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Exhibit 10.3
VENTURI TECHNOLOGY ENTERPRISES, INC.
NON-STATUTORY STOCK OPTION AGREEMENT
This Non-Statutory Stock Option Agreement (the "Agreement") made and
entered into as of the 1st day of July, 1997, by and between Venturi Technology
Enterprises, Inc., a Nevada corporation with its principal place of business in
Utah (the "Company"), and Xxxxxx Xxxxxxxxxx (the "Optionee"), pursuant to the
Consultant Program of the Dual Stock Option Plan of the Company (the "Plan")
which reserves for issuance to persons serving the Company and its subsidiaries
as directors and consultants certain shares of the Company's no par value common
stock (the "Capital Stock"). As used herein, the term "subsidiary" shall mean
any present or future corporation which would be a "subsidiary corporation" of
the Company, as that term is defined in Section 424(f) of the Internal Revenue
Code of 1986, as amended.
WHEREAS, the Company desires to carry out the purposes of the Plan by
affording the Optionee, who is the Company's Chief Financial Officer, an
opportunity to purchase shares of Capital Stock by means of a grant of a
non-statutory stock option, as hereinafter provided;
NOW, THEREFORE, based upon the mutual covenants and conditions contained
herein, the parties hereto have agreed to and do hereby agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right
and option (the "Option") to purchase all or any part of an aggregate of Four
Hundred Thousand (400,000) shares of the Capital Stock (such number being
subject to adjustment as provided in Paragraph 6 hereof and hereinafter called
the "Option Shares") on the terms and conditions herein set forth.
2. Purchase Price. The purchase price of the Option Shares shall be $0.01
per share.
3. Terms of Option. The Option shall automatically terminate upon the
date ten (10) years subsequent to the Effective Date, subject to earlier
termination as provided in Paragraph 5 hereof. The Board of Directors of the
Company in its sole discretion deems there to be satisfactory and sufficient
consideration for the grant of this Option taking into account, among other
factors, the services that Optionee has rendered to the Company. The Option may
be exercised as to any or all of the available Option Shares. The purchase price
of the shares as to which the Option shall be exercised shall be paid in full at
the time of exercise either in cash, or, subject to the approval of the Board,
by promissory note, in shares of the Company's stock, or a combination of cash,
promissory note and/or shares of the Company's stock. The Optionee shall not
have any of the rights of a shareholder with respect to the shares covered by
the Option as to which there has been no exercise of the Option.
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4. Nontransferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Optionee, only by the Optionee. More
particularly (but without limiting the generality of the foregoing), the Option
may not be assigned, transferred (except as provided above), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. Death or Disability of Optionee. If the Optionee shall die, the Option
may be exercised (to the extent that the Optionee shall have been entitled to do
so at the date of the Optionee's death) by the Optionee's personal
representatives, or appropriate heirs or legatees, at any time before the date
on which the Option automatically expires pursuant to Section 3 above, at the
expiration of which time the Option shall terminate.
6. Adjustments Upon Changes in Capital Structure. In the event of changes
in the outstanding capital stock of the Company by reason of any stock dividend,
stock split or reverse split, reclassification, recapitalization, merger,
consolidation, reorganization or liquidation, the Board may make such
adjustments in (a) the aggregate number and class of shares available under the
Plan; (b) the number and class of shares to which optionees will thereafter be
entitled upon exercise of their options; and (c) the price which optionees shall
be required to pay upon such exercise; as it deems appropriate, and such
determination shall be final, binding and conclusive.
In the event of any merger of the Company (except with a subsidiary) or any
acquisition of 80 percent or more of its gross assets or stock, or any
reorganization or liquidation of the Company (an "Event"), the Board shall make
arrangements (the "Arrangements") which shall be binding upon the holders of
unexpired options then outstanding under this Plan (d) for the substitution of
new options for any portion of such unexpired options; (e) for the assumption of
any portion of such unexpired options by any successor to the Company; (f) for
the acceleration of the expiration date of any portion of such unexpired options
to a date not earlier than thirty (30) days after notice to the optionee; or (g)
for the cancellation of such portion of unexpired options in exchange for the
payment by any successor to the Company of deferred compensation to the optionee
in an amount equal to the difference between the fair market value of the Shares
subject to such unexpired portion and the aggregate exercise price of the Shares
under the terms of such unexpired portion on the date of the Event, in
installments which correspond to the vesting schedule of the unexpired option.
Notwithstanding the foregoing, if an Event should occur, the Arrangements
which the Board shall make to each portion of all outstanding unexercised
options shall be limited to either (h) providing for the substitution of new
options for such portion; (i) providing the holder of such portion with no less
than thirty (30) days to exercise such portion in full; (j) causing any
successor corporation to assume such portion in full; or (k)
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canceling such portion and causing any successor corporation to pay deferred
compensation to the holder of such portion at the time such portion would have
become exercisable, in an amount equal to the difference between the fair
market value of the Shares subject to the portion and the aggregate exercise
price of the portion on the date of the Event.
7. Method of Exercising Option. Subject to the terms and conditions of
this Agreement, the Option may be exercised by written notice to the Company at
its main office. Such notice shall state the election to exercise the Option
and the number of shares in respect of which it is being exercised and shall be
signed by the person or persons so exercising the Option. Such notice shall be
accompanied by payment of the full purchase price of such shares, and the
Company shall deliver a certificate or certificates representing such shares as
soon as practicable after the notice shall be received. In the event the Option
shall be exercised pursuant to Paragraph 5 hereof, such notice shall be
accompanied by appropriate proof of the right of such person or persons to
exercise the Option. The certificate or certificates for the shares as to which
the Option shall have been so exercised shall be registered in the name of the
Optionee and shall be delivered as provided above to or upon the written order
of the person or persons exercising the Option. All shares that shall be
purchased upon the exercise of the Option as provided herein shall be fully
paid and nonassessable.
The shares to be issued upon the exercise of options granted under the
Plan have not been registered with the Securities and Exchange Commission, nor
have they been registered or qualified under the laws of any state. The notice
exercising the Option shall be in a form satisfactory to the Company, and shall
affirm that the purchaser is acquiring the shares for the purchaser's own
account for investment and not for the purposes of resale or distribution. The
certificates for the shares shall be subject to any legend condition imposed
under the laws of any state. In addition, the certificate representing the
shares shall be subject to the following restrictions and all certificates
representing said shares shall bear a conspicuous legend containing said
restrictions:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE (THE "LAW"). SUCH
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NEITHER SAID SHARES
NOR ANY INTEREST THEREIN MAY BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER
THE ACT AND QUALIFICATION UNDER THE LAW OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED AS TO SAID SALE OR OFFER.
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9. Income Tax. It is understood that the exercise of this Option will be
taxed as a non-statutory option. In particular, the Optionee will realize
ordinary income at the time of exercise equal to the difference between the then
fair market value of the shares purchased and the exercise price, and the
Company will be entitled to a compensation expense deduction in the same amount.
10. Right of First Refusal.
A. Initiation of Right of First Refusal. Each time the Optionee
exercises the Option and acquires Option Shares until the initial public
offering of the Corporation's Capital Stock, the Optionee (which for purposes of
this Section 10 shall include the Optionee's heirs, executors, administrators
and transferees, and shall be referred to as the "Shareholder") shall not sell,
pledge, assign, or otherwise transfer such Option Shares without first offering
to the Corporation or its designees the right and option to purchase said
shares as provided hereinafter in this Section 10 (the "Right of First
Refusal"). Notwithstanding the above, the Optionee may sell or transfer said
Option Shares to the Optionee's spouse or children, or to a trustee or
custodian for the benefit of the Optionee or Optionee's spouse or children
without first offering said Option Shares to the Corporation or its designees,
provided such buyer or transferee agrees in writing to be bound by the
restrictions set forth in this Section 10 and Section 8 of this Agreement. In
the event of a pledge or other hypothecation of the Option Shares, then the
Right of First Refusal shall come into existence at the time of any sale or
transfer of ownership of the Option Shares pursuant to the foreclosure under
such pledge or hypothecation, provides, however, that Optionee may not pledge
the Option Shares unless the pledge holder agrees in writing at the time of the
pledge to be bound by the Right of First Refusal as contained in this Section
10 and to cause any proposed assignee or transferee of such pledge to execute
and deliver to the Corporation a similar writing prior to such assignment or
transfer.
B. Mechanics. Any Shareholder desiring to sell any or all of the
Option Shares during such time period shall give written notice to the
Secretary of the Corporation of the Shareholder's bona fide intention to sell
the Option Shares pursuant to a bona fide written offer of a third party other
than the Corporation (the "Proposed Purchaser"). The notice shall include a
photocopy of such written offer which shall specify the identity of the
Proposed Purchaser, the number of such Option Shares proposed to be sold
(hereinafter the "Offered Shares"), and the price and payment terms of the
proposed offer to buy the Offered Shares. The payment terms of the Proposed
Purchaser to the Shareholder (and of the Shareholder to the Corporation) must
be cash, cash equivalent (a certificate of deposit, shares of stock in a
publicly traded company, and the like), or a promissory note of the Proposed
Purchaser payable on date(s) specified by passage of time. The Corporation or
its designees shall have the right and option to purchase any and all of the
Offered Shares, at the price and on the payment terms specified in the
Shareholder's notice, for a period of sixty (60) days from receipt of said
notice from the Shareholder. That is, such notice by the Shareholder
constitutes an irrevocable offer by the Shareholder to sell
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any or all of the Offered Shares to the Corporation or its designees at the
price and payment terms specified in such notice for sixty days from the
Corporation's receipt of such notice.
The Corporation shall exercise its option by giving written notice (the
"Original Notice") stating the number of Offered Shares for which it is
exercising its option either by delivering such notice personally to the
Shareholder, or by depositing such notice in the United States Mail, postage
prepaid, and addressed to the Shareholder at the Shareholder's address
appearing in the Corporation's records. The Shareholder shall deliver
certificates representing the number of Offered Shares purchased by the
Corporation or its designees against payment for the account of the Shareholder
of the purchase price in compliance with the terms of the bona fide offer
within thirty (30) days of the option exercise notice.
Any offered Shares for which both the Corporation and its designees fail
to exercise their option as provided in this section, may be sold by the
Shareholder to the proposed Purchase within a period of ninety (90) days
following the end of the Corporation's sixty (60)-day option period specified
above, provided that (1) such sale is made at a price and on terms no more
favorable to the proposed Purchaser than those made available to the
Corporation and its designees under this section, (2) the Proposed Purchaser
delivers a written undertaking to the Secretary of the Corporation to be bound
by the restrictions on the Option Shares set forth in this Section 10 and
Section 8 of this Agreement, and (3) the Corporation receives an opinion of
counsel reasonably satisfactory to it that the sale to the Proposed Purchaser
complies with applicable federal and state corporate securities laws.
Upon receipt of a writing from Shareholder and Proposed Purchaser that the
foregoing conditions have been satisfied and the purchase price paid to the
Shareholder by the proposed Purchasers, the Corporation shall transfer the
ownership of record to the Proposed Purchaser (and reissue the certificate).
If within this ninety (90)-day period the Shareholder does not enter into
an agreement for such a sale of Offered Shares to the Proposed Purchaser which
is consummated within thirty (30) days of the execution thereof, the Right of
First Refusal shall be revived as to the Offered Shares which shall not be sold
or transferred unless the Shareholder first offers the Corporation the right
and option to repurchase any and all such Option Shares in accordance with this
section.
Any transfer or purported transfer of the Option Shares or any interest
therein shall be null and void unless the terms and conditions of this Section
10 are strictly observed and followed, or such terms and conditions are waived
by the Corporation's Board of Directors.
In addition to the legend described in Section 8 of this Agreement, the
Corporation is authorized to place the following conspicuous legend on all
certificates representing Option Shares:
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THESE SHARES ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS, INCLUDING A RIGHT
OF FIRST REFUSAL, AS SET FORTH IN A NON-
STATUTORY STOCK OPTION AGREEMENT
DATED JULY 1, 1997 ON FILE WITH THE
SECRETARY.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date written above, to be effective as of the Effective
Date written above.
OPTIONOR:
VENTURI TECHNOLOGY ENTERPRISES, INC.
By:--------------------------------
Its:----------------------------
OPTIONEE:
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XXXXXX XXXXXXXXXX
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