EMPLOYMENT AGREEMENT
Exhibit
10.1
AGREEMENT
dated as of September 22, 2006 by and between Sparta Commercial Services, Inc.,
a Nevada corporation with an address at X.X. Xxx 00, Xxx Xxxx, Xxx Xxxx 00000
(the “Company”)
and
Xxxxxxx X. Xxxxx (“Executive”)
with
an address at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000.
WHEREAS,
the Company and Executive wish to enter into an agreement relating to the
employment of Executive by the Company;
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein and
for
other good and valuable consideration, the parties agree as
follows:
1. Term
of Employment. Subject to the provisions of Section 8 of this Agreement and
on the other terms and subject to the conditions set forth herein, Executive
shall be employed by the Company commencing on the date hereof (the
“Commencement Date”) and ending on the last day of the third anniversary of the
Commencement Date (the “Employment Term”). Notwithstanding the preceding
sentence, the Employment Term shall be extended for an additional one (1) year
period upon the written agreement of the Company and Executive. Additional
extensions may be agreed upon by the Company and Executive from time to time.
“Employment Term” shall include any extension that becomes applicable pursuant
to the preceding sentence.
2. Position.
(a) During
the Employment Term, Executive shall serve as the Company’s Executive Vice
President. In such position, Executive shall have the powers, duties and
responsibilities that are customary for such position in a corporation of the
size, type and nature of the Company and shall perform such other duties as
the
Company’s Board of Directors or Company’s Chief Executive Officer (“CEO”),
as
the case may be, shall determine in their reasonable discretion, including
those
duties currently performed on behalf of the Company’s affiliates. In addition,
Executive shall act as the Company’s interim Chief Financial Officer commencing
after the audit of the Company’s books and records for the fiscal year ended
April 30, 2006 shall have been delivered and accepted by the Company and
thereafter until his replacement shall have been appointed. Executive shall
report exclusively to the Company’s CEO. Executive shall comply with all
federal, state and local laws applicable to his duties and also shall comply
with the rules and regulations of any self-regulatory organization (as such
term
is defined in Rule 3(a)(26) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) having jurisdiction over the Company.
(b) During
the Employment Term, Executive will devote his full business time to the
performance of his duties hereunder and will not engage in any other business,
profession or occupation for compensation or otherwise which would conflict
with
the rendition of such services either directly or indirectly, without the prior
written consent of the CEO. Nothing contained herein shall preclude Executive
from (i) serving on corporate, civic and charitable boards or committees and
(ii) managing his personal investments; provided
that
none of
the
activities set forth in clauses (i) and (ii) interfere in any material respect
with the performance of Executive’s employment hereunder or conflict in any
material respect with the business of the Company; and further provided that
no
such non-employment activities shall be conducted at the Company’s offices or
using the Company’s facilities.
3. Base
Salary. During
the Employment Term, the Company shall pay Executive a base salary (the “Base
Salary”) at the annual rate of $185,000 payable in regular installments in
accordance with the Company’s usual payment practices. Executive shall be
entitled to such annual increases in his Base Salary, if any, as may be
determined in the sole discretion of the Company’s Board of Directors or of the
Compensation Committee thereof.
4. Additional
Compensation. In
addition to salary and other compensation specified in this agreement, Executive
may from time to time, receive such additional compensation (“Additional
Compensation”) from the Company in such form or forms as may be determined by
the Company’s Board of Directors or the Compensation Committee thereof from time
to time in order to more fully compensate Executive for the true value of his
services to the Company.
5. Equity
Arrangements.
(a) Grant
of Option.
Executive shall be entitled to a grant of non-qualified options (the
“Grant”)
to
purchase up to 4,000,000 shares of the Company’s Common Stock, $.001 par value
per share (the “Option Shares”), at a price equal to 110% of the average closing
price of the Company’s Common Stock for the five (5) trading days immediately
preceding the Commencement Date, subject to stock splits and to the terms of
the
Grant of Option set forth in Exhibit A hereto. Subject to Section 8 of this
Agreement, Executive’s rights to such shares of stock shall vest as follows:
(i) 20
% of
the Option Shares on the Commencement Date;
(ii) 20
% the
Option Shares on the first anniversary of the Commencement Date;
(iii) 30
% the
Option Shares on the second anniversary of the Commencement Date;
and
(iv) 30%
the
Option Shares on the third anniversary of the Commencement Date.
(b) Company
Repurchase Option.
Following the termination of Executive’s employment hereunder, if Executive
determines to sell all or any portion of the Option Shares that he has purchased
(other than Option Shares included in a registration statement filed under
the
Securities Act of 1933, as amended (the “Securities Act”)), Executive shall
first offer to sell such Option Shares to the Company by providing written
notice to the Company setting forth the number of Option Shares to be sold.
If
the Company elects to purchase all or part of such Option Shares so offered
the
purchase price per share therefor shall equal 90% of the average daily bid
price
per
share of the Company’s Common Stock during the 7-trading day period following
receipt by the Company of such notice. If the Company elects to purchase less
than all of the Option Shares so offered, the purchase price per share shall
be
100% of the average daily bid price per share of the Company’s Common Stock
during the 7-trading day period following receipt by the Company of such notice.
The Company shall notify Executive in writing of its decision whether to
purchase any or all of the Option Shares so offered within three days of the
end
of such 7-trading day period. If the Company elects to purchase such Shares,
the
Company shall pay the full purchase price therefor within thirty (30) days
of
the Company’s election to so purchase. If the Company does not so elect or fails
to notify Executive of its election within the time specified herein, Executive
shall be permitted to sell such Option Shares in the open market in accordance
with the applicable rules and regulations of the Securities and Exchange
Commission.
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(c) Volume
Limitation on Sales of Option Shares.
If the
Company elects not to purchase all of the Option Shares pursuant to Section
5(b), Executive may sell any remaining Option Shares in the open market provided
that the number of Option Shares Executive may sell in any one calendar month
shall be the lesser of the average daily trading volume for the month
immediately preceding such sale or the number of Option Shares Executive may
sell pursuant to Rule 144 of the Securities Act.
(d) Accelerated
Vesting.
If
there shall be a change in control of the Company and this Agreement is not
assumed by the person or entity acquiring control, all unvested Options shall
be
deemed vested on the date immediately prior to the event resulting in such
change in control. For purposes of this Agreement, the phrase “change in
control” shall mean:
(i) a
transaction in which any Person (as defined in Section 3(a)(9) of the Exchange
Act) becomes the Beneficial Owner (as defined in Rule 13d-3 of the Exchange
Act)
(except that a Person shall be deemed to be the Beneficial Owner of all shares
that any such Person has the right to acquire pursuant to any agreement or
arrangement or upon exercise of conversion rights, warrants or options or
otherwise, without regard to the sixty day period referred to in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s
then-outstanding securities;
(ii) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board, and any new director whose election by the Board
or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved but excluding for this
purpose any such new director whose initial assumption of office occurs as
a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened
solicitation of proxies or consents by or on behalf of an individual,
corporation, or partnership, group, associate or other entity or Person other
than the Board, cease for any reason to constitute at least a majority of the
Board;
3
(iii) the
consummation of a merger or consolidation of the Company with any other entity,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of
the surviving or resulting entity) more than 50% of the combined voting power
of
the surviving or resulting entity outstanding immediately after such merger
or
consolidation; or
(iv) the
Company disposes of all or substantially all of the consolidated assets of
the
Company (other than such a sale or disposition immediately after which such
assets will be owned directly or indirectly by the shareholders of the Company
in substantially the same proportions as their ownership of the common stock
of
the Company immediately prior to such sale or disposition).
(e) Registration
Rights.
If at
any time the Company proposes to file a registration statement under the
Securities Act with respect to an offering by the Company for its own account
or
for the account of any holders of the Company’s Common Stock or for an
underwritten offering of the Company’s Common Stock (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that may
be
adopted by the Securities and Exchange Commission) or (ii) a registration
statement filed in connection with an exchange offer or offering of securities
solely to the Company’s existing security holders), then the Company shall give
written notice of such proposed filing to Executive as soon as practicable
(but
in no event less than 20 days before the anticipated filing date), and such
notice shall offer Executive the opportunity to register such number of Option
Shares as Executive request (a “Piggy-Back Registration”).
In
the
case of a registration statement filed by the Company for its own account or
for
the account of any holders of its Common Stock and not involving an underwritten
offering of Common Stock, the number of Options Shares that Executive may
include in such registration statement shall be unlimited. In the case of a
registration statement involving an underwritten offering of the Company’s
Common Stock, the Company shall use commercially reasonable efforts to cause
the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Option Shares requested by Executive to be included in a Piggy-Back
Registration on the same terms and conditions as any similar securities of
the
Company or any other security holder included therein and to permit the sale
or
other disposition of such Option Shares in accordance with the intended method
of distribution thereof; provided, however, that the determination of the
managing underwriter or underwriters of such offering shall be conclusive as
to
the number of Option Shares to be included in such registration statement.
Executive shall
have
the
right to withdraw his request for inclusion of any Option Shares in any
registration statement by giving written notice to the Company of its request
to
withdraw.
4
Executive’s
right to participate in Piggy-Back Registrations shall continue until Executive
is permitted to sell all of his Option Shares without restriction under Rule
144
of the Securities Act.
6. Employee
Benefits. During the Employment Term, Executive shall be provided, in
accordance with the terms of the Company’s employee benefit plans as in effect
from time to time, health insurance and short term and long term disability
insurance, retirement benefits and fringe benefits (collectively “Employee
Benefits”) on the same basis as those benefits are generally made available to
other employees of the Company. Executive shall be entitled to paid vacation
of
four (4) weeks per annum during the first year Employment Term and five (5)
weeks during each additional year of the Employment Term. Such vacation shall
be
taken at times consistent with the proper performance by the Executive of his
duties and responsibilities and with the approval of the CEO. Vacation not
taken
in any calendar year shall not carry forward to any future year. Executive
may
work from home up to two (2) business days per month, subject to approval by
the
CEO. If Executive works from home more than two (2) business days per month,
any
such additional days shall be deducted first from Executive’s accrued but unused
vacation days and then from allowable sick days, either in the calendar year
in
which such additional days are taken or the next succeeding calendar year,
as
applicable.
7. Business
Expenses. During the Employment Term, reasonable business expenses incurred
by Executive in the performance of his duties hereunder shall be reimbursed
by
the Company in accordance with Company policies.
8. Termination.
Notwithstanding any other provision of this Agreement:
(a) By
the
Company for Cause or By Executive for Executive’s Convenience.
(i) The
Employment Term and Executive’s employment hereunder may be terminated by the
Company for Cause (as defined below) or by Executive’s resignation for his
convenience.
(ii) For
purposes of this Agreement, “Cause”
shall
mean (A) the Executive’s continued failure to substantially perform the
duties of his position or breach of material terms of this Agreement, after
notice (specifying the details of such alleged failure) and a reasonable
opportunity to cure if such breach can be cured; (B) any willful act or omission
which is demonstrably and materially injurious to the Company or any of its
subsidiaries or affiliates; (C) conviction or plea of nolo contendere to a
felony or other crime of moral turpitude other than involving acts of
negligence; or (D) willful failure to carry out the legitimate directives of
the
Company’s Board of Directors or the CEO. No act or failure to act will be deemed
“willful” (i) unless effected without a reasonable belief
that such action or failure to act was in or not opposed to the Company’s best
interest; or (ii) if it results from any physical or mental
incapacity.
5
(iii) If
Executive’s employment is terminated by the Company for Cause, or if Executive
resigns, Executive shall be entitled to receive (A) any accrued but unpaid
Base Salary through the date of termination; (B) such compensation and Employee
Benefits, if any, as to which Executive may be entitled under the employee
compensation and benefit plans of the Company; (C) any reimbursable business
expenses incurred; and (D) any accrued but unpaid Additional Compensation
through the termination date. Following such termination of Executive’s
employment by the Company for Cause or resignation by Executive, except as
set
forth in this Section 8(a), Executive shall have no further rights to any
compensation or any other benefits under this Agreement, including without
limitation the right to receive unvested Option Shares.
(b) Disability,
Death or Retirement.
(i) The
Employment Term and Executive’s employment hereunder shall terminate (A) upon
his death; (B) if Executive becomes physically or mentally incapacitated for
a
period of indefinite duration and is therefore unable for a period of two (2)
consecutive months or for an aggregate of three (3) months in any twelve (12)
consecutive month period to perform his duties, (such incapacity is hereinafter
referred to as “Disability”);
and
(C) upon his Retirement (as defined below). Any question as to the existence
of
the Disability of Executive as to which Executive and the Company cannot agree
shall be determined in writing by a qualified independent physician mutually
acceptable to Executive and the Company. If Executive and the Company cannot
agree as to a qualified independent physician, each shall appoint such a
physician and those two physicians shall select a third who shall make such
determination in writing. The determination of such third physician shall be
binding upon the parties hereto. For purposes of this Agreement, “Retirement”
shall
mean Executive’s voluntary resignation any time after attaining age 65 (or at
any earlier date with the permission of the Board).
(ii) Upon
termination of Executive’s employment hereunder for death, Disability or
Retirement, Executive or his estate (as the case may be) shall be entitled
to
receive (A) any accrued but unpaid Base Salary through the end of the month
in
which such termination occurs, (B) a pro rata portion of any Additional
Compensation that the Executive would have been entitled to receive pursuant
to
Section 4 hereof in such year based upon the percentage of the employment
year that shall have elapsed through the date of Executive’s termination of
employment, payable when such Additional Compensation would have otherwise
been
payable had the Executive’s employment not terminated, (C) the opportunity to
exercise vested stock options and Executive’s stock options scheduled to vest
during the year following such termination (i) in the case of death or
Disability, for six months following such termination or (ii) in the case of
Retirement,
for one year following such termination, (D) a pro rata portion of any long
term
incentive granted to the Executive and (E) such compensation and Employee
Benefits, if any, as to which he may be entitled under the employee compensation
and benefit plans and arrangements of the Company, (F) any reimbursable business
expenses incurred; and (G) any accrued but unpaid Additional Compensation
through the termination date. Following such termination of Executive’s
employment due to death, Disability or Retirement, except as set forth in this
Section 8(b), Executive shall have no further rights to any compensation or
any
other benefits under this Agreement, including without limitation the right
to
receive unvested Option Shares.
6
(c) By
the
Company without Cause.
(i) The
Employment Term and Executive’s employment hereunder may be terminated by the
Company without Cause at any time upon thirty (30) days prior written notice
to
Executive.
(ii) If
Executive’s employment is terminated by the Company without Cause (other than by
reason of death or Disability or bankruptcy of the Company), Executive shall
be
entitled to receive (A) his Base Salary through the end of the then current
Employment Term, plus any accrued Severance pursuant to clause D of this Section
8(c)(ii), payable in accordance with the Company’s standard payroll policy, (B)
unpaid Additional Compensation for the fiscal year prior to termination payable
when such Additional Compensation would have been payable if Executive’s
employment had not terminated; (D) payment equal to the Severance in accordance
with Section 9 hereof; (E) such vested compensation and Employee Benefits,
if any, as to which Executive may be entitled under the employee compensation
and benefit plans and arrangements of the Company; (F) any reimbursable business
expenses incurred through the termination date; and (G) immediate acceleration
of all unvested stock options granted pursuant to Section 5(a)
hereof.
(d) Notice
of Termination.
Any
purported termination of employment by the Company or by Executive (other than
due to Executive’s death or in accordance with the provisions of Section 1
hereof) shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 12(i) hereof. For purposes of this
Agreement, a “Notice
of Termination”
shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of employment under
the
provision so indicated.
9.
Severance.
Subject
to the provisions of Section 8(c) of this Agreement, Executive shall earn
additional "Severance"
compensation based on Executive's base salary according to Executive's length
of
service with the Company. Executive shall earn eight weeks of his base salary
as
of the date of termination for the first full year of service hereunder, plus
four weeks for the second full year of service hereunder, and plus five
weeks
for
each succeeding year of service thereafter, up to an aggregate of seventeen
(17)
weeks of such base salary. All Severance payments will be paid in accordance
with the Company’s regular payroll policy.
7
10. Confidentiality.
Executive
will not at any time (whether during or after his employment with the Company),
unless required by a court or administrative agency, disclose or use for his
own
benefit or purposes or the benefit or purposes of any other person, firm,
partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than the Company and any of its
subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or affiliate
of the Company, provided that the foregoing shall not apply to information
which
is not unique to the Company or which is generally known to the industry or
the
public other than as a result of Executive’s breach of this covenant. Executive
further understands that any processes, formulae, methods of doing business,
software or other programs or other developments (collectively “Developments”)
created by him for use by the Company during the Employment Term, whether or
not
developed during normal business hours or at Company facilities, shall be and
remain the exclusive property of the Company and shall be deemed “works for
hire”, and Executive shall take all steps to ensure that title to the
Developments shall be vested with the Company, including, without limitation,
executing and delivering to the Company any and all assignments, applications
and other documents that the Company may request in order to apply for and
obtain patents, copyrights or other registrations with respect to any
Development in the United States or elsewhere. Executive recognizes and agrees
that activities in violation of this Section could cause irreparable injury
to
the Company and that such injury would be difficult or impossible to measure.
Accordingly, the Company shall be entitled to an injunction and other equitable
remedies for any violation without limiting the Company’s rights to pursue
monetary or other damages or remedies.
11. Noncompetition. During
the term of Executive’s employment with the Company and for a period of two (2)
years after he ceases to be employed by the Company, Executive shall not engage
directly or indirectly in competition with the Company or its Affiliates (as
such term is defined in Rule 501(b) of the Securities Act of 1933, as amended)
in the business of motorcycle leasing or finance. Competition shall include,
without limitation, any role as a sponsor, consultant, employee, partner or
stockholder which aids or abets any business to compete or prepare for
competition with the Company or its Affiliates in any business in which any
of
them is engaged or planning to engage. In addition, during such two-year period,
Executive shall not solicit any then current employee of the Company to engage
in activities competitive with the business of the Company. Executive further
acknowledges that the services to be performed by him under this Agreement
are
of a special, unique extraordinary and intellectual character, that the
Company’s business is national in scope and that its services are marketed
throughout the United States and that the provisions of this Section
11
are
reasonable and necessary to protect the Company’s business. As such competitive
activities in violation of this Section could cause irreparable injury to the
Company and that such injury would be difficult or impossible to measure.
Accordingly, the Company shall be entitled to an injunction and other equitable
remedies for any violation without limiting the Company’s rights to pursue
monetary or other damages or remedies.
8
12. Miscellaneous.
(e) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to conflicts of laws principles
thereof.
(f) Arbitration.
Except
as otherwise set forth herein with respect to the obtaining of injunctive
relief, any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration held in The City of New
York
and conducted in accordance with the commercial arbitration rules of the
American Arbitration Association (“AAA”) in effect at the time of the
arbitration before a single arbitrator appointed by the President of the AAA;
provided that such arbitrator shall be an expert in the field of finance and
shall not have had any previous dealings or relationships with either party.
(c) Entire
Agreement.
This
Agreement contains the entire understanding of the parties with respect to
the
employment of Executive by the Company. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with respect
to the subject matter herein other than those expressly set forth herein. This
Agreement may not be altered, modified, or amended except by written instrument
signed by the parties hereto.
(d) Waiver.
The
failure of a party to insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver of such party’s rights or
deprive such party of the right thereafter to insist upon strict adherence
to
that term or any other term of this Agreement.
(e) Severability
.
Except
to the extent set forth in Section 11 hereof, if any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions of this Agreement shall not be affected thereby.
(f)
Assignment
.
This
Agreement shall not be assignable by Executive. This Agreement may be assigned
by the Company to a company which is a successor in interest to substantially
all of the business operations of the Company. Such assignment shall become
effective when the Company notifies the Executive of such assignment or at
such
later date as may be specified in such notice. Upon such assignment, the rights
and obligations of the Company hereunder shall become the rights and obligations
of such successor company.
9
(g) Successors;
Binding Agreement.
This
Agreement shall inure to the benefit of and be binding upon personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devises and legatees.
(h) Notice.
For the
purpose of this Agreement, notices and all other communications provided for
in
the Agreement shall be in writing and shall be deemed to have been duly given
when delivered by facsimile or United States registered mail, return receipt
requested, postage prepaid, or by recognized overnight courier service addressed
to the respective addresses set forth on the execution page of this Agreement
or
such other address as either party may have furnished to the other in writing
in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
If
delivery is by facsimile:
If
to the
Company, at 000-000-0000
If
to
Executive, at 000-000-0000.
(i) Counterparts.
This
Agreement may be signed in counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same
instrument.
(j) Survival.
The
provisions of Section 8, 10, 11 and 12(b) shall survive the expiration or
termination of this Agreement regardless of the reason or reasons
therefor.
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
day and year first above written.
|
/s/
Xxxxxxx X.
Xxxxx
Xxxxxxx
X. Xxxxx
By:
/s/ X. X.
Xxxxxx
Name:
Xxxxxxx X. Xxxxxx
Title:
Chief Executive Officer
|
10
EXHIBIT
A
GRANT
OF OPTION
| 1. |
Grant
of Option
|
|
(a)
|
The
Company hereby grants to you an option (the "Option") to purchase
up to
4,000,000 shares of the Company's Common Stock, par value $.001 per
share
(the "Common Stock"). The price per share of such Common Stock shall
be to
110% of the average closing price of the Company’s Common Stock for the
five (5) trading days immediately preceding on the Commencement Date
of
the Employment Agreement (the “Employment Agreement.”) to which this Grant
of Option is attached (the “Option
Price.”).
|
|
(b)
|
Such
options shall vest in accordance with the conditions to Section 5(a),
5(d)
or 8(c)(ii) of the Employment
Agreement.
|
| 2. |
Exercise
of Option
|
Subject
to the following terms, you may exercise the vested portions of the Option
during the five (5) year period commencing on the date any such portion shall
vest; provided, however, that the Option and any rights underlying the Option,
to the extent not previously exercised shall terminate in accordance with the
provisions of the Employment Agreement. You may exercise any such portion of
the
Option in whole or in part by written notice delivered to the Company; provided,
however, that in the event you exercise any portion of the Option for less
than
the entire amount of such portion, you must exercise the Option for at least
20%
of the aggregate number of shares of the Common Stock applicable to that portion
of the Option. Payment of the Option Price for the shares of Common Stock
purchased upon exercise shall be made by delivery to the Company of a certified
or bank cashier's check payable to the Company in the amount of the Option
Price
multiplied by the number of shares of the Common Stock you intend to
purchase.
| 3. |
Delivery
of Shares of Stock
|
The
Company shall, upon payment of the Option Price for the shares of Common Stock
subject to an exercise, make prompt delivery of certificates representing such
shares of Stock to you. Subject to the terms hereof, the Company shall, at
all
times during the term of the Employment Agreement, reserve and keep available,
solely for issuance and delivery upon exercise of the Option, all shares of
Common Stock issuable upon exercise of the Option. All shares of Common Stock
issuable upon exercise of the Option shall, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable, with no liability
on the part of the holder thereof. The Company shall pay all original issue
taxes on the exercise of the Option, and all other fees and expenses necessarily
incurred by the Company in connection therewith.
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| 4. |
No
Rights in Option Stock
|
You
shall
have no rights as a stockholder in respect of any shares of Common Stock subject
to the Option unless and until you have exercised the Option in respect of
such
shares in complete accordance with the terms hereof.
| 5. |
Certain
Adjustments
|
|
(a)
|
Except
for the issuance of the shares of Common Stock pursuant to warrants
or
options issued by the Company prior to the date of this Option (which
shall not result in any adjustments
hereunder):
|
| (i) |
Stock
Dividends, Splits and Combinations
If
at any time or from time to time, the holders of Common Stock become
entitled to receive additional shares or less shares because of a
stock
dividend, stock split or combination of shares, the number of shares
in
this Option not yet exercised and the Option Price therefore shall
be
proportionately and correspondingly adjusted. For example, if the
Common
Stock shall split three-for-one, this Option shall thereafter entitle
you
to purchase upon its exercise three times the number of shares and
the
Option Price per share set forth in Section 1 hereof not yet exercised,
shall be reduced to one-third of the Option Price previously in
effect.
|
| (ii) |
Reclassifications
If
at any time or from time to time, the holders of Common Stock become
entitled to receive a different class of stock (the "Entitlement
Event"),
you shall be entitled to receive upon its exercise of this Option
after
the Entitlement Event the same number and kind of shares of stock
as a
holder of the same number of shares of the Common Stock for which
this
Option was exercisable immediately prior to the Entitlement Event
was
eligible to receive with respect to such Common Stock pursuant to
the
Entitlement Event. This provision shall include any reclassification
in
connection with a merger of another corporation into the
Company.
|
| (iii) |
Certain
Distributions
If
at any time or from time to time, the holders of the Common Stock
become
entitled to receive an extraordinary distribution consisting of cash,
debt
securities or property including stock of a subsidiary as a spin-off
or
split-off, the Company shall send written notice at least 20 days
(but no
more than 90 days) prior to the record date of shareholders eligible
to
receive such distribution to you describing the amount and nature
of the
distribution,
the time fixed for its payment and any conditions thereupon, and
if you do
not exercise this Option on or before such record date for that portion
of
the Option which is then currently exercisable, the Option Price
for
shares not yet exercised shall be reduced by an amount equal to the
value
of the extraordinary distribution per share of the Common Stock.
An
extraordinary distribution shall mean any distribution other than
periodic
payments of cash dividends from profits intended to be regular and
recurring. The value of any extraordinary distribution shall be
conclusively determined in good faith by an affirmative vote of the
Board
of Directors of the Company.
|
12
| (iv) |
Merger
Into or Sale of Assets to Another Corporation
If
at any time or from time to time, the holders of the Common Stock
become
entitled to receive stock, securities, property or cash (or any
combination of them) by reason of a capital reorganization or dissolution,
liquidation or winding-up of the Company or a merger with, a consolidation
of the Company into, or a sale of all or substantially all of the
assets
of the Company to, another corporation (the "Reorganization Event"),
you
shall be entitled to receive upon exercise of the Option after the
Reorganization Event the same stock, securities, property or cash
(or
combination of them) as a holder of the same number of shares of
the
Common Stock for which this option was exercisable immediately prior
to
the Reorganization Event was eligible to receive with respect to
such
Common Stock pursuant to the Reorganization
Event.
|
| 6. |
Nonassignability
|
Neither
the Option nor any interest therein or in the Common Stock underlying the Option
shall be encumbered, disposed of, assigned or transferred in whole or in part
by
you in any way whatsoever, except that shares of Common Stock received by you
upon exercise of the Option shall remain your property. However,
options already vested but not exercised upon your death or disability or
termination of your status as an Employee of the Company without cause may
be
exercised during the periods set forth in Section 8 of the Employment
Agreement., providing that this is still within the 5 year exercisable period
of
the option grant.
| 7. |
Restricted
Securities
|
|
(a)
|
You
represent and warrant to the Company that all shares of Common Stock
to be
acquired by you upon any exercise of the Option are purchased for
your own
account for investment, and not with a view to resale or distribution.
You
understand that the Option and the underlying shares of Common Stock
are
subject to certain restrictions against transfer in compliance with
federal and state securities laws. Each certificate representing
shares of
Common Stock issued upon exercise of the Option, unless at the time
of
exercise such shares are registered under the Securities Act of 1933
as
amended ("Securities Act"), shall bear the following or a similar
restrictive legend thereon:
|
13
"THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH
SALE OR DISPOSITION MAY BE EFFECTED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
IN
FORM AND SUBSTANCE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933 AS AMENDED AND THAT THE SALE OR DISPOSITION
MAY
BE MADE IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS."
| (b) |
You
understand that the Option granted hereby is a non-qualified option
and
that you are solely responsible for any income or other taxes that
may
result
from the exercise of the Option.
|
14
