceases, but in no event later than the scheduled expiration
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date. In such a case, the Employee's only rights hereunder shall
be those which are properly exercised before the termination of
this option.
5. Deaths; Disability. If the Employee dies while in the employ
of the Company, this option may be exercised, to the extent of
the number of shares with respect to which the Employee could
have exercised on the date of the Employee's death, by the
Employee's estate, personal representative or beneficiary to whom
this option has been assigned pursuant to Section 10, at any time
within one (1) year after the date of death, but not later than
the scheduled expiration date. If the Employee ceases to be
employed by the Company by reason of the Employee's disability
(as defined in the Plan), this option may be exercised, to the
extent of the number of shares with respect to which the Employee
could have exercised it on the date of the termination of the
Employee's employment, at any time within one (1) year after such
termination, but not later than the scheduled expiration date. At
the expiration of such one-year period or the scheduled
expiration date, whichever is the earlier, this option shall
terminate and the only rights hereunder shall be those as to
which the option was properly exercised before such termination.
6. Partial Exercise. Exercise of this option up to the extent
above stated may be made in part at any time and from time to
time within the above limits, except that this option may not be
exercised for a fraction of a share unless such exercise is with
respect to the final installment of stock subject to this option
and a fractional share (or cash in lieu thereof) must be issued
to permit the Employee to exercise completely such final
installment. Any fractional share with respect to which an
installment of this option cannot be exercised because of the
limitation contained in the preceding sentence shall remain
subject to this option and shall be available for later purchase
by the Employee in accordance with the terms hereof
7. Payment of Price. The option price is payable as follows:
(a) in cash or by checks, or any combination of the
foregoing, equal in amount to the option price.
(b) in cash, by check, by delivery of shares of the
Company's Common Stock having a fair market value (as determined
by the Board of Directors or Committee, as appropriate) equal as
of the date of exercise to the option price, or by any
combination of the foregoing, equal in amount to the option
price.
As provided above, payment of such purchase price or any
portion thereof may be made with shares of stock of the same
class as the shares then subject to this option, if shares of
that class are then publicly traded (as defined below), such
shares to be credited toward such purchase price on the valuation
basis set forth below, in which event the stock certificates
evidencing the shares so to be used shall accompany the notice of
exercise and shall be duly endorsed or accompanied by duly
executed stock powers to transfer the same to the Company;
provided, however, that such payment in stock instead of cash
shall not be effective and shall be rejected by the Company if
(i) the Company is then prohibited from purchasing or acquiring
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shares of the class of its stock thus tendered to it, or (ii) the
right or power of the person exercising the option to deliver
such shares in payment of said purchase price is subject to the
prior interests of any other person (excepting the Company as
indicated by legends upon the certificate(s) or as known to the
Company), For purposes of this paragraph: (a) "publicly traded"
shares are those which are listed or admitted to unlisted trading
privileges on a national securities exchange or as to which sales
or bid and offer quotations are reported in the automated
quotation system ("Nasdaq"), operated by the National Association
of Securities Dealers, Inc. ("NASD"); and (b) for credit toward
the purchase price, shares so surrendered shall be valued as of
the day immediately preceding the delivery to the Company of the
certificate(s) evidencing such shares (or, if such day is not a
trading day in the U.S. securities markets, on the nearest
preceding trading day), on the basis of the closing price of
stock of that class as reported with respect to the market (or
the composite of the markets, if more than one) in which such
shares are then traded, or if no such closing prices are
reported, the lowest independent offer quotation reported,
therefor in Level 2 of Nasdaq, or if no such quotations are
reported on the basis of the most nearly comparable valuation
method acceptable to the Company. If the Company rejects the
payment in stock, the tendered notice of exercise shall not be
effective hereunder unless promptly after being notified of such
rejection the person exercising the option pays the purchase
price in acceptable form. If and while payment of the purchase
price with stock is permitted in accordance with the foregoing
provisions, the person then entitled to exercise this option may,
in lieu of using previously outstanding shares therefor, use some
of the shares as to which this option is then being exercised, in
which case the notice of exercise need not be accompanied by any
stock certificates but shall include a statement directing the
Company to withhold so many of the shares that would otherwise
have been delivered upon that exercise of this option as equals
the number of shares that would have been transferred to the
Company if the purchase price had been paid with previously
issued stock.
No person shall be entitled to the privileges of stock
ownership in respect of any shares issuable upon exercise of this
option, unless and until such shares have been issued to such
person as fully paid shares.
No certificate or certificates for shares of stock purchased
upon exercise of this option shall be issued and delivered prior
to the admission of such shares to listing on any stock exchange
on which shares of that class are then listed, nor unless and
until, in the opinion of counsel for the Company, such securities
may be issued and delivered without causing the Company to be in
violation of or incur any liability under any federal, state or
other securities law, any requirement of any securities exchange
listing agreement to which the Company may be a party, or any
other requirement of law or of any regulatory body having
jurisdiction over the Company.
Notwithstanding the foregoing, the Employee may not pay any
part of the exercise price hereof by transferring Common Stock to
the Company if such Common Stock is both subject to a substantial
risk of forfeiture and not transferable within the meaning of
Section 83 of the Code.
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8. Agreement to Purchase for Investment. By acceptance of this
option, the Employee agrees that a purchase of shares under this
option will not be made with a view to their distribution, as
that term is used in the Securities Act of 1933, as amended,
unless in the opinion of counsel to the Company such distribution
is in compliance with or exempt from the registration and
prospectus requirements of that Act, and the Employee agrees to
sign a certificate to such effect at the time of exercising this
option and agrees that the certificate for the shares so
purchased may be inscribed with a legend to ensure compliance
with the Securities Act of 1933. Employee has had access to all
information required by Employee to make an investment decision
and Employee has had an opportunity to ask questions of and
receive answers from the Company pertaining to the Company, its
business, this option and the underlying Common Stock.
9. Method of Exercising Option. Subject to the terms and
conditions of this Agreement, this option may be exercised by
written notice to the Company, at the principal executive office
of the Company. Such notice shall state the election to exercise
this option and the number of shares in respect of which it is
being exercised and shall be signed by the person or persons to
exercising this option. Such notice shall be accompanied by
payment of the full purchase price of such shares, and the
Company shall deliver a certificate representing such shares as
soon as practicable after the notice shall be received. The
certificate for the shares as to which this option shall have
been so exercised shall be registered in the name of the person
or persons so exercising this option (or, if this option shall be
exercised by the Employee and if the Employee shall so request in
the notice exercising this option, shall be registered in the
name of the Employee and another person jointly, with right of
survivorship) and shall be delivered as provided above to or upon
the written order of the person or persons exercising this
option. In the event this option shall be exercised, pursuant to
Section 5 hereof, by any person or persons other than the
Employee, such notice shall be accompanied by appropriate proof
of the right of such person or persons to exercise this option.
All shares that shall be purchased upon the exercise of this
option as provided herein shall be fully paid and non-assessable.
10. Option Not Transferable. This option is not transferable or
assignable except by will or by the laws of descent and
distribution or except as permitted by Rule l6b-3 under the
Securities Exchange Act of 1934. During the Employee's lifetime
only the Employee can exercise this option.
11. No Obligation to Exercise Option. The grant and acceptance
of this option imposes no obligation on the Employee to exercise
it.
12. No Obligation to Continue Employment. The Company and any
Related Corporation (as defined in the Plan) are not by the Plan
or this option obligated to continue the Employee in employment.
13. No Rights as Stockholder until Exercise. The Employee shall
have no rights as a stockholder with respect to shares subject to
this Agreement until a stock certificate therefor
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has been issued to the Employee and is fully paid for. Except as
is expressly provided in the Plan with respect to certain changes
in the capitalization of the Company, no adjustment shall be made
for dividends or similar rights for which the record date is
prior to the date such stock certificate is issued.
14. Capital Changes and Business Successions. Subject to Section
20 hereof, the Plan contains provisions covering the treatment of
options in a number of contingencies such as stock splits and
mergers. Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with
respect to successors to the business of the Company are hereby
made applicable hereunder and are incorporated herein by
reference. In particular, without affecting the generality of the
foregoing, it is understood that for the purposes of Sections 4
through 5 hereof, both inclusive, employment by the Company
includes employment by a Related Corporation as defined in the
Plan.
15. Early Disposition. The Employee agrees to notify the Company
in writing immediately after the Employee makes a Disqualifying
Disposition of any Common Stock received pursuant to the exercise
of this option. A Disqualifying Disposition is any disposition
(including any sale) of such Common Stock before the later of (a)
two (2) years after the date the Employee was granted this option
or (b) one (1) year after the date the Employee acquired Common
Stock by exercising this option. If the Employee has died before
such stock is sold, these holding period requirements do not
apply and no Disqualifying Disposition can occur thereafter. The
Employee also agrees to provide the Company with any information
which it shall request concerning any such disposition. The
Employee acknowledges that he or she will forfeit the favorable
income tax treatment otherwise available with respect to the
exercise of this incentive stock option if he or she makes a
Disqualifying Disposition of the stock received on exercise of
this option.
16. Withholding Taxes. If the Company in its discretion
determines that it is obligated to withhold tax with respect to a
Disqualifying Disposition (as defined in Section 15) of Common
Stock received by the Employee on exercise of this option, the
Employee hereby agrees that the Company may withhold from the
Employee's wages the appropriate amount of federal, state and
local withholding taxes attributable to such Disqualifying
Disposition. If any portion of this option is treated as a Non-
Qualified Option, the Employee hereby agrees that the Company may
withhold from the Employee's wages the appropriate amount of
federal, state and local withholding taxes attributable to the
Employee's exercise of such Non-Qualified Option. At the
Company's discretion, the amount required to be withheld may
be withheld in cash from such wages, or (with respect to
compensation income attributable to the exercise of this option)
in kind from the Common Stock otherwise deliverable to the
Employee on exercise of this Option. The Employee further agrees
that, if the Company does not withhold an amount from the
Employee's wages sufficient to satisfy the Company's withholding
obligation, the Employee will reimburse the Company on demand, in
cash, for the amount under withheld.
17. Company's Right of First Refusal.
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(a) Exercise of Right: If the Employee desires to sell all
or any part of the shares acquired under this option (including
any securities received in respect thereof pursuant to any stock
dividend, stock split, reclassification, reorganization,
recapitalization and the like), and an offeror (the "Offeror")
has made an offer therefor, which offer the Employee desires to
accept, the Employee shall: (i) obtain in writing an irrevocable
and unconditional bona fide offer (the "Bona Fide Offer") for the
purchase thereof from the Offeror; and (ii) give written notice
(the "Option Notice") to the Company setting forth his desire to
sell such shares, which Option Notice shall be accompanied by a
photocopy of the original executed Bona Fide Offer and shall set
forth at least the name and address of the Offeror and the price
and terms of the Bona Fide Offer. Upon receipt of the Option
Notice, the Company shall have an assignable option to purchase
any or all of such shares (the "Option Shares") specified in the
Option Notice, such option to be exercisable by giving, within
thirty (30) days after receipt of the Option Notice, a written
counter-notice to the Employee. If the Company elects to purchase
any or all of such Option Shares, it shall be obligated to
purchase, and the Employee shall be obligated to sell to the
Company, such Option Shares at the price and terms indicated in
the Bona Fide Offer within sixty (60) days from the date of
receipt by the Company of the Option Notice.
(b) Sale of Option Shares to Offeror: The Employee may
sell, pursuant to the terms of the Bona Fide Offer, any or all of
such Option Shares not purchased or agreed to be purchased by the
Company for sixty (60) days after the expiration of the thirty
(30) day period during which the Company may give the aforesaid
counter-notice; provided, however, that the Employee shall not
sell such Option Shares to the Offeror if the Offeror is a
competitor of the Company and the Company gives written notice to
the Employee, within thirty (30) days of its receipt of the
Option Notice, stating that the Employee shall not sell his
Option Shares to the Offeror; and provided, further, that prior
to the sale of such Option Shares to the Offeror, the Offeror
shall execute an agreement with the Company pursuant to which the
Offeror agrees to be subject to the restrictions set forth in
this Section 17. If any or all of such Option Shares are not sold
pursuant to a Bona Fide Offer within the time permitted above,
the unsold Option Shares shall remain subject to the terms of
this Section 17.
(c) Adjustments for Changes in Capital Structure: If there
shall be any change in the Common Stock of the Company through
merger, consolidation, reorganization, recapitalization, stock
dividend, split-up, combination or exchange of shares, or the
like, the restrictions contained in this Section 17 shall apply
with equal force to additional and/or substitute securities, if
any, received by the Employee in exchange for, or by virtue of
his ownership of, Option Shares.
(d) Failure to Deliver Option Shares: In the event the
Employee fails or refuses to deliver on a timely basis duly
endorsed certificates representing Option Shares to be sold to
the Company pursuant to this Section 17, the Company shall have
the right to deposit the purchase price for the Option Shares in
a special account with any bank or trust company in the State of
Utah, giving notice of such deposit to the Employed, whereupon
such Option Shares shall be deemed to have been purchased by the
Company. All such monies shall be held by the bank or
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trust company for the benefit of the Employee. All monies
deposited with the bank or trust company but remaining unclaimed
for two (2) years after the date of deposit shall be repaid by
the bank or trust company to the Company on demand, and the
Employee shall thereafter look only to the Company for payment.
The Company may place a legend on any stock certificate delivered
to the Employee reflecting the restrictions on transfer provided
in this Section 17.
18. No Exercise of Option if Employment Terminated for
Misconduct. If the employment of the Employee is terminated for
"Misconduct", this option shall terminate on the date of such
termination of employment and all unvested or unexercised
options shall thereupon not be exercisable to any extent
whatsoever. "Misconduct" is conduct, as determined by the Board
of Directors, involving one or more of the following: (i) the
substantial and continuing failure of the Employee to render
services to the Company in accordance with his assigned duties;
(ii) a determination by two-thirds of the members of the Board of
Directors that the Employee has inadequately performed the duties
of his employment; (iii) disloyalty, gross negligence, dishonesty
or breach of fiduciary duty to the Company; (iv) the commission
of an act of embezzlement, fraud, disloyalty, dishonesty or
deliberate disregard of the rules or policies of the Company
which results in loss, damage or injury to the Company, whether
directly or indirectly; (v) the unauthorized disclosure of any
trade secret or confidential information of the Company; or (vi)
the commission of an act which constitutes unfair competition
with the Company or which induces any customer of the Company to
break a contract with the Company. In making such determination,
the Board of Directors shall act fairly and in utmost good faith
and shall give the Employee an opportunity to appear and to be
heard at a hearing before the Board of Directors or any Committee
and present evidence on his behalf. For the purposes of this
Section 18, termination of employment shall be deemed to occur
when the Employee receives notice that his employment is
terminated.
19. Company's Right of Repurchase.
(a) Rights of Repurchase. If any of the events specified in
Section 19(b) below occur, then:
(i) with respect to shares acquired upon exercise of
this option prior to the occurrence of such event, within sixty
(60) days after the Company receives actual knowledge of the
event, and
(ii) with respect to shares acquired upon exercise of
this option after the occurrence of such event, within sixty (60)
days following the later of the date of such exercise or the date
the Company receives actual knowledge of such event,(in either
case, the "Repurchase Period"), the Company shall have the
option, but not the obligation, to repurchase all, but not a
portion of, the shares from the Employee, or his legal
representatives, as the case may be (the "Repurchase Option").
The Repurchase Option shall be exercised by the Company by giving
the Employee, or his legal representative, written notice of its
intention to exercise the Repurchase Option on or before the last
day of the
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Repurchase Period, and, together with such notice, tendering to
the Employee, or his legal representative, an amount equal to the
higher of the option price or the fair market value of the
shares. The Company may, in exercising the Repurchase Option,
designate one or more nominees to purchase the shares either
within or without the Company. Upon timely exercise of the
Repurchase Option, designate one or more nominees to purchase the
shares either within or without the Company. Upon timely exercise
of the Repurchase Option in the manner provided in this Section
19(a), Employee, or his legal representative, shall deliver to
the Company the stock certificate or certificates representing
the shares being repurchased, duly endorsed and free and clear of
any and all liens, charges and encumbrances.
If shares are not purchased under the Repurchase Option, the
Employee and his successor in interest, if any, will hold any
such shares in his possession subject to all of the provisions of
this Agreement.
(b) Company's Right to Exercise Repurchase Option : The
Company shall have the Repurchase Option in the event that any of
the following events shall occur:
(i) The receivership, bankruptcy or other creditor's
proceeding regarding the Employee or the taking of any of
Employee's shares acquired upon exercise of this option by legal
process, such as a levy of execution;
(ii) Distribution of shares held by the Employee to his
spouse as such spouse's joint or community interest pursuant to a
decree of dissolution, operation of law, divorce, property
settlement agreement or for any other reason, except as may be
otherwise permitted by the Company; or
(iii) The termination of the Employee's employment
by the Company for Misconduct (as defined in Section 18 hereof).
(c) Determination of Fair Market Value: The fair market
value of the shares subject to this option shall be, for purposes
of this Section 19, an amount per share determined on the basis
of the price at which shares of the Common Stock could reasonably
be expected to be sold in an arms-length transaction, for cash,
other than on an installment basis, to a person not employed by,
controlled by, in control of or under common control with the
Company. Fair market value shall be determined by the Board of
Directors, giving due consideration to recent grants of incentive
stock options for shares of Common Stock, recent transactions
involving shares of the Common Stock, if any, earnings of the
Company to the date of such determination, projected earnings of
the Company, the effect of the transfer restrictions to which the
shares are subject under law and this Agreement, the existence or
absence of a public market for the Common Stock and such other
matters as the Board of Directors deems pertinent. The
determination by the Board of Directors of the fair market value
shall be conclusive and binding. The fair market value of the
shares shall be determined as of the day on which the event
occurs.
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20. Changes in Control. Notwithstanding any other provisions
hereof, this option shall accelerate so that the Employee shall
have the right, at all times until the expiration or earlier
termination of the option, to exercise the unexercised portions
of this option, including the portions thereof which would, but
for this Section 20, entitled "Changes in Control," not yet be
exercisable, from and after any Involuntary Termination within
twenty-four (24) months after a Change in Control that occurs
while the Employee is an employee of the Company or any of its
Related Corporations. For purposes of this Section 20: (a) an
"Involuntary Termination" is any termination of the Employee's
employment with the Company or with any of its Related
Corporation for reasons other than (i) the Employee's death, (ii)
the Employee's total disability as defined in the Plan, (iii) the
Employee's retirement under circumstances that entitle the
Employee to full benefits under one or another of his employer's
retirement or pension plans or programs generally applicable to
salaried employees, or (iv) termination for misconduct as defined
in Section 18 hereof, and (b) a "Change in Control" means any of
the following events if they occur after the date of grant of
this option: the direct or indirect beneficial ownership (within
the meaning of Section 13(d) of the Securities Exchange Act of
1934 (the "Exchange Act") and Regulations 13D - G thereunder) of
thirty percent (30%) or more of the class of securities then
subject to this option is acquired or becomes held by any person
or group of persons (within the meaning of Section 13(d)(3) of
the Exchange Act), or the sale, mortgage, lease or other transfer
in one or more transactions not in the ordinary course of the
Company's business of assets or earning power constituting more
than fifty percent (50%) of the assets or earning power of the
Company and its Related Corporations (taken as a whole) to any
such person or group of persons.
21. Provision of Documentation to Employee. By signing this
Agreement, the Employee acknowledges receipt of a copy of this
Agreement and a copy of the Company's 2000 Stock Option Plan.
22. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of
Utah.
23. Holding Period. The Employee acknowledges that if the shares
acquired upon exercise of this option are not held for at least
twelve (12) months following the date of grant, the grant of this
option will be deemed a purchase that may be matched against any
sale of the Company's securities occurring within twelve (12)
months of the grant and may create liability for the Employee
pursuant to Section 15(b) of the Securities Exchange Act of 1934,
as amended. Certain holding periods are also required under the
Internal Revenue Code of 1986, as amended, in order for this
option to qualify as an incentive stock option.
IN WITNESS WHEREOF the Company and the Employee have caused
this instrument to be executed, and the Employee whose signature
appears below acknowledges receipt of a copy of the Plan and
acceptance of an original copy of this Agreement.
EMPLOYEE: COMPANY:
XX. XXXXXXXXXXX'X ORIGINAL FORMULAS,
INC.
/s/ Xxxxxx Xxxxx By: /s/ Xxxxxx Xxxxx
Its: President
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