EXHIBIT 10.38
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the 1st day
of July , 2000, by and between UTG Communications International, Inc. (the
"Company") and Klaus Brenner (EXECUTIVE).
WHEREAS, EXECUTIVE serves the Company as Director and Treasurer, as
well as Mnager for a subsidiary without the benefit of a written employment
agreement; and
WHEREAS, the Company and EXECUTIVE desire to secure the continued
employment of EXECUTIVE and to memorialize EXECUTIVE's terms of employment by
entering into an agreement setting forth the terms of such employment;
NOW THEREFORE, in consideration of the mutual agreements hereinafter
contained, the Company and EXECUTIVE, hereby agree as follows:
15. EMPLOYMENT AND TERM. The Company hereby employs EXECUTIVE as
President and Chief Executive Officer and EXECUTIVE hereby accepts such
employment and agrees to devote a twenty (20%) percent of his business time and
attention to the business and affairs of the Company, excepting any periods of
vacation, illness and excepting any pursuits in which EXECUTIVE is engaging on
the date of this Agreement, or any pursuits of a similar nature, which do not
materially interfere with his duties hereunder. The initial term (the "Initial
Term") of this Agreement shall continue through June 30, 2005. Commencing July
1, 2005 and each anniversary thereafter, this Agreement shall be renewed
automatically for 12 additional months (each, a "Renewal Term") on the same
terms and conditions contained herein, unless not later than 180 days before the
expiration of any term of EXECUTIVE's employment hereunder, either the Company
or the EXECUTIVE shall have given notice to the other that it or he, does not
wish to extend EXECUTIVE's term of employment under this Agreement.
16. DUTIES. EXECUTIVE during the term hereof shall render such
services of an executive character for the Company as are assigned to him by
Company's Board of Directors (the "Board"). EXECUTIVE shall only be assigned
duties of the type, nature and dignity normally assigned to such an officer of a
corporation of the size, stature and nature of the Company and which are
consistent with the nature and status of the duties performed by EXECUTIVE as of
the date hereof. Without limiting the generality of the foregoing, EXECUTIVE
shall have general direction and control of the business and affairs of the
Company, subject to the general direction of the Board of Directors of the
Company. During the term of this Agreement, the Board shall reelect EXECUTIVE to
the office he holds on the date of this Agreement and EXECUTIVE shall have, at a
minimum, the same prerequisites of office as he had on the date hereof.
17. COMPENSATION.
a. EXECUTIVE shall receive an annual base salary, payable in
equal biweekly installments, equal to ONE HUNDRED TWENTY THOUSAND ($24,000.00)
DOLLARS (the "Base Salary"). The Base Salary will be reviewed at least annually
by the Board and will be increased if the Board reasonably determines an
increase is appropriate based upon EXECUTIVE's merit, performance and
accomplishments. The Base Salary, as the same may be increased from time to
time, shall not be reduced during the term of this Agreement.
b. This Agreement shall not affect or impair, and shall, be in
addition to any rights EXECUTIVE may have in any bonus, incentive, annuity,
savings, profit-sharing, stock option, pension or retirement plan or any life,
accident, medical, hospital or any similar group insurance program, now or
hereafter generally provided to EXECUTIVE or made available or applicable by the
Company to its salaried employees. EXECUTIVE shall be entitled to participate in
<PAGE>
all of the employee benefit plans and arrangements in which key and/or other
employees of the Company. participate, provided however, that during the Initial
Term and any Renewal Term of this Agreement, the Company shall maintain and
EXECUTIVE shall be entitled to participate in employee benefit plans and/or
arrangements which provide EXECUTIVE with at least equivalent benefits to those
in effect on the date hereof in which EXECUTIVE participates.
c. STOCK OPTIONS. The Company hereby grants to EXECUTIVE the
option to purchase such number of shares of common stock as equal one percent
(0.2%) of the number of shares of common stock to be outstanding immediately
following expiration of each of the five Employment Years (as defined below) of
the Initial Term of this Agreement (each, an "Option"). In computing such number
of shares of common stock outstanding, any and all shares which may be acquired
upon the exercise of any outstanding warrant, option or other right, excluding
the Option, shall be deemed outstanding. Each such Option shall be for a term of
five (5) years from the date of such Option at an exercise price of $5.00 per
share, subject to adjustment for dilution following the date of this Agreement,
in the same manner provided for in the Option Agreement provided for below. Each
Option shall be evidenced by an option agreement in the form attached hereto as
EXHIBIT A that shall be executed and delivered by the Company to EXECUTIVE at
the end of each Employment Year (the "Option Agreement"). Furthermore,
notwithstanding anything contained in this Agreement or the Option Agreement to
the contrary, any Option to be granted to EXECUTIVE pursuant to this Paragraph
3(c) shall be upon terms and conditions no less favorable than the stock options
which may be granted to senior executives of the Company or its affiliates,
including but not limited to any so-called registration rights. As used in this
Agreement, the term "Employment Year" shall mean the twelve consecutive month
period commencing on the execution date ("Execution Date") of this Agreement and
each subsequent consecutive twelve month period during the Initial Term
commencing on the anniversary date of the Execution Date.
<PAGE>
d. The Company may also pay to EXECUTIVE an annual bonus based
upon the attainment of levels of profitability or other financial targets to be
established by the Board.
18. EXPENSES. The Company shall promptly pay or reimburse
EXECUTIVE for all expenses reasonably incurred by EXECUTIVE in performing his
duties under this Agreement including but not limited to travel, lodging, meals,
entertainment and club and association membership expenses. The Company shall
also promptly pay or reimburse EXECUTIVE for all automobile lease expenses
incurred with respect to the car presently leased and used by EXECUTIVE in
connection with the business of the Company or for any replacement vehicle
leased by EXECUTIVE upon comparable terms. Alternatively, at EXECUTIVE's option,
the Company shall pay EXECUTIVE an automobile allowance equal to the aforesaid
amount.
19. VACATION. EXECUTIVE will be entitled to a number of paid
vacation days, leave for holidays and personal days in each calendar year
consistent with EXECUTIVE's position and status, but not less than four weeks
per year.
20. TERMINATION. EXECUTIVE's employment hereunder may be
terminated under the following circumstances and for no other reason whatsoever:
a. DEATH. EXECUTIVE's employment hereunder shall terminate upon
his death. .
B. DISABILITY. If, as a result of EXECUTIVE's incapacity due to
physical or mental illness, EXECUTIVE is unable to perform his duties, services
and responsibilities hereunder or has been absent from his duties hereunder on a
full-time basis for nine consecutive months or for 300 days, or more in the
aggregate in any consecutive 12-month period, the Company may terminate
EXECUTIVE's employment hereunder.
<PAGE>
C. CAUSE. EXECUTIVE's employment hereunder may be terminated at
the Company's option at any time for "Cause". For purposes of this Agreement,
the term "Cause" shall mean and be limited to (i) a willful and material breach
of this Agreement by EXECUTIVE which has not been cured within thirty (30) days
after Notice of Non-Compliance has been given by the Company to EXECUTIVE, and
(ii) conviction of EXECUTIVE of a felony for theft, embezzlement or fraud. A
Notice of Non-Compliance shall set forth in reasonable detail the facts and
circumstances which provide a basis for the termination of EXECUTIVE's
employment under this Agreement and which shall indicate the specific clause of
this Section 6(c) relied upon. Notwithstanding the foregoing, EXECUTIVE shall
not be deemed to have been terminated for Cause unless EXECUTIVE has received a
Notice of Termination together with a copy of a resolution, duly approved by the
affirmative vote of a majority of the entire membership of the Board (excluding
EXECUTIVE, if EXECUTIVE is a member of the Board) finding that EXECUTIVE engaged
in the conduct set forth in clause (i) or (ii) of this paragraph 6(c).
D. TERMINATION BY EXECUTIVE.
(i) EXECUTIVE may terminate his employment hereunder (A) for
Good Reason, (B) within 180 days of the occurrence of a
Transaction, as defined in Section 8 hereof, or (C) if his health
should become impaired to an extent that his continued
performance of his duties hereunder would be reasonably likely to
have a material adverse effect upon his physical or mental health
or his life, or (D) otherwise at EXECUTIVE's option upon 90 days
notice to the Company.
(ii) For purposes of this Agreement, "Good Reason" shall
mean a failure by the Company to comply with any material
obligation of the Company under this Agreement which has not been
cured within thirty (30) days, (ten (10) days with respect to
payment of Base Salary) after receipt by the Company of notice of
such noncompliance has been given by EXECUTIVE to the Company,
including, without limitation, any reduction in Base Salary,
failure of EXECUTIVE to be entitled to participate in employee
<PAGE>
benefit plans or arrangements which provide EXECUTIVE with at
least equivalent benefits to those in effect on the date hereof
in which key and/or other employees of the Company participate,
or any material change in EXECUTIVE's position, duties, or
offices, as specified herein, or in working conditions, including
but not limited to a change in job responsibilities, a
restructuring or redefining of position, responsibilities,
assigned duties, person(s) to whom EXECUTIVE reports, or his
relocation or transfer.
e. 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 EXECUTIVE's
employment under the provision so indicated.
f. "Date of Termination" shall mean (i) if EXECUTIVE's employment
is terminated by his death, the date of his death, (ii) if EXECUTIVE's
employment is terminated due to disability pursuant to paragraph (b) of this
Section 6, thirty (30) days after the date a Notice of Termination is given,
(iii) if EXECUTIVE's employment is terminated for Cause pursuant to paragraph
(c) of this Section 6, the date specified in the Notice of Termination, (iv) if
EXECUTIVE terminates his employment for health reasons or at his option pursuant
to paragraph (d)(i)(C) or (D) of this Section 6, the later of the date specified
in the Notice of Termination or thirty (30) days after the date on which a
Notice of Termination is given, and (v) if EXECUTIVE's employment is terminated
for any other reason, the date on which a Notice of Termination is given.
<PAGE>
21. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
a. During any period that EXECUTIVE fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), EXECUTIVE shall continue to receive his full salary (and
all benefits) at the rate then in effect for such period until his employment is
terminated pursuant to Section 6 hereof; PROVIDED, HOWEVER, that payments so
made to EXECUTIVE during the disability period shall be reduced by the sum of
the amounts, if any, payable to EXECUTIVE at or prior to the time of any such
payment under disability benefit plans of the Company or under the Social
Security disability insurance program. If EXECUTIVE's employment is terminated
by the Company for disability pursuant to paragraph (b) of Section 6, on the
Date of Termination the Company will pay to EXECUTIVE in a lump sum payment the
sum of (i) his full Base Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, and (ii) all other cash
compensation earned by EXECUTIVE pursuant to Section 3 hereof, if any, prior to
the Date of Termination which has not previously been paid to EXECUTIVE on or
prior to the Date of Termination.
b. If EXECUTIVE's employment is terminated by reason of his
death, within fifteen days (15) after the Company learns of EXECUTIVE's death,
the Company will pay a lump sum payment to such person as EXECUTIVE shall have
previously designated, in a notice filed, with the Company, or, if no such
person shall have been designated, to his estate the sum of: (i) his full Base
Salary through his date of death at the rate then in effect, and (ii) all other
cash compensation earned by EXECUTIVE pursuant to Section 3 hereof, if any,
prior to his date of death which has not previously been paid to EXECUTIVE on or
prior to his date of death.
<PAGE>
c. If EXECUTIVE's employment is terminated by the Company for
Cause, or by EXECUTIVE at his option pursuant to Section 6(d)(i)(D), within
fifteen (15) days after the Date of Termination the Company shall pay EXECUTIVE
in a lump sum payment his full Base Salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given plus all other
cash compensation earned by EXECUTIVE pursuant to Section 3 hereof, if any,
prior to the Date of Termination which has not been paid to EXECUTIVE on or
prior to the date of Termination.
d. If the Company shall terminate EXECUTIVE's employment in
connection with a Transaction, or other than for disability or Cause, or if
EXECUTIVE shall terminate his employment for Good Reason or within 180 days of
the occurrence of a Transaction, then within fifteen (15) days after the Date of
Termination: the Company shall pay EXECUTIVE:
(i) EXECUTIVE's full Base Salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given plus
all other cash compensation earned by EXECUTIVE pursuant to Section 3
hereof, if any, prior to the Date Termination which has not been paid
to EXECUTIVE on or prior to such date;
(ii) The Company shall continue to pay EXECUTIVE his annual Base
Salary at the rate in effect at the time Notice of Termination is
given plus all other annual compensation payable to EXECUTIVE pursuant
to Section 3 hereof for the balance of the Initial Term, or the
Renewal Term then in effect, as the case may be;
(iii) All of the Options provided for in Section 3(c) shall
immediately vest, and the Company shall execute and deliver to
EXECUTIVE an Option Agreement for the balance of the Options provided
for in Section 3(c) to which EXECUTIVE would have been entitled had
this Agreement remained in effect for the entire Initial Term; and
<PAGE>
(iv) The Company shall also grant EXECUTIVE the option (the
"Termination Option") to acquire additional common stock of the
Company at a price of $5.-- per share, which price shall be subject to
adjustment for dilution following the date of this Agreement in the
same manner provided for in the Option Agreement (as adjusted the
"Strike Price"). The number of shares covered by the Termination
Option shall be equal to the quotient obtained by dividing (a) the
product of (i) the total market capitalization for the Company's
common stock on the Date of Termination, and (ii) 0.6%, and (b) the
Strike Price. On the Date of Termination the Company shall deliver to
EXECUTIVE an Option Agreement with respect to the Termination Option.
Notwithstanding anything contained in this Agreement to the
contrary, the foregoing payments and stock options shall not be
reduced by any compensation or consideration earned by EXECUTIVE from
any source and EXECUTIVE shall have no obligation to mitigate such
payments.
22. TRANSACTION.
a. For the purposes of this Agreement, the term "Transaction" shall
mean and shall deem to have occurred upon the occurrence of any of the
following, whether or not EXECUTIVE's employment is terminated:
(i) a change of more than 50 percent in the voting stock
ownership of the Company, or any operating subsidiary of Company
(each an "Operating Subsidiary") excluding transfers of equity
interests among the shareholders of record of the voting stock of
the Company as of the date of this Agreement;
<PAGE>
(ii) the consummation of any consolidation or merger of the
Company and, as a result of such consolidation or merger (x) less
than 50 percent of the outstanding common shares and 50 percent
of the voting shares of the surviving or resulting Company are
owned, immediately after such consolidation or merger, by the
owners of the Company's common shares as of the date hereof, or
(y) any person (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or "persons" acting in concert or who are
otherwise required to aggregate their holdings under the Exchange
Act, other than the owners of the common shares of the Company as
of the date hereof, shall become the beneficial owner(s) (within
the meaning of Rule 13d-3 under the Exchange Act) of 25 percent
or more of the surviving or resulting Company's outstanding
common shares;
(iii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company, or any Operating
Subsidiary shall be consummated;
(iv) the shareholders of the Company shall approve any plan
or proposal for the liquidation or dissolution of the Company;
(v) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), or "persons" acting in concert or
who are otherwise required to aggregate their holdings under the
Exchange Act, other than the owners of the common shares of the
Company as of the date hereof, shall become the beneficial
owner(s) (within the meaning of Rule 13d-3 under the Exchange
Act) of 25 percent or more of the Company's outstanding common
shares;
<PAGE>
(vi) the granting of any options or rights to acquire more
than 50 percent of the voting stock of the Company, or any
Operating Subsidiary, excluding any options or other rights
presently outstanding or hereafter granted to shareholders of
record of the voting stock of the Company as of the date of this
Agreement; or
(vii) a shifting of more than 50 percent of the net income
of the Company, or any operating Subsidiary to a nonshareholder
of record of the voting stock of the Company as of the date of
this Agreement, whether through a joint venture or otherwise.
For purposes of this Agreement, convertible securities
or options, warrants, or other rights to acquire securities of the Company, or
any Operating Subsidiary that are outstanding as of the date of this Agreement,
and any stock issued by the Company, or any operating Subsidiary pursuant to
such options or securities shall be considered to be outstanding voting stock.
b. If EXECUTIVE's employment is terminated by the Company at any time in
connection with a Transaction, or by EXECUTIVE within 180 days of the
occurrence of a Transaction, and if any payment under Section 7(d),
calculated as set forth above either alone or together with other payments
which EXECUTIVE has the right to receive from the Company hereunder or
otherwise, would constitute a :"parachute payment" (as defined in Section
28OG of the Code), such payment shall be reduced to the largest amount as
will result in no portion of the payment under Section 7(d) or otherwise
being subject to the excise tax imposed by Section 4999 of the Code. The
determination of any reduction in the payment under Section 7(d) pursuant
to the foregoing proviso shall be made by EXECUTIVE in good faith, and
such determination shall be conclusive and binding on the Company.
23. INDEMNIFICATION. The Company shall indemnify EXECUTIVE against all
liabilities, costs and expenses actually and necessarily incurred by EXECUTIVE
in connection with any suit, action or claim in which EXECUTIVE is a party or
otherwise involved in any capacity (they than a suit, action or claim by or in
the right of the Company and approved by its Board of Directors) by reason of
his employment or service as a director, officer or agent of the Company,
provided that (A) EXECUTIVE was not grossly negligent or reckless, (B) EXEUCTIVE
had reasonable cause to believe his conduct was lawful and in the best interests
of the Company and (C) EXECUTIVE's actions were performed in the course of his
employment duties. Expenses incurred in appearing at or participating in any
suit, action or claim, whether civil, criminal, administrative or investigative,
shall be paid or reimbursed by the Company as incurred in advance of final
disposition of such suit, upon receipt of an unsecured written contractual
undertaking by EXECUTIVE to reimburse or repay such amount if it is determined
that EXECUTIVE is not entitled to be indemnified by the Company pursuant to this
Paragraph 9.
24. SUCCESSORS: ASSIGNABILITY.
a. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by written agreement
in form and substance satisfactory to EXECUTIVE, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent as the
Company would be required to perform if no such succession had occurred,
provided however the foregoing shall not relieve the Company of its obligations
under this Agreement. As used in this Agreement, the "Company" shall mean the
Company, and any of its subsidiaries and any successor to all or substantially
all of the Company's business or assets that becomes bound by all of the terms
and conditions of this Agreement, whether by the terms hereof, by operation of
law, or otherwise.
<PAGE>
b. This Agreement is personal in nature and neither of the parties
hereto shall assign or transfer this Agreement or any obligations hereunder.
This Agreement shall be binding upon and inure to the benefit of and bind the
parties hereto and their respective successors, assigns and personal
representative, heirs and estate.
25. NOTICES. Any notice or other communication ("Notice") to be given to
the Company under the terms of this Agreement shall be addressed to the Company
in care of its Corporate Secretary, at its principal place of business; and any
Notice to be given to EXECUTIVE shall be addressed to him at the last home
address on file with the Company, or at such other address(es) as the party to
whom the Notice is to be given may hereafter designate in writing to the other.
Any such notice shall be deemed duly given when enclosed in a properly sealed
envelope, addressed as herein above required, registered (with return receipt
requested) and deposited (postage and registration fee prepaid) in a post office
or branch maintained by the United States Government, or personally delivered.
26. WAIVER OF BREACH. The waiver by the Company of a breach of any
provision of this Agreement by EXECUTIVE shall not operate as or be construed to
be a waiver of any subsequent breach by EXECUTIVE, and the waiver by EXECUTIVE
of a breach of any provision of this Agreement by the Company shall not operate
as or be construed to be a waiver of any subsequent breach by the Company.
27. GOVERNING LAW. The construction and interpretation of this Agreement
shall be governed by the laws of the State of Delaware.
<PAGE>
28. ENTIRE AGREEMENT. Except as otherwise set forth or referenced by the
terms of this Agreement, this Agreement constitutes the entire agreement of the
parties hereto relating to the Company's employment of EXECUTIVE and supersedes
any and all previous understandings or written arrangements. It may not be
changed except by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
REMAINDER OF THIS PAGE LEFT INTENTIALLY BLANK
<PAGE>
IN WITNESS WHEREOF, the Company and EXECUTIVE have executed this
Agreement on the day and year first above written.
ATTEST: re
UTG Communications Int. Inc.
By: /S/ UELI ERNST CEO
------------------------------------------
EXECUTIVE: Secretary and Treasurer
/S/ KLAUS BRENNER
Klaus Brenner
EXHIBIT A
STOCK OPTION AGREEMENT
----------------------
AGREEMENT, made as of this 1st day of July 2000, by and between UTG
Communications International, Inc., a corporation organized under the laws of
the State of Delaware (the "Corporation"), and Klaus Brenner, an individual
residing at ("Optionee").
W I T N E S S E T H:
-------------------
WHEREAS, the Corporation and Optionee entered into an Employment
Agreement dated July 1st, 2000 (the "Employment Agreement"; and
WHEREAS, pursuant to paragraph 3(c) of the Employment Agreement, the
Corporation is obligated to grant to Optionee the right to acquire shares of its
common stock.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, the parties hereto agree as follows:
1. GRANT OF OPTION.
The Corporation hereby grants to Optionee, subject to the terms of,
this Agreement, the right, privilege and option (the "Option") to purchase ( )
shares of Common Stock (the "Shares") on the terms. and conditions and in the
manner herein set forth, subject to adjustment as provided in paragraph 5 below
at a purchase price of ($5.00) per share (the "Purchase Price"). The Corporation
warrants and represents to Optionee that the Shares represent two (2%o) promille
of the total number of shares of Common Stock of the Corporation issued and
outstanding as of the date of this Agreement, on a fully diluted basis. Without
limiting the generality of the foregoing, in calculating such number of shares
of Common Stock outstanding any and all shares that may be acquired, upon the
exercise of any outstanding warrants or options (excluding the Option) or other
rights shall be deemed to be presently outstanding.
<PAGE>
2. METHOD OF EXERCISE OF THE OPTION.
b. Subject to the terms and conditions of this Agreement, the Option
will be exercisable by notice and payment to the Corporation in accordance with
the procedure prescribed herein. Each such notice shall:
(i) State the election to exercise the Option and the number
of Shares in respect of which it is being exercised;
(ii) contain a customary representation and agreement as to
investment intent with respect to the Shares in form reasonably
satisfactory to the Corporation's counsel; and
(iii) be signed by the person or persons entitled to
exercise the Option and, if the Option is being exercised by any
person(s) other than Optionee, be accompanied by proof,
reasonably satisfactory to the Corporation's counsel, of the
right of such person(s) to exercise the Option.
c. Upon receipt of such notice, the Corporation shall specify, by
written notice to the person(s) exercising the Option, a date and time (such
date and time being herein called the "Closing Date") and place within New York
City for payment of the full purchase price of the Shares. The Closing Date will
not be more than fifteen (15) days from the date the notice of exercise is
received by the Corporation unless another date is agreed upon by the
Corporation and the person(s) exercising the Option or is required upon advice
of the Corporation's counsel in order to meet the requirement of paragraph 8(d)
hereof. Payment of the purchase price of the Shares in respect of which the
Option is exercised will be made by such person(s) at the place specified by the
Corporation on or before the Closing Date by delivering to the Corporation a
certified or bank cashier's check payable to the order of the Corporation.
d. The Option will be deemed to have been exercised with respect
to any particular Shares if, and only if, the preceding provisions of this
paragraph 2 and the provisions of paragraph 8(d) hereof shall have been complied
with, in which event the Option will be deemed to have been exercised on the
Closing Date. Anything in this Agreement to the contrary notwithstanding, any
notice of exercise given pursuant to the provisions of this paragraph 2 will be
void and of no effect if all the preceding provisions of this paragraph 2 and
the provisions of paragraph 8(d) shall not have been complied with. The
certificate(s) for the Shares will be issued on the Closing Date (the "Date of
Issuance") and will be registered in the name the Optionee (or, if the Option is
exercised by Optionee and if Optionee so requests in the notice exercising the
Option, will be registered in the name of Optionee and another person jointly,
with right of survivorship) and will be delivered on the Closing Date to the
person(s) exercising the Option at the place specified for the Closing, but only
upon compliance with, all of the provisions of this Agreement.
e. The Shares issuable upon exercise of the Option shall, when
issued, be duly authorized, validly issued, fully paid and non-assessable and
will be free from all taxes, liens and charges with respect thereto. The
issuance of certificates for the Shares upon exercise of the Option will be made
without charge to Optionee for any tax in respect of the issuance thereof or
other cost incurred by the Corporation in connection with such exercise and the
related issuance and delivery of the Shares.
<PAGE>
3. TERMINATION OF THE OPTION. Except as otherwise stated herein, the
Option to the extent not heretofore exercised will terminate (the "Expiration
Date") five (5) years from the date of this Agreement.
5. ADJUSTMENTS. The number of Shares purchasable pursuant hereto and the
Purchase Price per Share purchasable pursuant hereto shall be subject to
adjustment from time to time on and after the Date of Issuance as hereinafter
provided in this Section 4.
5.1. ADJUSTMENT OF NUMBER OF SHARES.
5.2. If and whenever after the date of this Agreement the Corporation
shall in any manner (i) issue or sell any shares of its Common Stock (other than
pursuant to the terms of a duly authorized employee stock option plan) for less
than Market Value as determined at the time of such issuance or sale in
accordance with Section 4. 10 hereof, or, if no Market Value is available at
such time, the Appraisal Value as determined at the time of such issuance or
sale on a per share basis after giving effect to the full exercise or conversion
of the Option. or (ii) grant (whether directly or by assumption in a merger or,
otherwise) any rights to subscribe for or to purchase, or any options or
warrants for the purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock, whether or not immediately
exercisable, convertible or exchangeable (such rights, options or warrants being
herein called "Options" and such convertible or exchangeable stock or securities
being herein called "Convertible Securities"), or issue or sell (whether
directly or by assumption in a merger or, otherwise) Options or Convertible
Securities, and the price per share for which Common Stock is issuable upon,
exercise, conversion or exchange of such Options or Convertible Securities
(determined by dividing (x) the aggregate amount received or receivable by the
Corporation as considered for the issue, sale or grant of such Options or
Convertible Securities, PLUS the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise, conversion
or exchange thereof, by (y) the total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all such Options or Convertible
Securities) shall be less than the Market Value (as defined below), or if no
Market Value is available at such time the Appraisal Value per share of Common
Stock on a fully-diluted basis (after taking into account any consideration
received by the Corporation with respect to the exercise of any Options or
conversion of any Convertible Securities) on the date of such issue, sale or
grant, whether or not, the rights to exercise, exchange or convert thereunder
are immediately exercisable or (iii) declare a dividend or make any other
distribution upon any stock of the Corporation payable in Common Stock, Options
or Convertible Securities, then (A) the Purchase Price shall be reduced to a
price determined by multiplying the Purchase Price in effect prior to the
adjustment referred to in this Section 4.1 by a fraction, the numerator of which
is an amount equal to the sum of (x) the number of shares of Common Stock
outstanding immediately prior to such issue, sale, grant, dividend or
distribution, plus (y) the consideration. if any, received by the Corporation
upon any such issue or sale divided by the Market Value or Appraisal Value (as
the case may be) as determined at the time of such issue or sale, and the
denominator of which is the total number of shares of Common Stock outstanding
immediately after such issue, sale, grant, dividend or distribution; and (B) the
number of shares of Common Stock for which this Option is exercisable shall be
adjusted to equal the number obtained by dividing (x) the Purchase Price in
effect immediately prior to such issue, sale, grant, dividend or distribution
<PAGE>
multiplied by the number of shares of Common Stock for which this Option is
exercisable immediately prior to such issue, sale, grant, dividend or
distribution by (y) the Purchase Price resulting from the adjustment made
pursuant to clause (i) above.
5.3. RECORD DATE. In case at any time the Corporation shall take a
record of the holders of the Common Stock for the purpose of entitling them: (a)
to receive a dividend or other distribution payable in shares of the Common
Stock, Options or in Convertible Securities; or (b) to subscribe for or purchase
shares of Common Stock, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of the Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
5.4. CERTAIN DIVIDENDS. In case the Corporation shall pay a dividend
or make a distribution of shares of its capital stock (other than shares of
Common Stock), evidences of its indebtedness, assets or rights, warrants or
options (excluding (i) dividends or distributions payable in cash out of the
current year's or retained earnings of the Corporation, (ii), distributions
relating to subdivisions and combinations covered by Section 4.4, (iii)
distributions relating to reclassification, changes, consolidations, mergers,
sales or conveyances covered by Section 4.5 and (iv) rights, warrants or options
to purchase or subscribe for shares of Common Stock or Convertible Securities),
then in each such case the Purchase Price shall be adjusted so that the same
shall equal the price determined by multiplying the Purchase Price in effect
immediately prior to the record date mentioned below by a fraction, the
numerator of which shall be (x) the total number of shares of Common Stock then
outstanding multiplied by the Market , Value, or if no Market Value is available
the Appraisal Value, per share of Common Stock on the record date mentioned
below, less (y) the fair market value (as determined by the Board of Directors
of the Corporation or any duly authorized committee thereof) as of such record
date of said shares of stock, evidences of indebtedness or assets so paid or
distributed or of such rights, warrants or options, and the denominator of which
shall be the total number of shares of Common Stock then outstanding multiplied
by the Market Value or Appraisal Value, as the case may be, per share of Common
Stock on the record date mentioned below. Such adjustment shall be made whenever
any such dividend is paid or such distribution is made and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such dividend or distribution.
5.5. In the event of a distribution by the Corporation of stock of a
subsidiary or securities convertible into or exercisable for such stock, then in
lieu of an adjustment in the Purchase Price, the Optionee, upon the exercise
thereof at any time after such distribution, shall be entitled to receive from
the Corporation, such subsidiary or both, as the Corporation shall determine,
the stock or other securities to which such Optionee would have been entitled if
such Optionee had exercised such Option immediately prior thereto, all subject
to further adjustment as provided in this Section 4; PROVIDED, HOWEVER, that no
adjustment in respect of dividends or interest on such stock or other securities
shall be made during the term of this Option Agreement or upon the exercise of
this Option.
5.6. SUBDIVISION OR COMBINATION OF SHARES. In case the Corporation
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares
purchasable hereunder shall be proportionately increased. In case the
outstanding shares of the Common Stock of the Corporation shall be combined into
a smaller number of shares, the Purchase Price in effect immediately prior to
<PAGE>
such combination shall be proportionately increased. but in no event to greater
than the aggregate Purchase Price of all Shares in effect on the Date of
Issuance, and the number of Shares purchasable hereunder shall be
proportionately reduced.
5.7. REORGANIZATION, MERGER, ETC. Except as otherwise provided in
Section 5(d) hereof, if any capital reorganization, reclassification or similar
transaction involving the capital stock of the Corporation, any consolidation,
merger or business combination of the Corporation with another corporation, or
the sale or conveyance of all or substantially all of its assets to another
corporation, shall be proposed to be effected in such a way that holders of the
Common Stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for shares of Common Stock (a "Section 4.5 Event"),
then, the Corporation shall give the Optionee at least 30 days prior written
notice of such Section 4.5 Event, and the terms thereof, and prior to and as a
condition of such Section 4.5 Event, lawful and adequate provision shall be made
whereby the Optionee shall thereafter have the right to purchase and receive
upon the basis and upon the terms and conditions specified in this Agreement and
in lieu of the Shares of the Corporation immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding Shares equal to the number of Shares
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such Section 4.5 Event not taken place. In any
such case, appropriate provision shall be made with respect to the rights and
interests of the Optionee to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Purchase Price and of the
number of Shares purchasable upon the exercise of the Option) shall thereafter
be applicable, as nearly as may be, in relation to any stock, securities or
assets thereafter deliverable upon the exercise hereof. The Corporation shall
not effect any such Section 4.5 Event unless prior to or simultaneously with the
consummation thereof the survivor or successor corporation (if other than the
Corporation) resulting from such consolidation or merger or the corporation
purchasing such assets shall (1) assume by written instrument executed and sent
to the Optionee, the obligation to deliver to such Optionee such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Optionee may be entitled to receive, and containing the express assumption
by such successor corporation of the due and punctual performance and observance
of every provision of this Agreement to be performed and observed by the
Corporation and of all liabilities and obligations of the Corporation hereunder,
provided however that the foregoing shall not relieve the Corporation of its
obligations hereunder unless and until such survivor or successor corporation
has performed all of the Corporation's obligations hereunder and (2) deliver to
the Optionee an opinion of counsel, in form and substance reasonably
satisfactory to such Optionee, to the effect that such written instrument has
been duly authorized, executed and delivered by such successor corporation and
constitutes a legal, valid and binding instrument enforceable against such
successor corporation in accordance with its terms (except as enforcement
thereof may be subject to the effect of any applicable bankruptcy, insolvency,
reorganization. moratorium or similar law affecting creditors' rights generally,
and general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law)), and to such further effects as the
Optionee may reasonably request.
5.8. EXCEPTIONS TO ADJUSTMENT. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any adjustment of
the Purchase Price or the number of shares issuable hereunder as a result of the
issuance of the Option or the issuance of shares of the Common Stock upon
exercise of the Option. In the event any adjustment to the Purchase Price or the
number of Shares issuable upon exercise of the Option is required to be made
hereunder, and such adjustment results in an adjustment to any other security of
the Corporation outstanding prior to the Date of Issuance pursuant to the terms
of such other security as they existed prior to the Date of Issuance, then such
<PAGE>
adjustment to such other security shall not in and of itself be deemed to
require any subsequent adjustment to the Purchase Price or the number of Shares
issuable hereunder.
5.9. TREASURY SHARES. The number of shares of the Common Stock
outstanding at any time shall not include shares owned or held by or for the
account of the Corporation or any of its subsidiaries, but the disposition (but
not the cancellation) of any such shares shall be considered an issue or sale of
the Common Stock for the purposes of Section 4.
5.10. CORPORATION TO PREVENT DILUTION. In case at any time or from
time to time conditions arise by reason of action taken by the Corporation or
any of its subsidiaries, which are not adequately covered by the provisions of
this Section 4, or which might materially and adversely affect the exercise
rights of the Optionee, the Board of Directors of the Corporation shall appoint
a firm of independent certified public accountants of recognized national
standing, which may be the firm regularly retained by the Corporation, which
shall give their opinion upon the adjustment, if any, necessary with respect to
the Purchase Price, on a basis consistent with the standards established in the
other provisions of this Section 4, so as to preserve, without dilution, the
exercise rights of the Optionee. Upon receipt of such opinion, the Board of
Directors of the Corporation shall forthwith make the adjustments described
therein.
5.11. ADJUSTMENT NOTICES TO OPTIONEE. Upon any increase or decrease in
the number of Shares purchasable upon the exercise of the Option, or upon any
adjustment in the Purchase Price, then, and in each such case, the Corporation
shall promptly deliver written notice thereof to the Optionee, which notice
shall state the increased or decreased number of Shares purchasable upon the
exercise of this Option, setting forth in reasonable detail the method of
calculation on and the facts upon which such calculations are based. Such notice
shall also contain a certificate of the Corporation's independent public
accountants as to the correctness of such adjustments and calculations and to
the effect that such adjustments and calculations have been made in accordance
with the terms hereof; PROVIDED, HOWEVER, that the Corporation shall not be
required to deliver such a certificate in the case of an adjustment in the
Purchase Price resulting from a dividend in shares of Common Stock or from a
subdivision of the outstanding shares of Common Stock into a greater number of
shares. Where appropriate, such notice shall be given in advance.
5.12. DEFINITIONS.
(a) As used in this Agreement, the term Appraisal Value
shall mean the fair market value of the Corporation (determined
without any discount for the fact that the Option or Shares in
question may represent a minority interest and may be illiquid)
as determined by an independent appraiser experienced in the
appraisal of companies in the businesses in which the Corporation
is then engaged who is appointed by the Corporation; PROVIDED,
HOWEVER, that if the Optionee does not agree with the fair market
value as determined by such appraiser in accordance with the
preceding sentence, then, within 30 days of such determination,
the Optionee shall have the right to appoint an independent
appraiser of his choice who is experienced in the appraisal of
companies engaged in the businesses in which, the Corporation is
<PAGE>
then engaged. If the two appraisers agree upon an Appraisal
Value, their joint determination shall govern. If the two
appraisers cannot reach agreement within 15 days after the
appointment of the appraiser by the Optionee, the two appraisers
selected shall promptly appoint a third appraiser experienced in
the appraisal of companies engaged in the businesses in which the
Corporation is then engaged, and the unanimous decision of the
three appraisers shall govern or, if the three appraisers cannot
unanimously agree, then the average of the two appraisers closest
in amount shall be considered the Appraisal Value. The Appraisal
Value, determined as herein provided, shall be final and
conclusive on the Corporation and the Optionee and shall be
enforceable in any court having jurisdiction over a proceeding
brought to seek such enforcement. In the event that the final
Appraisal Value determined in accordance with the foregoing
exceeds the initial Appraisal Value determined by the appraiser
appointed by the Corporation by more than $50,000, then the
Corporation shall be responsible for the costs of all appraisers;
otherwise the Optionee shall be responsible for the costs of all
appraisers other than the appraiser appointed by the Corporation.
(b) As used in this Agreement, the term Market Value shall
mean a value equal to (i) the average of the high and low prices
of the Common Stock on all securities exchanges on which Common
Stock may be listed during the applicable, period listed below,
or (ii) if there shall have been no sales on any such exchange on
any day during such period, the average of the bid and asked
prices of Common Stock at the end of each such day, or (iii) if
Common Stock shall not be so listed, the average of the bid and
asked prices during such period in the over-the-counter market.
if any, in each circumstance set forth above, averaged over the
20 consecutive trading days immediately prior to the day as to
which Market Value is determined. In the event quotations for the
Common Stock are not available for each day during the twenty
consecutive day period provided above, then such Market Value
shall be determined based upon the first twenty days (which need
not be consecutive) preceding the day as of which Market Value is
to be determined for which quotations are available, provided
such twenty day period does not extend past fifty business days
from the date as of which Market Value is to be determined.
6. SPECIAL COVENANTS OF THE CORPORATION.
The Corporation covenants and agrees that until the earlier of the
Expiration Date or the exercise in full of this Option:
f. The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
directly or indirectly avoid or seek to avoid the observance or performance of
any of the terms of this Agreement, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Optionee
against dilution or other impairment. Without limiting the generality of the
foregoing, the Corporation (i) will not increase the par value of any shares of
stock receivable upon the exercise of the Option above the Purchase Price
payable therefor upon such exercise, and (ii) will take all such action as may
be necessary or appropriate in order that the Corporation may validly and
legally issue fully paid and non-assessable shares of stock upon the exercise of
the Option (including as a result of a reduction in the Purchase Price pursuant
to the terms hereof).
g. If any Shares required to be reserved for the purposes of exercise
of this Option require registration with or approval of any governmental
authority under any federal law (other than the Securities Act) or under any
state law before such Shares may be issued upon exercise of this Option, the
Corporation will, at its expense, as expeditiously as possible use its best
efforts to cause such Shares to be duly registered or approved, as the case may
be; PROVIDED, HOWEVER, that the Corporation shall not be required to so register
<PAGE>
such Shares in more than 2 states unless the Optionee agrees to pay the expenses
of such registration of each state over and above the first 2.
h. If at any time Common Stock is listed on any national securities
exchange (as defined in the Exchange Act), the Corporation will, at its expense,
obtain and maintain the approval for listing on each such exchange upon
"official notice of issuance" of all Shares issuable upon the exercise of the
Option and maintain the listing of such Shares after their issuance and the
Corporation will so list on such national securities exchange, will register
under the Exchange Act (and any similar state statute then in effect), and will
maintain such listing of, any other securities that at any time are issuable
upon exercise of the Option, if and at the time that any securities of the same
class shall be listed on such national securities exchange by the Corporation.
i. In the event that a Business Combination (as hereinafter defined)
between the Corporation and any Related Person (as hereinafter defined) is
proposed, such Business Combination shall not be valid or effective unless the
terms thereof shall provide for the payment to the Optionee for all of his
Shares of an amount not less than the highest price per share which such Related
Person paid to acquire any share of such class or series, or any share of any
class or series issuable upon exercise hereof, as the case may be, pursuant to a
tender offer, cash purchase, market transaction or privately negotiated sale not
effected on the open market within three years prior to the record date set to
determine the stockholders entitled to vote on the proposed Business
Combination. The consideration to be paid to the Holder shall be in cash or in
such other form as that in which the price determined pursuant to the foregoing
clause shall have been paid.
j. For the purposes of this Agreement, the following terms shall have
the meanings set forth below:
(iv) The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation with or into a Related
Person, (b) any sale, lease, exchange, transfer or other
disposition of all or substantially all of the assets of the
Corporation (including any voting securities of a subsidiary
of the Corporation) to a Related Person or of a Related
Person to the Corporation, (c) the issuance of any
securities of a Related Person in a share exchange for stock
of the Corporation, (d) any recapitalization of the
Corporation that would have the effect of increasing the
voting power of a Related Person, and (e) any plan or
proposal for the liquidation or dissolution of the
Corporation proposed by or on behalf of a Related Person.
(v) The term "Related Person shall mean and include any
individual, corporation, partnership or other person or
entity which, together with its "Affiliates" and Associates"
(as defined pursuant to Rule l2b-2 under the Exchange Act)
"Beneficially Owns" (as defined pursuant to Rule 13d-3 under
the Exchange Act) shares of capital stock of the Corporation
having more than ten (10) percent of the voting power of the
outstanding Voting Stock of the Corporation, and any
Affiliate or Associate of any such individual, corporation,
partnership or other person or entity.
<PAGE>
(vi) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation entitled to vote generally
in the election of directors, other than any stock having
such right only by reason of the occurrence of a
contingency.
7. NOTIFICATION BY THE CORPORATION.
In case at any time:
(v) the Corporation shall declare any dividend or make any
distribution upon its Common Stock; or
(vi) the Corporation shall offer for subscription PRO RATA to the
holders of its Common Stock any additional shares of stock
of any class or any other securities convertible into or
exchangeable for shares of stock or any rights or options to
subscribe thereto; or
(vii) the Board of Directors of the Corporation shall authorize
any capital reorganization, reclassification or similar
transaction involving the capital stock of the Corporation,
or a sale or conveyance of all or substantially all of the
assets of the Corporation, or a consolidation. merger or
business combination of the Corporation with another Person;
or
(viii) actions or proceedings shall be authorized or commenced
for a voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then, in any or more of such cases, the Corporation shall give written notice to
the Optionee, at the earliest time legally practicable (and not less than 10
days before any record date or other date set for definitive action) of the date
on which (A) the books of the Corporation shall close or a record shall be taken
for such dividend, distribution or subscription rights or options (B) such
reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation or winding-up shall take place or be voted on by
stockholders of the Corporation, as the case may be. Such notice shall also
specify the date as of which the holders of the Common Stock of record shall
participate in said dividend, distribution, subscription rights or options or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, sale,
conveyance, consolidation, merger, dissolution, liquidation or winding-up, as
the case may be. If the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of stockholders, the notice required by this Section 6 shall so
state.
8. RIGHTS AND OBLIGATIONS PRIOR TO EXERCISE OF THE OPTION.
Optionee shall have no rights, privileges or obligations as a
stockholder with respect to the Shares until payment of the Option Price as set
forth in paragraph 2 above.
9. NON-TRANSFERABILITY OF THE OPTION.
The Option will not be transferable otherwise than by will or by the
laws of descent and distribution, and the Option may be exercised during the
lifetime of Optionee only by him. More particularly, but without limiting the
generality of the foregoing, the Option may not be assigned, transferred
(except as provided in the next preceding sentence) or otherwise disposed of,
or pledged or hypothecated in any way (whether by operation of law or
otherwise), and will not be subject to execution. attachment or other process.
<PAGE>
Any assignment, transfer, pledge, hypothecation or other disposition of the
Option attempted contrary to the terms and provisions of this Agreement, or any
levy of execution, attachment or other process attempted upon the Option, will
be null and void and without effect. Any attempt to make such assignment,
transfer, pledge, hypothecation or other disposition of the Option or any
attempt to make any such levy of execution, attachment or other process will
cause the Option to terminate immediately upon the happening of any such event
if the Board of Directors of the Corporation, at any time, should, in its sole
discretion, so elect, by written notice to Optionee or to the person(s) then
entitled to exercise the Option under the provisions of paragraph 9 below;
provided, however, that any such termination of the Option under the foregoing
provisions of this paragraph 9 will not prejudice any rights or remedies which
the Corporation or any subsidiary may have under this Agreement or otherwise.
10. EXERCISE UPON DEATH.
If Optionee dies while the Option is exercisable by Optionee, the
Option may, subject to the provisions of paragraphs 8 and 10(d) hereof, be
exercised by the estate of Optionee or by the person(s) (including the estate of
any such person(s) who has died) who acquires the right to exercise the Option
by bequest or inheritance or by reason of the death of Optionee (or by reason of
the death of any person(s) entitled to exercise the Option pursuant to this
paragraph 9, at any time prior to the date set forth in paragraph 3(c) above.
11. REGISTRATION RIGHTS.
a. "PIGGYBACK" REGISTRATION RIGHTS. At least fifteen (15) days prior
to the proposed filing of a registration statement under the Securities Act for
any offering of any class of equity securities for the account of the Company or
any other Person (other than a registration statement on Form S-4 or S-8 (or any
successor forms under the Securities Act) or other registrations relating solely
to employee benefit plans or any transaction governed by Rule 145 of the
Securities Act), the Company shall give written notice of such proposed filing
and of the proposed date thereof to the Optionee, and if, on or before the
twentieth (20th) day following the date on which such notice is given, the
Company shall receive a written request, requesting that the Company include
among the securities covered by such registration statement any Company Stock
issued to Optionee or issuable to Optionee pursuant to this Option for offering
for sale in a manner and on terms set forth in such request, the Company shall
include such Company Stock in such registration statement, if filed, so as to
permit such Company Stock to be sold or disposed of in the manner and on the
terms of the offering thereof set forth in such request. Such registration,
including the initial public offering made by the Company, shall hereinafter be
called a "Piggyback Registration".
b. DEMAND REGISTRATION RIGHTS. The Optionee shall have the right
(which right is in addition to the piggyback registration rights provided for
under Section 11(a) hereto), exercisable by written notice to the Corporation
(the "Demand Registration Request"), to have the Corporation prepare and file
with the SEC, on one occasion, at the sole expense of the Corporation, a
registration statement and such other documents, including a prospectus, as may
be necessary (in the opinion of counsel for the Corporation), in order to comply
with the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), so as to permit a public offering and sale of the securities covered by
the Option by the holders thereof, for one demand registration right. In
connection with the filing of a registration statement pursuant to this Section
11(b), the Corporation shall (i) file the registration statement as
expeditiously as possible after the receipt by the Corporation of the Demand
Registration Request, and (ii) use its best efforts to have any such
registration statement declared effective at the earliest possible time.
<PAGE>
c. TERMS AND CONDITIONS OF REGISTRATION OR QUALIFICATION. In
connection with any registration statement filed pursuant to Section 11(a)
hereof, the following provisions shall apply:
(i) If the managing underwriter advises that the inclusion in
such registration or qualification of some or all of the Company Stock
sought to be registered exceeds the number (the "Saleable Number")
that can be sold in an orderly fashion without a substantial risk that
the price per share to be derived from such registration will be
materially and adversely affected, then the number of shares of
Company Stock offered shall be limited to the Saleable Number and
shall be allocated as follows:
(1) first, all the Company Stock the Company proposes to register and
(2) second, the difference between the Saleable Number and the number
of shares allocated among all other selling Shareholders pro rata on the basis
of the relative number of shares of Common Stock offered for sale by each such
Stockholder.
(ii) The Optionee will promptly provide the Company with such
information as the Company shall reasonably request in order to
prepare any such registration statement filed pursuant to this Section
11 and, upon the Company's request, Optionee shall provide such
information in writing and signed and stated to be specifically for
inclusion in the registration statement. In the event that the
distribution of the Company Stock covered by the registration
statement shall be effected by means of an underwriting, the right of
Optionee to include its Company Stock in such registration shall be
conditioned on such holder's execution and delivery of a customary
underwriting agreement, custody agreement, selling stockholder power
of attorney and similar agreements with respect thereto; provided,
however, that except with respect to information concerning such
holder and such holder's intended manner of distribution of the
Company Stock, Optionee shall not be required to make any
representations or warranties in such agreement as a condition to the
inclusion of its Company Stock in such registration.
d. All fees and expenses in connection with the preparation and filing
of any registration statement filed pursuant to Section 11 hereof (other than
underwriting fees, discounts or commissions with respect to Company Stock of the
Optionee) shall be borne solely by the Company.
e. Following the effective date of such registration statement, the
Company shall, upon the request of the Optionee, forthwith supply such number of
prospectuses (including preliminary prospectuses and amendments and supplements
thereto) meeting the requirements of the Securities Act or such other securities
laws where the registration statement or prospectus has been filed and such
other documents as are referred to in the registration statement as shall be
requested by the Optionee to permit such Optionee to make a public distribution
of their Company Stock.
f. The Company shall prepare and file such amendments and supplements
to such registration statement as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act or
such other securities laws where the registration statement has been filed with
respect to the offer and sale or other disposition of the Company Stock covered
by such registration statement during the period required for distribution of
the Company Stock, which period shall not be in excess of sixty (60) days from
the effective date of such registration statement.
g. The Company shall use its best efforts to register or qualify the
Company Stock of the Optionee covered by any such registration statement under
such securities or "Blue Sky" laws in such jurisdictions as the Optionee may
request; provided, however, that the Company shall not be required to execute a
general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction where it is not so qualified in order to comply
with such request.
<PAGE>
h. In connection with any registration pursuant to Section 11 hereof,
the Company will as expeditiously as possible:
(i) cause the Company Stock covered by such registration
statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of the Company to enable the Optionee to consummate the
disposition of such Company Stock;
(ii) promptly notify each Optionee at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, and the Company will prepare a supplement or amendment to
such prospectus so that as thereafter delivered to the purchasers of
such Company Stock, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading;
(iii) cause all Company Stock covered by the registration
statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, and, unless the same
already exists, provide a transfer agent, registrar and CUSIP number
for all such Company Stock not later than the effective date of the
registration statement;
(iv) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
actions as the holders of a majority of the voting power of the
Company Stock being sold or the underwriters retained by such holders,
if any, reasonably request in order to expedite or facilitate the
disposition of such Company Stock;
(v) make available for inspection by the Optionee, any
underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent
retained by the Optionee or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company as shall be necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information requested by any such Inspector in connection with such
registration statement;
(vi) obtain "cold comfort" letters and updates thereof from the
Company's independent public accountants and an opinion from the
Company's counsel (naming the Optionee as additional addressees) in
customary form and covering such matters of the type customarily
covered by "cold comfort" letters and opinions of counsel,
respectively, as the Optionee shall reasonably request;
(vii) supply copies of the registration statement and any
amendments thereto to Optionee at least two (2) business days prior to
filing such document with the SEC, and shall reasonably consult with
such persons and their counsel with respect to the form and content of
such filing. The Company will immediately amend such registration
statement to include such reasonable changes as the Optionee
reasonably agrees should be included therein. If Optionee shall
request a change refused by the Company may withdraw his Company Stock
from the Registration Statement;
<PAGE>
(viii) promptly provide Optionee with copies of any comment
letters or other correspondence with the SEC;
(ix) promptly notify Optionee (i) of the issuance by the SEC of
any stop order or order suspending the effectiveness of any
registration statement or the initiation of any proceedings for that
purpose, or (ii) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Company
Stock for sale in any jurisdiction, or the initiation of any
proceedings for such purpose. The Company, with the reasonable
cooperation of the Optionee, shall make every reasonable effort to
contest any such proceedings and to obtain the withdrawal of any such
order at the earliest possible moment,
(x) with a view to making available to the Optionee the benefits
of Rule 144, (i) file with the SEC in a timely manner all reports and
other documents required of the Company under the Exchange Act, and
(ii) furnish to Optionee, so long as the Optionee holds any Company
Stock subject to this Agreement, forthwith upon request (a) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (b)
a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (c)
such other information as may be reasonably requested in availing
Optionee of any rule or regulation of the SEC which permits the
selling of any such securities without registration under the
Securities Act; and
(xi) otherwise comply with all applicable rules and regulations
of the Commission, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering a period of
twelve (12) months, beginning within three (3) months after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder.
i. Optionee agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section hereof, Optionee
will forthwith discontinue disposition of its Company Stock pursuant to the
registration statement covering such, Company Stock until Optionee's receipt of
the copies of the supplemented or amended prospectus contemplated by such
Section 6. 1 (c)(viii)(B) hereof and, if so directed by the Company, such holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such holder's possession, of the prospectus
covering such Company Stock current at the time of receipt of such notice.
j. The Company shall not be required to register any Company Stock
with respect to any proposed offer or sale after a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement or if such securities shall have been
previously sold pursuant to Rule 144 under the Securities Act.
k. The Company will not, at any time after the date hereof, grant any
registration rights that conflict with, or have any priority over, the
registration rights granted hereby.
12. INDEMNIFICATION.
a. In the event of the registration or qualification of any Company
Stock of the Optionee under the Securities Act or any other applicable
securities laws pursuant to the provisions of this Section 11, the Company
agrees to indemnify and hold harmless Optionee (a "Seller"), underwriter, broker
or dealer, if any, of such Company Stock, and each other Person, if any, who
controls any such Seller, underwriter, broker or dealer within the meaning of
the Securities Act or any other applicable securities, from and against any and
all losses, claims, damages or liabilities (or actions in respect thereto),
joint or several, to which such Seller, underwriter, broker or dealer or
<PAGE>
controlling Person may become subject under the Securities Act or any other
applicable securities laws or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such Company Stock was registered or
qualified under the Securities Act or any other applicable securities laws, any
preliminary prospectus or final prospectus relating to such Company Stock, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation by the Company of any rule or regulation under the Securities Act
or any other applicable securities laws applicable to the Company or relating to
any action or inaction required by the Company in connection with any such
registration or qualification and will reimburse each such Seller, underwriter,
broker or dealer and each such controlling Person for any legal or other
expenses reasonably incurred by such Seller, underwriter, broker or dealer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action. provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or omission made in
such registration statement, such preliminary prospectus, such final prospectus
or such amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by such Seller, underwriter,
broker, dealer or controlling Person specifically and expressly for use in the
preparation thereof or, with respect to any misstatement or omission, to the
extent such misstatement or omission was corrected in a revised prospectus made
available for delivery prior to the consummation of the subject transaction.
b. In the event of the registration or qualification of any Company
Stock of Optionee under the Securities Act or any other applicable securities
laws for sale pursuant to the provisions hereof, Optionee , each underwriter,
broker and dealer, if any, of such Company Stock, and each other person, if any,
who controls Optioneee or any such underwriter, broker or dealer within the
meaning of the Securities Act, agrees severally, and not jointly, to indemnify
and hold harmless the Company, each Person who controls the Company within the
meaning of the Securities Act, and each officer and director of the Company from
and against any losses, claims, damages or liabilities, joint or several, to
which the Company, such controlling Person or any such officer or director may
become subject under the Securities Act or any other applicable securities laws
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement of any
material fact contained in any registration statement under which such Company
Stock was registered or qualified under the Securities Act or any other
applicable securities laws, any preliminary prospectus or final prospectus
relating to such Company Stock, or any amendment or supplement thereto, or arise
out of or are based upon an untrue statement or the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, which untrue statement or omission was made therein in
reliance upon and in conformity with written information furnished to the
Company by such Optionee, specifically for use in connection with the
preparation thereof, and will reimburse the Company, such controlling Person and
each such officer or director for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that no Optionee shall
be liable under this Section for any amount in excess of the net proceeds to
Optionee of Company Stock sold by it.
c. Promptly after receipt by a person entitled to indemnification
under this Section 11(k) (an "indemnified party") of notice of the commencement
of any action or claim relating to any registration statement filed under
Section 11(a) or Section 11(b) hereof or as to which indemnity may be sought
hereunder, such indemnified party will, if a claim for indemnification hereunder
<PAGE>
in respect thereof is to be made against any other party hereto (an
"indemnifying party"), give written notice to such indemnifying party of the
commencement of such action or claim, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than pursuant to the provisions of this Section
11(k) and shall also not relieve the indemnifying party of its obligations under
this Section 11(k) except to the extent that the indemnifying party is actually
prejudiced thereby. In case any such action is brought against an indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled (at its own expense) to participate in and,
to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense, with counsel reasonably satisfactory
to such indemnified party, of such action and/or to settle such action and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof. other
than the reasonable cost of investigation; provided, however, that no
indemnifying party shall enter into any settlement agreement without the prior
written consent of the indemnified party unless such indemnified party is fully
released and discharged from any such liability. Notwithstanding the foregoing,
the indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (A) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such suit, action, claim or proceeding, (B) the indemnifying party shall not
have employed counsel (reasonably satisfactory to the indemnified party) to take
charge of the defense of such action, suit, claim or proceeding, or (C) such
indemnified party shall have reasonably concluded, based upon the advice of
counsel, that there may be defenses available to it which are different from or
additional to those available to the indemnifying party which, if the
indemnifying party and the indemnified party were to be represented by the same
counsel, could result in a conflict of interest for such counsel of materially
prejudice the prosecution of the defenses available to such indemnified party.
If any of the events specified in clauses (A), (B) or (C) of the preceding
sentence shall have occurred or shall otherwise be applicable, then the fees and
expenses of one counsel or firm of counsel selected by a majority in interest of
the indemnified parties (and reasonably acceptable to the indemnifying party)
shall be borne by the indemnifying party. If, in any such case, the indemnified
party employs separate counsel, the indemnifying party shall not have the right
to direct the defense of such action, suit, claim or proceeding on behalf of the
Stockholder indemnified party and the indemnified party shall assume such
defense and/or settle such action; provided, however, that, an indemnifying
party shall not be liable for the settlement of any action, suit, claim or
proceeding effected without its prior written consent which consent shall not be
unreasonably withheld.
d. If the indemnification provided for in this Section 11 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
<PAGE>
13. REGISTRATION AND RESTRICTIONS ON DISPOSITION.
a. Optionee understands that neither the Option nor the Shares subject
thereto and issuable upon the exercise thereof are registered or will be
registered under the Securities Act of 1933, as amended (the "Act") except as
provided for in Section 11. Optionee represents that the Option and the Shares
are being acquired by him for investment, without any present intention of
selling or otherwise distributing all or any part of the Shares.
b. Subject to Section 11, upon any sale or transfer of the Shares, so
long as the Shares which are the subject of any such sale or transfer bear the
legend required by Section 10(d) hereof, Optionee shall deliver to the
Corporation an opinion of counsel reasonably satisfactory to the Corporation to
the effect that either (i) the Shares to be so sold or transferred have been
registered under the Act, and that there is in effect a current prospectus
meeting the requirements of Subsection 10(a) of the Act which is being or will
be delivered to the purchaser or transferee at or prior to the time of delivery
of the certificates evidencing the Shares to be sold or transferred, or (ii) the
Shares may then be sold without violating Section 5 of the Act.
c. Notwithstanding anything contained in this Agreement to the
contrary, if the Corporation has granted or simultaneously with the grant of the
Option shall grant, one or more options to acquire its securities to any other
employee, which option shall contain rights (exclusive of the exercise price,
number of share and length) more favorable to such employee than the terms set
forth in this Agreement, including, without limitation, so-called registration
rights, then, at the option of Optionee any such provisions shall be deemed to
be incorporated in this Agreement by reference.
d. Subject to Section 11, the certificates representing the Shares
issued upon exercise of the Option will bear the following legend (unless
transferred pursuant to an effective registration statement or such legend may
be removed in compliance with applicable law, including Rule 144(k)): "THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOTBEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE TRANSFERRED.
ASSIGNED, HYPOTHECATED OR PLEDGED EXCEPT IN ACCORDANCE WITH THE ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER."
14. RESERVATION OF SHARES. The Corporation shall, at all times during the
term of the Option, reserve and keep available such number of shares
of Common Stock then subject to the Option as will be sufficient to
satisfy the requirements of this Agreement.
15. NOTICES. Each notice relating to this Agreement will be in writing and
delivered in person or by certified mail, return receipt requested, to
the proper address. All notices to the Corporation shall be addressed
to it at its principal executive offices at Limmattalstr. 10, CH-8954
Geroldswil. All notices to Optionee or other person(s) then entitled
to exercise the Option shall be addressed to Optionee or such other
person(s) at Optionee's address specified in the first paragraph
hereof Anyone to whom a notice may be given under this Agreement may
designate a new address by notice to that effect.
16. BENEFITS OF AGREEMENT. This Agreement will inure to the benefit of,
and be binding upon, the parties hereto and their respective heirs,
personal representatives, successors and assigns.
17. SCOPE AND MODIFICATION OF AGREEMENT. With the exception of the
Employment Agreement between Optionee and the Corporation, this
Agreement shall supersede any and all prior and contemporaneous
agreements or understandings between the Corporation and Optionee
which relate to its subject matter, whether express or implied. Both
the Corporation and Optionee hereby agree that any and all such prior
agreements shall be null and void and shall have no further effect.
This Agreement shall not be modified except by written agreement
signed by the Corporation and Optionee.
<PAGE>
18. GOVERNING LAW. This Agreement and the rights and duties of the parties
hereunder shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to its principles of
conflicts of laws.
19. ARBITRATION. Any controversy, dispute or question arising out of, in
connection with, or in relation to this Agreement or its
interpretation or performance or non-performance, or for any breach,
shall be determined by arbitration in accordance with the then
existing rules of the American Arbitration Association in New York,
New York. Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. No provisions of this
paragraph 16 shall limit the right of any party to exercise self-help
remedies, if any, to obtain any provisional or ancillary remedies
(including, but not limited to, injunctive relief or specific
performance) from a court of competent jurisdiction. The institution
and maintenance of any remedy permitted above shall constitute a
waiver of the right to submit any controversy or claim to arbitration.
The statute of limitations, estoppel, laces, and similar doctrines
which would otherwise be applicable in an action brought by a party
shall be applicable in any arbitration.
20. MISCELLANEOUS PROVISIONS.
a. Any term or provision of this Agreement which is declared by a
court of competent jurisdiction to be invalid, unenforceable or in violation of
any applicable statute, rule or other law shall be deemed, if possible, to be
modified or altered to enable such term or provision to comply thereto or, if
not possible, to be omitted here from. The invalidity of any portion hereof
shall not affect the force and effect of the remaining valid portions hereof.
b. This Agreement may be executed in one or more counterparts, any one
of which shall be deemed a duplicate original and all of which shall constitute
one and the same agreement.
c. No term or condition of this Agreement shall be deemed to have been
waived. nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed in its name by its Chairman of the Board, President or a Vice President
and its corporate seal to be hereunto affixed and attested by its Secretary or
one of its Assistant Secretaries and Optionee has hereunto set his hand all as
of the day, month and year first above written.
UTG COMMUNICATIONS INTERNATIONAL, INC.
By:
------------------------------------
OPTIONEE
--------------------------------------
Klaus Brenner
