<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _____________ to_____________ .
Commission file number 0-27828
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WANDERLUST INTERACTIVE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3779546
- ------------------------------ -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5301 Beethoven Street, Los Angeles, CA 90066
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(310) 821-7880
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of April 2, 1998
6,864,589 shares of common stock, par value $.01 per share.
<PAGE> 2
WANDERLUST INTERACTIVE, INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet 3
at March 31, 1998
Consolidated Statements of 4
Operations - Three Months Ended
March 31, 1998 and 1997
and Nine Months Ended
March 31, 1998 and 1997
Consolidated Statements of 5
Cash Flows - Nine Months
Ended March 31, 1998,
and 1997
Notes to Consolidated 6
Financial Statements
Item 2. Management's Discussion 7-8
and Analysis of Financial
Condition and Results of
Operations
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 9-11
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
Wanderlust Interactive, Inc. and Subsidiary
Consolidated Balance Sheet
<TABLE>
<CAPTION>
ASSETS
March 31,
1998
------------
<S> <C>
Current assets:
Cash and cash equivalents $ 253,695
Accounts receivable, net of reserve
of $23,500 249,448
Costs and estimated earnings in
excess of billings on contracts
in progress 14,340
Prepaid expenses 83,764
Other assets 67,536
------------
Total current assets 668,783
------------
Fixed assets, net 634,132
------------
Other assets:
License rights, advance royalty 125,000
Security deposits, and other 45,085
Patents and licenses, net 2,692,742
Capitalized software 36,746
Goodwill, net 1,631,653
------------
4,531,226
------------
$ 5,834,141
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 767,497
Billings in excess of costs and estimated
earnings on contracts in progress 177,941
Notes and loans payable 482,594
Convertible debentures 102,500
------------
Total current liabilities 1,530,532
------------
Due to officer/shareholder 54,544
------------
Commitments and contingency
Shareholders' equity:
Preferred stock, $.01 par value; authorized,
100,000 shares; issued and outstanding, none 0
Common stock, $.01 par value; authorized,
10,000,000 shares; issued and outstanding,
6,864,589 shares 68,647
Additional paid-in capital 12,122,272
Accumulated deficit (7,941,854)
------------
4,249,065
------------
$ 5,834,141
============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
Wanderlust Interactive, Inc. and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 0 $ 68,312 $ 2,367 $ 106,312
Development contracts 469,153 199,800 1,303,303 199,800
Royalties 431,736 180,837 937,571 437,224
----------- ----------- ----------- -----------
900,889 448,949 2,243,241 743,336
----------- ----------- ----------- -----------
Expenses:
Cost of product sales 0 50,042 0 100,084
Cost of development
contracts 281,825 281,421 858,256 281,421
Research and development 0 478,925 236,592 2,003,645
Selling, general
and administrative 586,784 793,145 1,460,366 1,500,641
Depreciation and
amortization 168,023 282,437 742,631 429,943
Interest expense
(income), net 11,910 (20,424) 44,022 (59,389)
----------- ----------- ----------- -----------
1,048,542 1,865,546 3,341,867 4,256,345
----------- ----------- ----------- -----------
Net loss $ 147,653 $ 1,416,597 $ 1,098,626 $ 3,513,009
=========== =========== =========== ===========
Net loss per common share,
basic and diluted $ .02 $ .33 $ .19 $ .89
=========== =========== =========== ===========
Weighted average
shares outstanding 6,619,572 4,303,952 5,872,620 3,943,797
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
Wanderlust Interactive, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months Nine months
Ended Ended
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating
activities:
Net loss $(1,098,634) $(3,513,009)
Adjustments to reconcile net loss
to net cash used in operating activities:
Stock issued for services 77,250 40,000
Loss on disposal of assets 4,725 0
Write off of license rights 75,000 12,004
Write off of capitalized software 63,192 0
Amortization 385,821 188,537
Depreciation 217,248 241,406
Change in:
Accounts receivable (12,467) (67,218)
Costs and estimated earnings in excess of
billings on contracts in progress 6,260 (24,320)
Billings in excess of costs and estimated
earnings on contracts in progress 47,656 (100,504)
Inventory 0 (43,180)
Accounts payable and accrued expenses 53,270 76,431
Prepaid expenses (59,264) 32,979
Other assets (56,670) 0
----------- -----------
Net cash used in operating activities (296,613) (3,156,874)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (10,306) (530,226)
Noncurrent receivable 0 (387,500)
----------- -----------
Net cash used in investing activities (10,306) (917,726)
----------- -----------
Cash flows from financing activities:
Payments on notes payable (137,028) (69,745)
Proceeds from loan payable 192,000 0
Payments on due to officer (28,756) 0
Issuance of common stock and warrants,
Net of costs of issuance 305,637 0
----------- -----------
Net cash provided by financing activities 331,853 (69,745)
----------- -----------
Increase (decrease) in cash
and cash equivalents 24,934 (4,144,345)
Cash and cash equivalents, beginning 228,761 4,893,658
----------- -----------
Cash and cash equivalents, ending $ 253,695 $ 749,313
=========== ===========
Cash paid for:
Income taxes 0 0
Interest 37,322 0
</TABLE>
During the nine months ended March 31, 1998, shares of common stock were issued
as follows;
269,581 shares in exchange for $162,500 of convertible debentures.
1,250 shares for extension of due date of convertible debentures.
285,000 shares for services relating to raising capital.
50,000 shares to satisfy $30,000 of accounts payable.
117,532 shares to satisfy $60,547 of notes payable.
150,000 shares for consulting services.
See notes to consolidated financial statements.
<PAGE> 6
Wanderlust Interactive, Inc.
Notes to Consolidated Financial Statements
1. The financial statements as of March 31, 1998 and for the three and nine
month periods ending March 31, 1998 and 1997 are unaudited and reflect all
adjustments (consisting of only normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. The
financial statements should be read in conjunction with the financial
statements and notes thereto, together with management's discussion and
analysis of financial condition and results of operations contained in the
Company's Annual Report to Stockholders incorporated by reference in the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1997. The results of operations for the three and nine months ended March
31, 1998 are not necessarily indicative of the results for the entire fiscal
year ending June 30, 1998.
2. During the nine months ended March 31, 1998 the Company effected a private
offering of 950,000 shares of common stock and 237,500 warrants for
aggregate consideration, of $305,637, net of expenses. The warrants are
exercisable at $1.25 per share and expire one year from the date of
issuance. In exchange for business consulting services performed indirectly
related to the private offering, the Company issued 285,000 shares of common
stock.
3. During the quarter ended December 31, 1997, the Company revised its
assessment of the useful lives of its patents and licenses. The assessment
indicated that a useful life of eight years, (rather than four years as
previously used) would be appropriate. As a result of this change in
accounting estimate, net loss for the nine months and three months ended
March 31, 1998 was reduced by $283,446 and $141,724, respectively, and net
loss per common share for the comparable periods was reduced by $.05 and
$.02.
<PAGE> 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
For the three months ended March 31, 1998, the Company had revenues of
$900,889, an increase of $451,940 or 101%, over revenues of $448,949 in the
corresponding three-month period in 1997. This increase was derived largely
from the Company's acquisition of Western Technologies, where the Company
enlarged its projects in the funded development of video and computer games and
has received significant new royalties. In the three months ended March 31,
1998, the results were a loss of $147,653, or $.02 per share, compared with a
loss of $1,416,597, or $.33 per share, for the corresponding period in the
previous year, a reduction of losses of $1,268,944 in the current period. When
non-cash depreciation and amortization of $168,023 are excluded for the three
month period ended March 31, 1998, the results reflect a positive $20,370,
compared with a negative $1,134,160 for the corresponding period in the
previous year when non-cash depreciation and amortization of $282,437 is
excluded. This represents a positive swing of $1,154,530 when comparing the
current and prior year three months periods.
For the nine months ended March 31, 1998 and 1997, the Company had
revenues of $2,243,241 and $743,336, respectively, an improvement of $1,499,905
or 202%. The Company incurred a net loss of $1,098,626, or $.19 per share, for
the nine month period ended March 31, 1998 as compared to $3,513,009, or $.89
for the year earlier period, a reduction of losses of $2,414,383 in the current
period. When non-cash depreciation and amortization of $742,631 are excluded
for the nine-month period ended March 31, 1998, the results reflect a negative
$355,995 compared with a negative $3,083,066 for the corresponding period in
the previous year when non-cash depreciation and amortization of $429,943 is
excluded. This represents a positive swing of $2,727,071 when comparing the
current and prior year nine- month periods. See the statements of cash flows
for further items, which affect cash flows from operations.
For the nine-month periods ended March 31, 1998 and 1997, research and
development expenses totaled $236,592 and $2,003,645, respectively, reflecting
the end of development on the Pink Panther CD-ROM games. Selling, general and
administrative expenses were $1,460,366 and $1,500,641 for the nine-month
periods ended March 31, 1998 and 1997, respectively.
Financial Condition
The Company used substantially less cash for operating activities of
$296,613 during the nine months ended March 31, 1998, as compared to using
$3,156,874 for the corresponding period in the prior year, an improvement of
$2,860,261. This reflects the Company's change in activities due to its
acquisition of Western Technologies and
<PAGE> 8
reduction of costs at its New York and California offices. The Company
purchased $10,306 of fixed assets during the nine months ended March 31, 1998,
as compared to $530,226 for the nine-month period a year ago. Financing
activities provided (used) funds in the amount of $331,853 and ($69,745) during
the nine months ended March 31, 1998 and 1997, respectively. This primarily
reflects issuance of common stock and warrants during the current period.
The Company reduced its working capital deficit at March 31, 1998 to
$861,749 from $1,116,839 at June 30, 1997, an improvement of $255,090 in the
nine-month period. The Company's current ratio was .43 to 1 at March 31, 1998
as compared to .31 to 1 at June 30, 1997.
During the nine months ended March 31, 1998, holders of $162,500 of
convertible debentures converted their debentures into 269,581 shares of Common
Stock (the "Common Stock"). At March 31, 1998, there remained $102,500 of
these convertible debentures, of which $37,500 continued to be due, unpaid and
in default.
During the nine months ended March 31, 1998, the Company conducted a
private equity offering pursuant to which it issued 950,000 shares of Common
Stock and 237,500 warrants to purchase additional shares of Common Stock, for
net proceeds of $305,637.
Due to significant losses and lower sales than forecast from the Company's
Pink Panther CD-ROM titles, the Company has experienced significant cash flow
shortages resulting in the Company substantially reducing its staff, especially
in its New York office. In addition, the Company is attempting to further
reduce its expenditures, and is subleasing unused facilities. Despite these
actions, unless the Company raises additional capital or its revenues from
operations increase, the Company will encounter increased liquidity pressures
that could result in a further material disruption of its operations. There is
no assurance, however, that such additional capital will be available, or if
available, whether it will be available on terms acceptable to the Company.
Safe Harbor Statement
Statements which are not historical facts, including statements about the
Company's confidence and strategies and its expectations about new and existing
products, technologies and opportunities, market and industry segment growth,
demand and acceptance of new and existing products are forward looking
statements that involve risks and uncertainties. These include, but are not
limited to, product demand and market acceptance risks; the impact of
competitive products and pricing; the results of financing efforts; the loss of
any significant customers of any business; the effect of the Company's
accounting policies; the effects of economic conditions and trade, legal,
social, and economic risks, such as import, licensing, and trade restrictions;
the results of the Company's business plan and the impact on the Company of its
relationship with its lenders.
<PAGE> 9
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c) Recent Sales of Unregistered Securities.
1. During the nine months ended March 31, 1998, the
Company issued an aggregate of 269,581 shares of Common Stock to an aggregate
of nine persons in exchange for the cancellation of $162,500 principal amount
of the Company's outstanding convertible debentures. In addition, the Company
issued an aggregate 1,250 shares of Common Stock to a total of two persons in
consideration of such persons' extension through May 31, 1998 of the due date
on an aggregate of $65,000 principal amount of the Company's outstanding
convertible debentures. Each of such persons is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. No underwriter was employed
in connection with such issuance and no underwriting discounts or commissions
were paid in connection with such issuance. The issuance of Common Stock to
such eleven holders of the Company's outstanding convertible debentures was
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Sections 3(a)(9) and/or 4(2)
thereof.
2. In October 1998, the Company issued, in separate
transactions, an aggregate of 285,000 shares of Common Stock to Mackenzie Shea,
Inc. ("MSI") and Morgen Evan & Company, Inc. ("Morgen") and warrants to
purchase an additional 500,000 shares of Common Stock to MSI as partial
consideration for the financial advisory and other business consulting services
performed, and/or committed to be performed, by MSI and Morgen in connection
with the Company's financing activities. The warrants are immediately
exercisable for a period of approximately seven years after the date of
issuance at an exercise price equal to $0.25 per share of Common Stock covered
thereby. No underwriter was employed in connection with such issuance and no
underwriting discounts or commissions were paid in connection with such
issuance. Each of MSI and Morgen is an "accredited investor" as defined in
Rule 501(a) of the Securities Act. The Company's issuances of Common Stock and
warrants to purchase Common Stock to MSI and Morgen were exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof.
3. During the Company's current fiscal year, the Company
has been in the process of conducting a private offering of up to a maximum of
1,200,000 shares of Common Stock and warrants to purchase an additional 300,000
shares of Common Stock (the "1997-98 Private Placement"). Pursuant to the
1997-98 Private Placement, the Company issued a total of 950,000 shares of
Common Stock and 237,500 warrants to purchase shares of Common Stock to an
aggregate of twelve persons for total gross cash consideration equal to
$475,000 during the period from October 10, 1997 through March 31, 1998. Each
of the warrants is immediately exercisable for a period of one year after its
date of issuance at a price equal to $1.25 per share of Common Stock covered
thereby. Each of such twelve persons was an "accredited investor" as
<PAGE> 10
defined in Rule 501(a) under the Securities Act. The Company did not employ an
underwriter in connection with the 1997-98 Private Placement. The Company's
issuances of such securities pursuant to the 1997-98 Private Placement were
exempt from the registration requirements of the Securities Act pursuant to
Sections 4(2) and 4(6) thereof.
4. In November 1997, the Company issued an aggregate of
50,000 shares of Common Stock to two of the Company's former lawyers in
exchange for such lawyers' cancellation of $30,000 of accounts payable owed by
the Company to such lawyers. Such lawyers are "accredited investors" as
defined in Rule 501(a) of the Securities Act. No underwriter was employed in
connection with such issuance and no underwriting discounts or commissions were
paid in connection with such issuance. The issuance of Common Stock to such
two lawyers was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof.
5. On December 16, 1997, the Company issued incentive
stock options to purchase an aggregate of 18,000 shares of Common Stock to
eighteen key employees pursuant to the Company's 1995 Stock Option Plan. Each
of such options has a five-year term and is exercisable at a price equal to
$0.625 per share of Common Stock covered thereby. Such options vest
approximately 33.4% immediately, 33.3% after one year and 33.3% after two
years. On December 16, 1997, the Company also issued nonqualified stock
options to purchase an aggregate of 700,000 shares of Common Stock to Jay
Smith, III, the President, Chief Executive Officer and a Director of the
Company. Such nonqualified options have a ten- year term and are exercisable
at a price equal to $0.625 per share of Common Stock covered thereby. Such
options vest at the rate of approximately 8.5% of the total number of shares of
Common Stock covered thereby at the end of each calendar quarter commencing
with the calendar quarter ended December 31, 1997. On December 16, 1997, the
Company also issued, in three separate transactions, warrants to purchase an
additional 350,000 shares of Common Stock to MSI and nonqualified stock options
to purchase an additional 35,000 shares of common stock to two other persons as
partial consideration for the financial advisory, business consulting and other
services performed, and/or committed to be performed, by MSI and such two other
persons on behalf of the Company. The warrants are immediately exercisable for
a period of approximately seven years after the date of issuance at an exercise
price equal to $0.625 per share of Common Stock covered thereby. The
nonqualified stock options are immediately exercisable for a period of five
years after the date of issuance at an exercise price equal to $0.625 per share
of common stock covered thereby. No underwriter was employed in connection
with any of such issuances and no underwriting discounts or commissions were
paid in connection with such issuances. The Company's issuance of such
incentive stock options to such eighteen persons and the Company's issuance of
such nonqualified stock options and warrants to Mr. Smith, MSI and such two
other persons were exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) thereof and/or Rule 701 promulgated thereunder.
<PAGE> 11
6. In January 1998, the Company issued an aggregate of
150,000 shares of Common Stock and 50,000 warrants to purchase Common Stock to
Lloyd Wade Securities, Inc. ("Lloyd Wade") and three of its principals as
consulting fees for certain investment banking activities performed, and/or
committed to be performed, by Lloyd Wade on behalf of the Company. The
warrants issued to such broker-dealer and its three principals have a term
equal to three years and are immediately exercisable at a price equal to $1.25
per share of Common Stock covered thereby. Lloyd Wade and each of its three
principals are "accredited investors" as defined in Rule 501(a) of the
Securities Act. No underwriter was employed in connection with such issuance
and no underwriting discounts or commissions were paid in connection with such
issuance. The Company's issuance of Common Stock and warrants to purchase
Common Stock to such Lloyd Wade and its three principals was exempt from the
registration requirements of the Securities Act pursuant to Section 4(2)
thereof.
7. In February 1998, the Company issued incentive stock
options to purchase an aggregate of 175,000 shares of Common Stock to Michael
Cartabiano, the Company's Vice President, pursuant to the Company's 1995 Stock
Option Plan. Such options have a five-year term and are exercisable at a price
equal to $0.469 per share of Common Stock covered thereby. Such options vest
approximately 33.3% immediately, 33.3% after one year and 33.4% after two
years. No underwriter was employed in connection with such issuance and no
underwriting discounts or commissions were paid in connection with such
issuance. The Company's issuance of such incentive stock options to Mr.
Cartabiano was exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof and/or Rule 701 promulgated thereunder.
8. In March 1998, the Company issued an aggregate of
117,532 shares of Common Stock to Robert A.D. Wilson, a Director of the
Company, in exchange for Mr. Wilson's cancellation of $60,547 of indebtedness
owed him by the Company in respect of a loan previously made by him to the
Company. Mr. Wilson is an "accredited investor" as defined in Rule 501(a)
under the Securities Act. No underwriter was employed in connection with such
issuance and no underwriting discounts or commissions were paid in connection
with such issuance. The Company's issuance of Common Stock to Mr. Wilson was
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof.
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4.1 Form of Warrant issued to MSI.
4.2 Form of Incentive Stock Option Agreement issued
pursuant to the Company's 1995 Stock Option Plan.
4.3 Nonqualified Stock Option Agreement, dated December 16,
1997, between the Company and Jay Smith, III.
4.4 Form of Nonqualified Stock Option Agreement issued to
two of the Company's business consultants.
4.5 Form of Warrant issued to Lloyd Wade and three of its
principals.
10.1 Employment Agreement, dated December 16, 1997, between
the Company and Jay Smith, III.
27 Financial Data Schedules.
(b) Reports on Form 8-K. During the quarter ended March 31, 1998,
the registrant did not file any reports on Form 8-K.
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WANDERLUST INTERACTIVE, INC.
Dated: May 20, 1998 s/Jay Smith, III
-------------------------------------
Jay Smith, III
President
(Principal Financial Officer)
<PAGE> 1
EXHIBIT 4.1
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "ACT") OR ANY STATE SECURITIES
ACT AND THUS MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE
ABSENCE OF THE FILING OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE
SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Warrant to Purchase 25,000 Shares of Common Stock.
WARRANT CERTIFICATE
WARRANT TO PURCHASE COMMON STOCK
OF
WANDERLUST INTERACTIVE, INC.
THIS WARRANT (this "Warrant") is to certify that, FOR VALUE RECEIVED,
_______________________________, or assigns (the "Holder"), is entitled to
purchase, subject to the provisions of this Warrant, from Wanderlust
Interactive, Inc., a Delaware corporation (the "Company"), Twenty Five Thousand
(25,000) shares of common stock of the Company ("Common Stock") at a price of
$.25 per share until 5:00 p.m., Pacific Standard Time, on December 31, 2004
(the "Expiration Date"). The shares of Common Stock deliverable upon such
exercise are hereinafter sometimes referred to as "Warrant Shares," and the
exercise price of each share of Common Stock is hereinafter sometimes referred
to as the "Exercise Price."
(1) EXERCISE OF WARRANT. This Warrant may, subject to applicable
securities laws, be exercised in whole or in part at any time or from time to
time on or after the date hereof and until the Expiration Date, or if either
such day is a day on which banking institutions in the State of California are
authorized by law to close, then on the next succeeding day which shall not be
such a day, by presentation and surrender hereof to the Company at its
principal office, or at the office of its stock transfer agent, if any, with
the Purchase Form annexed hereto duly executed and accompanied by payment of
the Exercise Price for the number of Warrant Shares specified in such form. If
this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
Warrant Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
<PAGE> 2
(2) PAYMENT UPON WARRANT EXERCISE. In lieu of paying cash to
exercise this Warrant, the Holder shall have the right to acquire a lesser
number of shares of Common Stock. In connection therewith, the following shall
apply:
a. The number of shares covered by this Warrant times
the exercise price of $.25 per share (or otherwise adjusted as set forth
herein) shall equal the "Total Price".
b. The number of shares covered by this Warrant times a
publicly traded price of the Holder's choosing, of the Common Stock during the
preceding 5 trading days to execution of this Warrant or equivalent price shall
equal the "Total Value" of the shares covered by this Warrant.
c. The Holder shall be entitled to receive without any
payment the number of shares of Common Stock equal to the Total Value less the
Total Price divided by the price at which Total Value was determined or an
equivalent price.
For purposes of example only, if the number of shares covered by this
Warrant is 25,000, and if the Total Value determining price per share is $4.00,
then the total price would be $25,000 and the total value would be $40,000.
The Holder would therefore be entitled to receive $37,500 of shares or 9,375
shares without the necessity of any cash payment.
(3) RESERVATION OF SHARES. The Company hereby agrees that at all
times there shall be reserved for issuance and/or delivery upon exercise of
this Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
(4) FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of a share.
(5) DETERMINATION OF SHARE PRICE. Price per share of Common Stock
shall be determined as follows:
(a) While the Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the NASDAQ system, the current market value shall be
the last reported sale price of the Common Stock on such exchange or system on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day, the average closing bid and asked prices for
such day on such exchange or system; or
<PAGE> 3
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market value shall be the mean of the
last reported bid and asked prices reported by the National Quotation Bureau,
Inc. on the last business day prior to the date of the exercise of this
Warrant; or
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market value shall be an amount not less than the book value thereof as
at the end of the most recent fiscal year of the Company ending prior to the
date of the exercise of the Warrant, determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company.
(6) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other warrants of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. This Warrant is transferable and may be
assigned or hypothecated from the date hereof, subject to any restrictions on
transfer under applicable securities laws. Upon surrender of this Warrant to
the Company at its principal office or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, the Company shall, without charge, execute
and deliver a new Warrant in the name of the assignee named in such instrument
of assignment and this Warrant shall promptly be canceled. This Warrant may be
divided or combined with other warrants which carry the same rights upon
presentation hereof at the principal office of the Company or at the office of
its stock transfer agent, if any, together with a written notice specifying the
names and denominations in which new Warrants are to be issued and signed by
the Holder hereof. The term "Warrant" as used herein includes any Warrants
into which this Warrant may be divided or exchanged. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and in the case of loss, theft or destruction, of
reasonably satisfactory indemnification and upon surrender and cancellation of
this Warrant, if mutilated, the Company will execute and deliver a new Warrant
of same terms and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be
at any time enforceable by anyone.
(7) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof,
be entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein. Furthermore, Holder by acceptance hereof, consents to and agrees
to be bound by and to comply with all the provisions of this Warrant. In
addition, the holder of this Warrant, by accepting the same, agrees that the
Company and the
<PAGE> 4
transfer agent may deem and treat the person in whose name this Warrant is
registered as the absolute, true and lawful owner for all purposes whatsoever,
and neither the Company nor the transfer agent shall be affected by any notice
to the contrary.
(8) ANTI-DILUTION PROVISIONS. The Exercise Price and the number
and kind of securities purchasable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the happening of certain events as
hereinafter provided. The Exercise Price in effect at any time and the number
and kind of securities purchasable upon exercise of each Warrant shall be
subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend or make
a distribution on its shares of Common Stock of other equity securities in
shares of Common Stock or other equity securities, (ii) subdivide or reclassify
its outstanding Common Stock or other equity securities in shares of Common
Stock or other equity securities into a greater number of shares, or (iii)
combine or reclassify its outstanding Common Stock or other equity securities
into a smaller number of shares, the Exercise Price in effect at the time of
the record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that the Holder of this Warrant exercised after such date shall be
entitled to receive the aggregate number and kind of shares which, if this
Warrant had been exercised by such Holder immediately prior to such date, he
would have owned upon such exercise and been entitled to receive upon such
dividend, subdivision, combination or reclassification. For example, if the
Company declares a 2 for 1 stock dividend or stock split and the Exercise Price
immediately prior to such event was $1.00 per share, the adjusted Exercise
Price immediately after such event would be $.50 per share. Such adjustment
shall be made successively whenever any event listed above shall occur. For
the purposes of this provision, equity securities shall include any security
convertible into preferred stock or Common Stock.
(b) Whenever the Exercise Price payable upon exercise of
each Warrant is adjusted pursuant to Subsection (a) above, the number of
Warrant Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the number of Warrant Shares initially issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(c) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least one
cent ($0.01) in such price; provided, however, that any adjustments which by
reason of this Subsection (c) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this Section 8 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be. Anything
in this Section 8 to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the Exercise
Price, in addition to those required by this Section 8, as
<PAGE> 5
it, in its sole discretion, shall determine to be advisable in order that any
dividend or distribution in shares of Common Stock, subdivision,
reclassification or combination of Common Stock, referred to hereinabove in
this Section 8 hereafter made by the Company to the holders of its Common Stock
shall not result in any tax to the holders of its Common Stock or securities
convertible into Common Stock.
(d) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Warrant Shares issuable upon exercise of
each Warrant to be mailed to the Holder of such Warrant at the Holder's last
address appearing in the Warrant Register, and shall cause a certified copy
thereof to be mailed to its transfer agent, if any. The Company may retain a
firm of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to make
any computation required by this Section 8, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(e) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (a) above, the Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable
upon exercise of this Warrant shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Common Stock contained in Subsection (a) to (c), inclusive
above.
(9) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of the foregoing Section, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by the Holder or any
holder of a Warrant executed and delivered pursuant to Section 1 and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
(10) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of
the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon exercise of
this Warrant) or in case of any sale, lease, or conveyance to
<PAGE> 6
another corporation of the property of the Company as an entirety, the Company
shall, as a condition precedent to such transaction, cause effective provisions
to be made so that the Holder shall have the right thereafter by exercising
this Warrant at any time prior to the expiration of the Warrant, to purchase
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale, or conveyance by a holder of the number of shares
of Common Stock which might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger,
sale, or conveyance. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The foregoing provisions of this
Section 10 shall similarly apply to successive reclassifications, capital
reorganizations, and changes of shares of Common Stock and to successive
consolidations, mergers, sales, or conveyances. In the event that in
connection with any such capital reorganization or reclassification,
consolidation, merger, sale, or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution, or payment, in whole or
in part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of
Subsection (a) of Section 8 hereof.
(11) EXERCISE AND TRANSFER TO COMPLY WITH THE SECURITIES ACT OF
1933. The Holder of this Warrant and any transferee hereof, by their
acceptance hereof, hereby agrees that: (a) the Warrants being acquired
hereunder are being purchased for investment purposes only and not with a view
to distribution and will not be transferred unless registered or unless there
is an exemption available from the registration requirements of the Act, which
exemption has been established to the satisfaction of the Company; (b) this
Warrant may not be exercised unless the Holder of this Warrant or any
transferee hereof first executes and delivers to the Company a Subscription
Agreement in form and substance acceptable to the Company and its counsel; (c)
the Warrant Shares issuable upon exercise of this Warrant shall be restricted,
shall be subject to legend condition, and may not be transferred without
registration under the Act unless an exemption from registration is available
or registration is otherwise not required, as evidenced by an opinion of
counsel reasonably satisfactory to the Company; (d) no public distribution of
the Warrants or Warrant Shares will be made in violation of the provisions of
the Act or any applicable state laws; and (e) during such period as delivery of
a prospectus with respect to the Warrants or Warrant Shares may be required by
the Act, no public distribution of the Warrants or Warrant Shares will be made
in a manner or on terms different from those set forth in, or without delivery
of, a prospectus then meeting the requirements of Section 10 of the Act and in
compliance with all applicable state laws. The Holder of this Warrant and any
such transferee hereof further agree that if any distribution of any of the
Warrants or Warrant Shares is proposed to be made by them otherwise than by
delivery of a prospectus meeting the requirements of Section 10 of the Act,
which action shall be taken
<PAGE> 7
only after submission to the Company of an opinion of counsel, reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed distribution will not be in violation of the Act or of applicable
state law. Furthermore, it shall be a condition to the transfer of the
Warrants or Warrant Shares thereof that the transferee deliver to the Company
his or its written agreement to accept and be bound by all of the terms and
conditions of this Warrant.
(12) REGISTRATION RIGHTS.
(a) Definitions. The following definitions shall apply
with respect to a registration (a "Registration") pursuant to this Section 12:
(i) The term "Public Offering" shall mean an
underwritten or direct public offering of equity securities of the Company
pursuant to an effective registration statement under the Act covering the
offer and sale of equity securities of such entity to the public.
(ii) The term "Registrable Securities" shall mean
the Common Stock underlying this Warrant.
(iii) The term "Registration Statement" shall mean
any registration statement of the Company that covers any of the Registrable
Securities pursuant to the provisions of this Warrant, including the prospectus
included therein, any amendment or supplement thereof, including post-effective
amendments, and all exhibits and all material incorporated by reference in such
Registration Statement.
(iv) The term "SEC" shall mean the United States
Securities and Exchange Commission or any successor thereto.
(b) Piggyback Rights.
(i) If the Company proposes to file a
Registration Statement in connection with a Public Offering of any of its
equity securities that may be used for the registration of the Registrable
Securities under the Act (a "Piggyback Registration Statement"), then the
Company shall in each case give prompt written notice (the "Piggyback Notice")
of such proposed filing to the Holder before the anticipated filing date of
such Piggyback Registration Statement, but in no event less than thirty (30)
days prior to such filing date, which Piggyback Notice shall offer the Holder
the opportunity to include in such Piggyback Registration Statement such number
of Registrable Securities as it may request. The Holder shall advise the
Company in writing within twenty (20) days after the date of receipt of the
Piggyback Notice (which request shall set forth the amount of Registrable
Securities for which Registration is requested). The Company shall include in
any such Piggyback Registration Statement all Registrable Securities so
requested to be included.
<PAGE> 8
(ii) In the event that a Registration pursuant to
this Section 12 is for a registered public offering involving an underwriting,
the Company shall so advise the Holder. In such event, the right of the Holder
to Registration pursuant to this Section 12 shall be conditioned upon the
approval of the managing underwriter and the Holder's participation in the
underwriting arrangements required by this Section 12(c)(ii) and the inclusion
of the Holder's Registrable Securities in the underwriting to the extent
requested shall be limited to the extent provided herein; provided that all
other holders of the Company's securities entitled to request registration
shall also be so limited pro rata and pari passu with the Holder based on the
total shares owned by such holders and the Holder on a fully diluted basis.
The Company shall select a qualified underwriter which will register as many of
the Registrable Securities as possible.
(iii) The Company shall (together with the Holder)
enter into an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 12, if the managing underwriter advises the
Holder in writing that marketing factors require a limitation of the number of
Registrable Securities to be underwritten or that none of the Registrable
Securities can be sold, then the Company shall also advise the Holder and,
subject to the following sentence, the number, if any, of shares of Registrable
Securities that may be included in the Registration and underwriting shall be
reduced accordingly; provided that the securities that may be sold by all other
holders requesting registration shall also be reduced pro rata and pari passu
with the Holder based on the total shares owned by such holders and the Holder
on a fully diluted basis. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such Registration.
(iv) If the Holder disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from the Registration, and such
Registrable Securities shall not be transferred in a public distribution prior
to ninety (90) days after the effective date of such Registration, or such
other shorter period of time as the underwriters may require.
(c) Demand Registration. Upon written demand of the
Holder, the Company shall file a Registration Statement for the Common Stock
underlying this Warrant in a manner and at a time early enough to provide for
the Registration Statement to go effective not later than nine (9) months from
the date of this Warrant.
(d) Provisions Applicable to Registration.
The following provisions shall apply, as applicable, in
connection with the Holder's Registrable Securities to the extent the
<PAGE> 9
Holder has requested Registrable Securities to be included in a Registration
Statement pursuant to this Section 12:
(i) the Holder, if reasonably requested by the
managing underwriter with respect to any Public Offering, shall agree not to
sell, make any short sale of, loan, grant any options for the purchase of, or
otherwise dispose of any Registrable Securities (other than those included in
the Registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days), from the effective date of such Registration as may
be requested by the underwriters, provided that all other holders of the class
of securities being registered shall make the same agreements as those made by
the Holder under this Section 12(d)(i);
(ii) the Holder shall promptly provide the Company
with such non-confidential and non-proprietary information as it shall
reasonably request and that is available to the Holder in order to prepare the
Registration Statement;
(iii) all reasonable and necessary expenses in
connection with the preparation of the Registration Statement, including,
without limitation, any and all legal, accounting and filing fees, but not
including fees and disbursements of experts and counsel retained by the Holder
or underwriting discounts and commissions to be paid by the Holder, shall be
borne by the Company; and
(iv) in connection with a Registration pursuant to
this Section 12, the Company shall use its best efforts to effect such
Registration permitting the sale of such Registrable Securities in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto, the Company shall as expeditiously as possible:
1. prepare and file with the SEC a
Registration Statement relating to the applicable Registration on any
appropriate form under the Act, which form shall be available for the sale of
the Registrable Securities in accordance with the intended method or methods of
distribution thereof and use its best efforts to cause such Registration
Statement to become effective and keep such Registration Statement effective in
accordance with Section 12(d)(iv)(2) below;
2. prepare and file with the SEC such
amendments and post-effective amendments to the Registration Statement as may
be necessary to keep the Registration effective for one hundred twenty (120)
days or such shorter period terminating when all Registrable Securities covered
by such Registration Statement have been sold; provided, however, that (A) such
one hundred twenty (120) day period shall be extended for any period of time
equal to the period the undersigned refrains from selling any Registrable
Securities at the request of an underwriter of Common Stock of the Company and
(B) in the case of any Registration of Registrable Securities on Form S-3 which
are intended to be offered on a continuous or delayed basis,
<PAGE> 10
such one hundred twenty (120) day period shall be extended, if necessary, to
keep the Registration Statement effective until all such Registrable Securities
are sold, provided that Rule 415 under the Act or any successor rule, permits
an offering on a continuous or delayed basis; cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Act; and comply with the provisions of
the Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof as set forth
in such Registration Statement or supplement to the prospectus;
3. notify the undersigned and the
managing underwriter, if any, promptly, and (if requested by any such person)
confirm such advice in writing, (A) when the prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when the same
has become effective, (B) of any request by the SEC for amendments or
supplements to the Registration Statement or the prospectus or for additional
information, (C) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose, (D) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation of any
proceedings for such purpose and (E) of the happening of any event as a result
of which the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and, at the
request of any such person, prepare and furnish to such person a reasonable
number of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing;
4. if requested by the managing
underwriter or the undersigned, promptly incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriter and
the undersigned agree should be included therein relating to the plan of
distribution with respect to such Registrable Securities, including, without
limitation, the purchase price being paid therefor by such underwriters and
with respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
prospectus supplements or post-effective amendments as soon as notified of the
matters to be incorporated in such prospectus supplements or post-effective
amendments;
<PAGE> 11
5. deliver to the undersigned and the
underwriters, if any, without charge, as many copies of the prospectus
(including each preliminary prospectus) in conformity with the requirements of
the Act and any amendments or supplements thereto as such persons may
reasonably request and such other documents as they may reasonably request to
facilitate the prior sale or other disposition of such Registrable Securities;
6. prior to any Public Offering of
Registrable Securities, register or qualify or cooperate with the undersigned,
or the underwriters, if any, in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as the undersigned or
underwriters, if any, reasonably requests in writing and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company shall not be required to qualify
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or would subject the Company to
any tax in any such jurisdiction where it is not then so subject; and
7. with a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of Registrable Securities to the public without registration,
during such time as a public market exists for its equity securities, the
Company agrees to:
a) make and keep public
information available, as those terms are understood and defined in Rule 144
under the Act, at all times after the effective date of the first registration
under the Act filed by the Company for an offering of its equity securities to
the general public;
b) use its best efforts to file
with the SEC in a timely manner all reports and other documents required of the
Company under the Act and the Exchange Act (at any time after it has become
subject to such reporting requirements); and
c) furnish to the undersigned
forthwith upon the undersigned's request a written statement by the Company as
to the Company's compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its equity
securities to the general public), and of the Act and the Exchange Act (at any
time after it has become subject to the requirements of the Exchange Act), a
copy of the most recent annual or quarterly report of the Company and such
other reports and documents of the Company as the undersigned may reasonably
request in availing itself of any rule or regulation of the SEC allowing a
holder to sell any such securities without registration (at any time after
<PAGE> 12
the Company has become subject to the reporting requirements of the Exchange
Act).
(v) Notwithstanding the provisions of this Section 12
to the contrary:
1. the Company may require the
undersigned to furnish to the Company such information regarding the
distribution of such securities as the Company may from time to time reasonably
request in writing, and the Company may limit such registration rights to
situations where a proposed distribution of Registrable Securities is to be
effected forthwith upon the effectiveness of the Registration Statement;
2. the Company shall not be required to
register any Registrable Securities of the undersigned if the number of such
securities requested to be so registered by the undersigned, at the time any
such Registration Statement is filed, may be sold without registration under
the Act;
3. the Company shall not be required to
use its best efforts to effect a registration of the Registrable Securities
pursuant to this Section 12 unless the undersigned agrees to offer the
Registrable Securities on the same terms and conditions as those contained in
the proposed Public Offering giving rise to the foregoing registration rights
pursuant to this Section 12; or if the managing underwriter of any such
proposed Public Offering delivers an opinion to the undersigned that the total
amount or kind of securities that the undersigned and any other persons or
entities entitled to be included in such Public Offering would adversely affect
the success of such Public Offering, then the amount of securities to be
offered for the account of the undersigned shall be reduced pro rata and pari
passu with all other holders of the Company's securities entitled to request
registration (based on the total shares owned by such holders and the
undersigned on a fully diluted basis) to the extent necessary to reduce the
total amount of securities to be included in such Public Offering to the amount
recommended by the managing underwriter or underwriters thereof. In no event
shall the Company be required pursuant to this Section 12 to reduce the amount
of securities to be registered by it. In the event that the contemplated
distribution does not involve an underwritten Public Offering, such
determination that the inclusion of such Registrable Securities shall adversely
affect the success of the offering shall be made by the Company in its
reasonable discretion; and
4. if the Company has filed a
Registration Statement covering the sale for its account of its own securities
for the purpose of making a Public Offering and Registrable Securities are to
be included therein pursuant to this Section 12, the Company may require the
undersigned to sell such Registrable Securities to such underwriters for
inclusion in the Public Offering.
(vi) the undersigned agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the
<PAGE> 13
Company of the happening of any event of the kind described in Section
12(d)(iv)(3) hereof (other than as provided in Section 12(d)(iv)(3)(A) hereof),
the undersigned shall forthwith discontinue disposition of Registrable
Securities until it is advised in writing by the Company that the use of the
prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the prospectus, and,
if so directed by the Company, the undersigned shall deliver to the Company (at
the Company's expense) all copies other than permanent file copies then in the
undersigned's possession, of the prospectus covering such Registrable
Securities current prior to the time of receipt of such notice.
(vii) the Company, in its sole discretion, shall
select the underwriter or underwriters, including the managing or lead
underwriter or underwriters, who are to undertake any offering of Registrable
Securities with respect to which the undersigned has registration rights
pursuant to this Section 12.
(e) Indemnification.
(i) In the event of a Registration or qualification
of any Registrable Securities under the Act pursuant to the provisions of this
Section 12, the Company shall indemnify and hold harmless the undersigned, the
officers and directors of the undersigned and each director or officer of any
person or entity who controls the undersigned, each underwriter of such
Registrable Securities and each other person or entity who controls the
undersigned or such underwriter within the meaning of the Act (collectively,
the "Undersigned Indemnitees"), from and against any and all losses, claims,
damages or liabilities, joint or several, to which any of the Undersigned
Indemnitees, joint or several, to which any of the Undersigned Indemnitees may
become subject under the Act or the 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 (x) any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Securities were registered or qualified under the
Act, or any amendment or supplement thereto, any preliminary prospectus or
final prospectus contained therein, or any supplement thereto, or any document
prepared and/or furnished to the undersigned incident to the registration or
qualification on any Registrable Securities, or (y) the omission or alleged
omission to state in any Registration Statement a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or (z)
any violation by the Company of the Act or state securities or "blue sky" laws
applicable to the Company and relating to action or inaction required of the
Company, in connection with such registration or qualification under such state
securities or "blue sky" laws, and in each case shall reimburse the Undersigned
Indemnitees for any legal or other expenses reasonably incurred by such the
Undersigned Indemnitees in connection with investigating or defending any such
loss, claim, damage or liability (or action in
<PAGE> 14
respect thereof); provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability (or
action in respect thereof) arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement in reliance upon and in conformity with information
furnished to the Company through an instrument duly executed by such the
Undersigned Indemnitees; and provided further, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission in
such Registration Statement, which untrue statement or alleged untrue statement
or omission or alleged omission is completely corrected in an amendment or
supplement to the Registration Statement and such the Undersigned Indemnitee
thereafter fails to deliver or cause to be delivered such Registration
Statement as so amended or supplemented prior to or concurrently with the sale
of the Registrable Securities to the person asserting such loss, claim, damage
or liability (or actions in respect thereof) or expense after the Company has
furnished the undersigned with the same.
(ii) In the event of the Registration or
qualification of any Registrable Securities under the Act pursuant to the
provisions of this Section 12, the undersigned shall indemnify and hold
harmless the Company, each person who controls the Company within the meaning
of the Act, each officer and director of the Company and any other selling
holder from and against any losses, claims, damages or liabilities to which the
Company, such controlling person, any such officer or director or any other
selling holder may become subject under the Act or the 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 (x) any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Securities were registered
or qualified under the Act, or any amendment or supplement thereto, or (y) 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,
which untrue statement or alleged untrue statement or omission or alleged
omission was made therein in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by the
undersigned specifically for use in preparation thereof, as it relates to such
holder, and in each case shall reimburse the Company, such controlling person,
each such officer or director and any other selling holder for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage or liability (or action in respect
thereof).
(iii) Promptly after receipt by a person entitled to
indemnification under this section (e) (an "Indemnified Party") of notice of
the commencement of any action or claim relating to any Registration Statement
filed under the provisions of this Section 12 or as to which indemnity may be
sought hereunder, such Indemnified Party shall, if a claim for indemnification
hereunder in respect
<PAGE> 15
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 so to notify the Indemnifying Party will not
relieve such person from any liability that such person may have to any
Indemnified Party other than pursuant to the provisions of this section (e) and
shall also not relieve the Indemnifying Party of such party's obligations under
this section (e), except to the extent that the omission so to notify results
in the Indemnifying Party being damaged solely as a result of the failure to
give timely notice. In case any such action is brought against an Indemnified
Party, and such party notifies an Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled (at such party's own expense)
to participate in and, to the extent that the Indemnifying Party may wish,
jointly with any other Indemnifying Party similarly notified, to assume the
defense, with counsel 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 shall 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 and no Indemnified Party shall
enter into any settlement agreement that would impose any liability on such
other party or parties without the prior written consent of such other party or
parties, unless such other party or parties are fully indemnified to such
party's satisfaction, as the case may be, against any such liability.
(iv) If for any reason the indemnification provided
for in this Section 12 is unavailable to an Indemnified Party or is
insufficient to hold it harmless as contemplated by this Section 12, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such loss, claim, damage, liability or action
in such proportion as is appropriate to reflect to only the relative benefits
received by the Indemnified Party and the Indemnifying Party, but also the
relative fault of the Indemnified Party and the Indemnifying Party, as well as
any other relevant equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
Dated: October 15, 1997 WANDERLUST INTERACTIVE, INC.
By:_____________________________________
Jay Smith III, CEO
<PAGE> 16
PURCHASE FORM
Dated: ____________________________, 19______________________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ______ shares of Common Stock and hereby
makes payment of ______ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name
(Please typewrite or print in block letters)
Address
Signature
IT SHALL BE A CONDITION TO THE VALIDITY OF THIS ASSIGNMENT THAT THE TRANSFEREE
DELIVER TO WANDERLUST INTERACTIVE, INC. HIS OR ITS WRITTEN AGREEMENT TO ACCEPT
AND BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto:
Name
(Please typewrite or print in block letters)
Address
the right to purchase Common Stock represented by this Warrant to the extent of
______________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _________________________ Attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Dated: ____________________________, 19______________________
Signature
<PAGE> 1
EXHIBIT 4.2
INCENTIVE STOCK OPTION AGREEMENT ISO-__
THIS INCENTIVE STOCK OPTION AGREEMENT ("Agreement") is made
and entered into on ___________, 19_, by and between WANDERLUST INTERACTIVE,
INC., a Delaware corporation ("Company"), and __________________ ("Optionee").
1. Grant of Option. The Company hereby irrevocably grants to the
Optionee, on the terms and subject to the conditions set forth in this
Agreement and subject to the terms and conditions of the Company's 1995 Stock
Option Plan (the "Plan"), the right and option (the "Option") to purchase all
or any part of an aggregate of ________ shares (the "Option Shares") of the
Company's common stock, such number being subject to adjustment as provided in
Section 9 hereof. It is understood by the parties hereto that the Option is
intended to qualify as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). It
is further understood by the parties hereto that the Option has been granted as
a matter of separate inducement and agreement in connection with the employment
of the Optionee and is not in lieu of any salary or other compensation for the
Optionee's services.
2. Option Exercise Price. The exercise price for the Option
Shares shall be $________ per share. The exercise price shall be paid in full
as provided in Section 10 hereof.
3. Term of Option. The term of the Option shall be for a period
of ____ (_) years from the date hereof, subject to earlier termination as
provided in Sections 7 and 8 hereof.
4. Exercisability of Option.
(a) Subject to the provisions of Section 4(b)
hereof, the Option shall be exercisable in accordance with the following
schedule:
<TABLE>
<CAPTION>
Percentage (Number)
of Option Shares
Date Purchasable
---- -------------------
<S> <C>
On or after ______, 19__ ___% (___)
On or after ______, 19__ ___% (___)
On or after ______, 19__ ___% (___)
</TABLE>
The Optionee's right to exercise the Option shall be cumulative as to the Option
Shares covered thereby.
(b) The Company's grant of the Option is based upon the assumption
that the Optionee's exercise of the Option and the Company's issuance of the
Option Shares as a result of such exercise
<PAGE> 2
will be exempt from registration under the Securities Act of 1933, as amended
(the "Securities Act"). In the event that the Company's assumption is erroneous,
the Option may not be exercised unless and until a registration statement under
the Securities Act relating to the Option Shares shall be in effect, or unless
and until the issuance of the Option Shares upon the exercise of the Option
shall be exempt from registration under the Securities Act, in either of which
events the term of the Option shall be deemed to have been automatically
extended through and including a period of ninety (90) days from and after the
date that such registration statement under the Securities Act relating to the
Option Shares first becomes effective or the date that the issuance of the
Option Shares upon the exercise of the Option first becomes exempt from
registration under the Securities Act, as the case may be. In this regard, the
Company shall use its best efforts to either register the Option Shares in
accordance with the registration requirements of the Securities Act or to comply
with any exemption therefrom with regard to the issuance of the Option Shares.
The Company shall promptly notify Optionee of any automatic extension in the
term of the Option in the event the foregoing provisions become applicable. In
all events, the Optionee shall give a written representation satisfactory to
legal counsel to the Company upon his exercise of the Option that he is
acquiring the Option Shares for investment purposes and not with a view to, or
for resale in connection with, the distribution of any Option Shares or other
securities of the Company.
5. Limitation on Optionee's Rights.
(a) The Optionee shall not have any of the
rights of a shareholder of the Company with respect to the Option Shares except
to the extent that one or more certificates for the Option Shares shall be
delivered to him upon the due exercise of the Option.
(b) Nothing contained in this Agreement shall
confer upon the Optionee any right with respect to the continuation of his
employment by the Company or a parent or a subsidiary of the Company or
interfere in any way with the right of the Company or a parent or a subsidiary
of the Company (subject to the terms of any separate employment agreement to
the contrary) to terminate his employment at any time or to increase or
decrease the compensation payable to the Optionee.
6. Nontransferability of Option. The Option shall not be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution, and the Option may be exercised during the lifetime of the
Optionee only by him. More particularly, but without limiting the generality
of the foregoing, the Option may not be assigned, transferred (except upon the
death of the Optionee), pledged or hypothecated in any way, shall not be
assignable by operation of law and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions
hereof, and the levy of any execution, attachment or similar process upon the
Option, shall be null and void and without effect.
<PAGE> 3
7. Early Termination of Option. The Option and all rights under
this Agreement, to the extent such rights shall not have been previously
exercised, shall terminate and become immediately null and void on the date
that the Optionee ceases to be an employee (whether by resignation, retirement,
dismissal, total disability, death or other-wise) of the Company or a parent or
a subsidiary of the Company; provided, however, the Option may thereafter by
exercised as follows:
(a) If the termination of employment was due to
the Optionee's forced retirement after becoming totally disabled, the Optionee
may, at any time or from time to time during a period of one hundred eighty
(180) days after such termination of his employment, exercise the Option
(except that in no event may the Option be exercised to any extent after the
expiration of the term specified in Section 3 hereof) to the extent such Option
was exercisable by him on the date of such termination of his employment.
(b) If the termination of employment was due to
the death of the Optionee while in the employ of the Company or a parent or a
subsidiary of the Company, then the Option, to the extent that the Optionee was
entitled to exercise such Option on the date of his death, may be exercised
within one (l) year after such death by the Optionee's executors,
administrators, heirs or legatees; provided, however, that in no event may the
Option be exercised to any extent after the expiration of the term specified in
Section 3 hereof.
8. Nonsurvival of Company. Where dissolution or liquidation of
the Company or any merger or combination in which the Company is not the
surviving corporation is involved, the Option shall terminate as of the
effective date of such liquidation, dissolution, merger or combination to the
extent that the Option is not assumed by, or replaced by equivalent options
granted by, the surviving corporation, if any, in such liquidation, dissolution
merger or combination, but, in such event, the Optionee shall have the right,
for a period of thirty (30) days immediately prior to the effective date of
such liquidation, dissolution or merger or combination, to exercise his Option,
in whole or in part, to the extent that such Option shall not have been
previously exercised or so assumed or so replaced, without regard to any
installment exercise provisions.
9. Changes in Capital Structure. In the event that the
outstanding shares of common stock of the Company are changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares,
stock dividend, stock split or reverse stock split, the rights of the Optionee
shall be appropriately adjusted both as to the number of Option Shares and the
exercise price for the Option Shares.
10. Method of Exercising Option.
<PAGE> 4
(a) Subject to the terms and conditions of the
Plan and this Agreement, the Option may be exercised by written notice
("Exercise Notice") from the Optionee or other person entitled to exercise the
Option delivered to the Company stating the election to exercise the Option and
the number of the Option Shares in respect of which it is being exercised, and
shall be signed by the person or persons so exercising the Option. The
Exercise Notice shall be accompanied by the full exercise price for the Option
Shares in respect of which the Option is being exercised. In the event the
Option shall be exercised pursuant to Section 7(b) hereof by any person or
persons other than the Optionee, the Exercise Notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the
Option.
(b) Payment of the exercise price shall be made
by certified or bank cashier's check or the equivalent thereof payable to the
order of the Company.
(c) The certificate or certificates for the
Option Shares in respect of which the option shall have been exercised shall be
registered in the name of the person or persons exercising the Option, or, if
the Option is exercised by the Optionee and if the Optionee shall so request in
the Exercise Notice, shall be registered in the name of the Optionee and
another person jointly, with right of survivorship, and shall be delivered as
provided above to or upon the written order of the person or persons exercising
the Option.
All of the Option Shares purchased upon the exercise of the Option as provided
herein shall, when issued, be fully paid and nonassessable.
11. Restrictions on Transfer of Option Shares. Optionee, by
acceptance of this Option, represents and warrants to the Company as follows:
(a) Optionee has been advised and understands
that: (i) the Option has been issued in reliance upon exemptions from
registration under the Securities Act and applicable state statutes; (ii) the
exercise of the Option and resale of the Option Shares have not been registered
under the Securities Act or applicable state statutes and the Option Shares
must be held and may not be sold, transferred or otherwise disposed of for
value unless they are subsequently registered under the Securities Act or an
exemption from such registration is available; (iii) the Company is under no
obligation to register the resale of the Option Shares under the Securities Act
or the applicable state statutes; (iv) in the absence of registration under the
Securities Act, the resale of the Option Shares may be practicably impossible;
and (v) the Company's registrar and transfer agent will maintain stop-transfer
instructions against registration or transfer of the Option Shares and any
certificate issued upon exercise of the Option representing the Option Shares
will bear on its face a legend in substantially the following form restricting
the resale of the Option Shares:
<PAGE> 5
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND ARE "RESTRICTED SECURITIES"
WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT."
(b) Prior to one year from the date the Option
has been exercised and the Option Shares purchased as a result of such exercise
have been fully paid for, the Company may refuse to allow the transfer of the
Option Shares unless the holder thereof provides an opinion of legal counsel
reasonably satisfactory to the Company or a "no action" letter or interpretive
response from the staff of the Securities and Exchange Commission to the
effect that the transfer is proper; further, unless such opinion letter or
response states that the Option Shares are free of any restrictions under the
Securities Act, the Company may refuse to allow the transfer of the Option
Shares to any transferee who does not furnish in writing to the Company the
same representations and agree to the same conditions with respect to such
Option Shares as are set forth herein. Notwithstanding any of the foregoing,
the Company may refuse to allow the transfer of the Option Shares if any
circumstances are present reasonably indicating that the transferee's
representations are not accurate.
(c) After one year but prior to two years from
the date the Option has been exercised and the Option Shares purchased as a
result of such exercise have been fully paid for, the Company may refuse to
allow the transfer of the Option Shares unless the holder either (i) meets the
requirements of subparagraph (b) above; or (ii) resells such Option Shares in
accordance with Rule 144 promulgated under the Securities Act and furnishes to
the Company written assurances of compliance therewith in the form of a copy of
the Notice of Form 144 and appropriate letters of compliance from the holder of
such Option Shares and the securities broker-dealer to or through which such
Option Shares are being resold. No opinion of counsel for the holder of the
Option Shares shall be required respecting resales in reliance on Rule 144
pursuant to clause (ii) of this subparagraph (c).
(d) After two years from the date the Option
has been exercised and the Option Shares purchased as a result of such
exercise have been fully paid for, the Company shall, upon the written request
of any person who has held the Option Shares for two years (excluding any
tolling period provided for by Rule 144) and who is not, and has not been
during the preceding three months, an affiliate of the Company, reissue to such
holder in such names and denominations as the holder shall request, one or more
certificates for such Option Shares without any restriction whatsoever on their
further transfer and cancel any and all stop-transfer instructions regarding
such Option Shares on the books and records of the Company.
<PAGE> 6
12. Adequate Authorized Capitalization. The Company shall at all
times during the term of the Option reserve and keep available or otherwise
have authorized such number of shares of the Company's common stock as will be
sufficient to satisfy the requirements of this Agreement, shall pay all fees
and expenses necessarily incurred by the Company in connection therewith, and
shall from time to time use its best efforts to comply with all laws and
regulations which, in the opinion of legal counsel to the Company, shall be
applicable thereto.
13. Notices. All notices, requests, demands and other
communications called for or contemplated hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered or when
mailed by United States certified or registered mail, postage prepaid,
addressed to the following parties or their successors in interest at the
following addresses, or at such other addresses as the parties may designate by
written notice in the manner aforesaid:
If to the Company: Wanderlust Interactive, Inc.
5301 Beethoven Street
Suite 255
Los Angeles, CA 90066
Attn: President and CEO
If to Optionee: (See address on signature page)
14. Successors and Assigns. Subject to the limitations on
transferability contained in Section 6 hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, the Company's
successors in interest and assigns, and the Optionee's permitted successors in
interest.
15. Applicable Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of California.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
"Company" "Optionee"
WANDERLUST INTERACTIVE, INC. _______________________________
By:________________________________ _______________________________
Jay Smith, III, President and CEO Signature
_______________________________
Number and Street
_______________________________
City, State and Zip Code
(If Optionee is unmarried as of
the date hereof, then he shall
sign his name again below.)
I certify that, as of the date
hereof, I am not married.
_______________________________
Name of Optionee
<PAGE> 1
EXHIBIT 4.3
NONQUALIFIED STOCK OPTION AGREEMENT NQSO-LA-001
THIS NONQUALIFIED STOCK OPTION AGREEMENT ("Agreement") is made
and entered into on December 16, 1997, by and between WANDERLUST INTERACTIVE,
INC., a Delaware corporation ("Company"), and JAY SMITH, III ("Optionee").
1. Grant of Option. The Company hereby irrevocably grants to the
Optionee, on the terms and subject to the conditions set forth in this
Agreement, the right and option (the "Option") to purchase all or any part of
an aggregate of 700,000 shares (the "Option Shares") of the Company's common
stock, such number being subject to adjustment as provided in Section 8 hereof.
It is understood by the parties hereto that the Option is not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Option Exercise Price. The exercise price for the Option
Shares shall be $0.625 per share. The exercise price shall be paid in full as
provided in Section 9 hereof.
3. Term of Option. Subject to the provisions of Section 7
hereof, the term of the Option shall for a period of ten (10) years from the
date hereof.
4. Exercisability of Option.
4.1 Exercise Period. Subject to the provisions of
Section 4(b) hereof, the Option shall be exercisable in accordance with the
following schedule:
<TABLE>
<CAPTION>
Percentage (Number)
of Option Shares
Date Purchasable
---- ----------------
<S> <C>
On or after December 31, 1997 8-1/3% ( 58,333)
On or after March 31, 1998 6-2/3% (116,666)
On or after June 30, 1998 25% (174,999)
On or after September 30, 1998 33-1/3% (233,332)
On or after December 31, 1998 41-2/3% (291,665)
On or after March 31, 1999 50% (349,998)
On or after June 30, 1999 58-1/3% (408,331)
On or after September 30, 1999 66-2/3% (466,664)
On or after December 31, 1999 75% (524,997)
On or after March 31, 2000 83-1/3% (583,330)
On or after June 30, 2000 91-2/3% (641,663)
On or after September 30, 2000 100% (700,000)
</TABLE>
The Optionee's right to exercise the Option shall be cumulative as to the
Option Shares covered thereby.
<PAGE> 2
4.2 Registration of Option Shares. The Company's grant
of the Option is based upon the assumption that the Optionee's exercise of the
Option and the Company's issuance of the Option Shares as a result of such
exercise will be exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"). In the event that the Company's assumption is
erroneous, the Option may not be exercised unless and until a registration
statement under the Securities Act relating to the Option Shares shall be in
effect, or unless and until the issuance of the Option Shares upon the exercise
of the Option shall be exempt from registration under the Securities Act, in
either of which events the term of the Option shall be deemed to have been
automatically extended through and including a period of ninety (90) days from
and after the date that such registration statement under the Securities Act
relating to the Option Shares first becomes effective or the date that the
issuance of the Option Shares upon the exercise of the Option first becomes
exempt from registration under the Securities Act, as the case may be. In this
regard, the Company shall use its best efforts to either register the Option
Shares in accordance with the registration requirements of the Securities Act
or to comply with any exemption therefrom with regard to the issuance of the
Option Shares. The Company shall promptly notify Optionee of any automatic
extension in the term of the Option in the event the foregoing provisions
become applicable. In all events, the Optionee shall give a written
representation satisfactory to legal counsel to the Company upon his exercise
of the Option that he is acquiring the Option Shares for investment purposes
and not with a view to, or for resale in connection with, the distribution of
any Option Shares or other securities of the Company.
5. No Shareholder Rights Prior to Exercise. The Optionee shall
not have any of the rights of a shareholder of the Company with respect to the
Option Shares except to the extent that one or more certificates for the Option
Shares shall be delivered to him upon the due exercise of the Option.
6. Nontransferability of Option. The Option shall not be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution, and the Option may be exercised during the lifetime of the
Optionee only by him. More particularly, but without limiting the generality
of the foregoing, the Option may not be assigned, transferred (except upon the
death of the Optionee), pledged or hypothecated in any way, shall not be
assignable by operation of law and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions
hereof, and the levy of any execution, attachment or similar process upon the
Option, shall be null and void and without effect.
7. Nonsurvival of Company. Where dissolution or liquidation of
the Company or any merger or combination in which the Company is not the
surviving corporation is involved, the Option shall terminate as of the
effective date of such liquidation, dissolution, merger or combination to the
extent that the Option is not assumed by, or
<PAGE> 3
replaced by equivalent options granted by, the surviving corporation, if any,
in such liquidation, dissolution, merger or combination.
8. Changes in Capital Structure. In the event that the
outstanding shares of common stock of the Company are changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares,
stock dividend, stock split or reverse stock split, the rights of the Optionee
shall be appropriately adjusted both as to the number of Option Shares and the
exercise price for the Option Shares.
9. Method of Exercising Option.
(a) Subject to the terms and conditions of the Plan and
this Agreement, the Option may be exercised by written notice ("Exercise
Notice") from the Optionee or other person entitled to exercise the Option
delivered to the Company stating the election to exercise the Option and the
number of the Option Shares in respect of which it is being exercised, and
shall be signed by the person or persons so exercising the Option. The
Exercise Notice shall be accompanied by the full exercise price for the Option
Shares in respect of which the Option is being exercised. In the event the
Option shall be exercised by any person or persons other than the Optionee, the
Exercise Notice shall be accompanied by appropriate proof of the right of such
person or persons to exercise the Option.
(b) Payment of the exercise price shall be made: (i) in
cash or by certified check or by bank draft made payable to the Company; (ii)
subject to any legal restrictions on the repurchase or redemption of shares of
the Company's common stock by the Company, by the delivery of shares of the
Company's common stock having a then "fair market value" equal to the aggregate
purchase price in respect of the Option Shares then being purchased, which
"fair market value" shall be determined in accordance with the provisions of
Article 7(a) of the Plan; or (iii) any combination of (i) or (ii) above.
(c) The certificate or certificates for the Option Shares
in respect of which the Option shall have been exercised shall be registered in
the name of the person or persons exercising the Option, or, if the Option is
exercised by the Optionee and if the Optionee shall so request in the Exercise
Notice, shall be registered either in the name of the Optionee and his spouse
jointly, with right of survivorship, or in the name of himself and/or his
spouse as trustee(s) of a trust for the benefit of himself and/or his spouse,
and shall be delivered as provided above to or upon the written order of the
person or persons exercising the Option.
All of the Option Shares purchased upon the exercise of the Option as provided
herein shall, when issued, be fully paid and nonassessable.
<PAGE> 4
10. Restrictions on Transfer of Option Shares. Optionee, by
acceptance of this Option, represents and warrants to the Company as follows:
(a) Optionee has been advised and understands that: (i)
the Option has been issued in reliance upon exemptions from registration under
the Securities Act and applicable state statutes; (ii) the exercise of the
Option and resale of the Option Shares have not been registered under the
Securities Act or applicable state statutes and the Option Shares must be held
and may not be sold, transferred or otherwise disposed of for value unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available; (iii) the Company is under no obligation to register
the resale of the Option Shares under the Securities Act or the applicable
state statutes; (iv) in the absence of registration under the Securities Act,
the resale of the Option Shares may be practicably impossible; and (v) the
Company's registrar and transfer agent will maintain stop-transfer instructions
against registration or transfer of the Option Shares and any certificate
issued upon exercise of the Option representing the Option Shares will bear on
its face a legend in substantially the following form restricting the resale of
the Option Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND ARE "RESTRICTED SECURITIES"
WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT."
(b) Prior to one year from the date the Option has been
exercised and the Option Shares purchased as a result of such exercise have
been fully paid for, the Company may refuse to allow the transfer of the Option
Shares unless the holder thereof provides an opinion of legal counsel
reasonably satisfactory to the Company or a "no action" letter or interpretive
response from the staff of the Securities and Exchange Commission to the
effect that the transfer is proper; further, unless such opinion letter or
response states that the Option Shares are free of any restrictions under the
Securities Act, the Company may refuse to allow the transfer of the Option
Shares to any transferee who does not furnish in writing to the Company the
same representations and agree to the same conditions with respect to such
Option Shares as are set forth herein. Notwithstanding any of the foregoing,
the Company may refuse to allow the transfer of the Option Shares if any
circumstances are present reasonably indicating that the transferee's
representations are not accurate.
(c) After one year but prior to two years from the date
the Option has been exercised and the Option Shares purchased as a result of
such exercise have been fully paid for, the Company may refuse to
<PAGE> 5
transfer the Option Shares unless the holder either (i) meets the requirements
of subparagraph (b) above; or (ii) resells such Option Shares in accordance
with Rule 144 promulgated under the Securities Act and furnishes to the Company
written assurances of compliance therewith in the form of a copy of the Notice
of Form 144 and appropriate letters of compliance from the holder of such
Option Shares and the securities broker- dealer to or through which such Option
Shares are being resold. No opinion of counsel for the holder of the Option
Shares shall be required respecting resales in reliance on Rule 144 pursuant to
clause (ii) of this subparagraph (c).
(d) After two years from the date the Option has been
exercised and the Option Shares purchased as a result of such exercise have
been fully paid for, the Company shall, upon the written request of any person
who has held the Option Shares for two years (excluding any tolling period
provided for by Rule 144) and who is not, and has not been during the preceding
three months, an affiliate of the Company, reissue to such holder in such names
and denominations as the holder shall request, one or more certificates for
such Option Shares without any restriction whatsoever on their further transfer
and cancel any and all stop-transfer instructions regarding such Option Shares
on the books and records of the Company.
11. Adequate Authorized Capitalization. The Company shall at all
times during the term of the Option reserve and keep available or otherwise
have authorized such number of shares of the Company's common stock as will be
sufficient to satisfy the requirements of this Agreement, shall pay all fees
and expenses necessarily incurred by the Company in connection therewith, and
shall from time to time use its best efforts to comply with all laws and
regulations which, in the opinion of legal counsel to the Company, shall be
applicable thereto.
12. Notices. All notices, requests, demands and other
communications called for or contemplated hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered or when
mailed by United States certified or registered mail, postage prepaid,
addressed to the following parties or their successors in interest at the
following addresses, or at such other addresses as the parties may designate by
written notice in the manner aforesaid:
If to the Company: Wanderlust Interactive, Inc.
5301 Beethoven Street
Suite 255
Los Angeles, CA 90066
Attn: President and CEO
If to Optionee: (See address on signature page)
13. Successors and Assigns. Subject to the limitations on
transferability contained in Section 6 hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, the Company's
successors in interest and assigns, and the Optionee's permitted successors in
interest.
<PAGE> 6
14. Applicable Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
"Company" "Optionee"
WANDERLUST INTERACTIVE, INC. JAY SMITH, III
By:__________________________________ _______________________________
Michael Cartabiano, Vice President Signature
_______________________________
Number and Street
_______________________________
City, State and Zip Code
(If Optionee is unmarried as of
the date hereof, then he shall
sign his name again below.)
I certify that, as of the date
hereof, I am not married.
_______________________________
Name of Optionee
<PAGE> 1
EXHIBIT 4.4
NONQUALIFIED STOCK OPTION AGREEMENT NQSO__
THIS NONQUALIFIED STOCK OPTION AGREEMENT ("Agreement") is made
and entered into on __________, 19__, by and between WANDERLUST INTERACTIVE,
INC., a Delaware corporation ("Company"), and ____________________
("Optionee").
1. Grant of Option. The Company hereby irrevocably grants to the
Optionee, on the terms and subject to the conditions set forth in this
Agreement, the right and option (the "Option") to purchase all or any part of
an aggregate of _______ shares (the "Option Shares") of the Company's common
stock, such number being subject to adjustment as provided in Section 8 hereof.
It is understood by the parties hereto that the Option is not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Option Exercise Price. The exercise price for the Option
Shares shall be $_____ per share. The exercise price shall be paid in full as
provided in Section 9 hereof.
3. Term of Option. Subject to the provisions of Section 7
hereof, the term of the Option shall for a period of ____ (__) years from the
date hereof.
4. Exercisability of Option.
4.1 Exercise Period. Subject to the provisions of Section
4(b) hereof, the Option shall be exercisable in accordance with the following
schedule:
<TABLE>
<CAPTION>
Percentage (Number)
of Option Shares
Date Purchasable
---- -------------------
<S> <C>
On or after ______, 19__ ___% (___)
On or after ______, 19__ ___% (___)
On or after ______, 19__ ___% (___)
</TABLE>
The Optionee's right to exercise the Option shall be cumulative as to the
Option Shares covered thereby.
4.2 Registration of Option Shares. The Company's grant
of the Option is based upon the assumption that the Optionee's exercise of the
Option and the Company's issuance of the Option Shares as a result of such
exercise will be exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"). In the event that the Company's assumption is
erroneous, the Option may not be exercised unless and until a registration
statement under the Securities Act relating to the Option Shares shall be in
effect, or
<PAGE> 2
unless and until the issuance of the Option Shares upon the exercise of the
Option shall be exempt from registration under the Securities Act, in either of
which events the term of the Option shall be deemed to have been automatically
extended through and including a period of ninety (90) days from and after the
date that such registration statement under the Securities Act relating to the
Option Shares first becomes effective or the date that the issuance of the
Option Shares upon the exercise of the Option first becomes exempt from
registration under the Securities Act, as the case may be. In this regard, the
Company shall use its best efforts to either register the Option Shares in
accordance with the registration requirements of the Securities Act or to
comply with any exemption therefrom with regard to the issuance of the Option
Shares. The Company shall promptly notify Optionee of any automatic extension
in the term of the Option in the event the foregoing provisions become
applicable. In all events, the Optionee shall give a written representation
satisfactory to legal counsel to the Company upon his exercise of the Option
that he is acquiring the Option Shares for investment purposes and not with a
view to, or for resale in connection with, the distribution of any Option
Shares or other securities of the Company.
5. No Shareholder Rights Prior to Exercise. The Optionee shall
not have any of the rights of a shareholder of the Company with respect to the
Option Shares except to the extent that one or more certificates for the Option
Shares shall be delivered to him upon the due exercise of the Option.
6. Nontransferability of Option. The Option shall not be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution, and the Option may be exercised during the lifetime of the
Optionee only by him. More particularly, but without limiting the generality
of the foregoing, the Option may not be assigned, transferred (except upon the
death of the Optionee), pledged or hypothecated in any way, shall not be
assignable by operation of law and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the provisions
hereof, and the levy of any execution, attachment or similar process upon the
Option, shall be null and void and without effect.
7. Nonsurvival of Company. Where dissolution or liquidation of
the Company or any merger or combination in which the Company is not the
surviving corporation is involved, the Option shall terminate as of the
effective date of such liquidation, dissolution, merger or combination to the
extent that the Option is not assumed by, or replaced by equivalent options
granted by, the surviving corporation, if any, in such liquidation,
dissolution, merger or combination.
8. Changes in Capital Structure. In the event that the
outstanding shares of common stock of the Company are changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares,
stock dividend, stock split
<PAGE> 3
or reverse stock split, the rights of the Optionee shall be appropriately
adjusted both as to the number of Option Shares and the exercise price for the
Option Shares.
9. Method of Exercising Option.
(a) Subject to the terms and conditions of the
Plan and this Agreement, the Option may be exercised by written notice
("Exercise Notice") from the Optionee or other person entitled to exercise the
Option delivered to the Company stating the election to exercise the Option and
the number of the Option Shares in respect of which it is being exercised, and
shall be signed by the person or persons so exercising the Option. The
Exercise Notice shall be accompanied by the full exercise price for the Option
Shares in respect of which the Option is being exercised. In the event the
Option shall be exercised by any person or persons other than the Optionee, the
Exercise Notice shall be accompanied by appropriate proof of the right of such
person or persons to exercise the Option.
(b) Payment of the exercise price shall be made:
(i) in cash or by certified check or by bank draft made payable to the Company;
(ii) subject to any legal restrictions on the repurchase or redemption of
shares of the Company's common stock by the Company, by the delivery of shares
of the Company's common stock having a then "fair market value" equal to the
aggregate purchase price in respect of the Option Shares then being purchased,
which "fair market value" shall be determined in accordance with the provisions
of Article 7(a) of the Plan; or (iii) any combination of (i) or (ii) above.
(c) The certificate or certificates for the
Option Shares in respect of which the Option shall have been exercised shall be
registered in the name of the person or persons exercising the Option, or, if
the Option is exercised by the Optionee and if the Optionee shall so request in
the Exercise Notice, shall be registered either in the name of the Optionee and
his spouse jointly, with right of survivorship, or in the name of himself
and/or his spouse as trustee(s) of a trust for the benefit of himself and/or
his spouse, and shall be delivered as provided above to or upon the written
order of the person or persons exercising the Option.
All of the Option Shares purchased upon the exercise of the Option as provided
herein shall, when issued, be fully paid and nonassessable.
10. Restrictions on Transfer of Option Shares. Optionee, by
acceptance of this Option, represents and warrants to the Company as follows:
(a) Optionee has been advised and understands
that: (i) the Option has been issued in reliance upon exemptions from
registration under the Securities Act and applicable state statutes; (ii) the
exercise of the Option and resale of the Option Shares have not been registered
under the Securities Act or applicable state statutes and the Option Shares
must be held and may not be sold, transferred or otherwise disposed of for
value unless they are
<PAGE> 4
subsequently registered under the Securities Act or an exemption from such
registration is available; (iii) the Company is under no obligation to register
the resale of the Option Shares under the Securities Act or the applicable
state statutes; (iv) in the absence of registration under the Securities Act,
the resale of the Option Shares may be practicably impossible; and (v) the
Company's registrar and transfer agent will maintain stop-transfer instructions
against registration or transfer of the Option Shares and any certificate
issued upon exercise of the Option representing the Option Shares will bear on
its face a legend in substantially the following form restricting the resale of
the Option Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND ARE "RESTRICTED SECURITIES"
WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE
SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT."
(b) Prior to one year from the date the Option
has been exercised and the Option Shares purchased as a result of such exercise
have been fully paid for, the Company may refuse to allow the transfer of the
Option Shares unless the holder thereof provides an opinion of legal counsel
reasonably satisfactory to the Company or a "no action" letter or interpretive
response from the staff of the Securities and Exchange Commission to the
effect that the transfer is proper; further, unless such opinion letter or
response states that the Option Shares are free of any restrictions under the
Securities Act, the Company may refuse to allow the transfer of the Option
Shares to any transferee who does not furnish in writing to the Company the
same representations and agree to the same conditions with respect to such
Option Shares as are set forth herein. Notwithstanding any of the foregoing,
the Company may refuse to allow the transfer of the Option Shares if any
circumstances are present reasonably indicating that the transferee's
representations are not accurate.
(c) After one year but prior to two years from
the date the Option has been exercised and the Option Shares purchased as a
result of such exercise have been fully paid for, the Company may refuse to
transfer the Option Shares unless the holder either (i) meets the requirements
of subparagraph (b) above; or (ii) resells such Option Shares in accordance
with Rule 144 promulgated under the Securities Act and furnishes to the Company
written assurances of compliance therewith in the form of a copy of the Notice
of Form 144 and appropriate letters of compliance from the holder of such
Option Shares and the securities broker-dealer to or through which such Option
Shares are being resold. No opinion of counsel for the holder of the Option
Shares shall be required respecting resales in reliance on Rule 144 pursuant to
clause (ii) of this subparagraph (c).
<PAGE> 5
(d) After two years from the date the Option has
been exercised and the Option Shares purchased as a result of such exercise
have been fully paid for, the Company shall, upon the written request of any
person who has held the Option Shares for two years (excluding any tolling
period provided for by Rule 144) and who is not, and has not been during the
preceding three months, an affiliate of the Company, reissue to such holder in
such names and denominations as the holder shall request, one or more
certificates for such Option Shares without any restriction whatsoever on their
further transfer and cancel any and all stop-transfer instructions regarding
such Option Shares on the books and records of the Company.
11. Adequate Authorized Capitalization. The Company shall at all
times during the term of the Option reserve and keep available or otherwise
have authorized such number of shares of the Company's common stock as will be
sufficient to satisfy the requirements of this Agreement, shall pay all fees
and expenses necessarily incurred by the Company in connection therewith, and
shall from time to time use its best efforts to comply with all laws and
regulations which, in the opinion of legal counsel to the Company, shall be
applicable thereto.
12. Notices. All notices, requests, demands and other
communications called for or contemplated hereunder shall be in writing and
shall be deemed to have been duly given when personally delivered or when
mailed by United States certified or registered mail, postage prepaid,
addressed to the following parties or their successors in interest at the
following addresses, or at such other addresses as the parties may designate by
written notice in the manner aforesaid:
If to the Company: Wanderlust Interactive, Inc.
5301 Beethoven Street
Suite 255
Los Angeles, CA 90066
Attn: President and CEO
If to Optionee: (See address on signature page)
13. Successors and Assigns. Subject to the limitations on
transferability contained in Section 6 hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, the Company's
successors in interest and assigns, and the Optionee's permitted successors in
interest.
14. Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.
"Company" "Optionee"
WANDERLUST INTERACTIVE, INC. _______________________________
By:__________________________________ _______________________________
Jay Smith, III, President and CEO Signature
_______________________________
Number and Street
_______________________________
City, State and Zip Code
(If Optionee is unmarried as of
the date hereof, then he shall
sign his name again below.)
I certify that, as of the date
hereof, I am not married.
_______________________________
Name of Optionee
<PAGE> 1
EXHIBIT 4.5
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS WARRANT HAS BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND SAID STATE SECURITIES LAWS
OR AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND SAID STATE SECURITIES LAWS.
WANDERLUST INTERACTIVE, INC.
WARRANT TO PURCHASE COMMON STOCK
WANDERLUST INTERACTIVE, INC, a Delaware corporation ("Company"),
certifies that _______________________________________________________
("Holder"), is entitled to purchase from Company, at any time during the period
set forth in Section 2.1 hereof, up to a maximum of ______ fully paid and
nonassessable shares (the "Shares") of Company's common stock, $0.01 par value
per share (the "Common Stock"), for a price per share equal to the Purchase
Price (as hereafter defined).
This Warrant and the Common Stock issuable upon exercise hereof are
subject to the terms and conditions hereinafter set forth:
1. Definitions. As used in this Warrant, the following terms
shall mean:
1.1 "Issuance Date" - January 14, 1998, the effective
date of the original issuance of this Warrant.
1.2 "Purchase Price" - $1.25 per share of the Company's
Common Stock.
1.3 "Subscription Form" - The form attached to this
Warrant as Exhibit A.
1.4 "Warrant" - This Warrant or any warrant delivered in
substitution or exchange therefor as provided herein.
2. Exercise.
2.1 Time of Exercise. This Warrant may be exercised at
the office of Company in whole or part at any time commencing on the Issuance
Date and terminating on January 13, 2001.
2.2 Manner of Exercise. This Warrant is exercisable at
the Purchase Price per share of Common Stock issuable hereunder payable in cash
or by check, payable to the order of Company, or by cancellation of any then
existing indebtedness owed by Company to the Holder, or any combination
thereof. Upon surrender of this Warrant with the
<PAGE> 2
annexed Subscription Form duly executed, together with payment of the Purchase
Price for the Shares purchased at Company's principal executive offices in
California, the Holder shall be entitled to receive a certificate or
certificates for the Shares so purchased. The purchase rights represented by
this Warrant are exercisable at the option of the Holder hereof, in whole or
part, during any period in which this Warrant may be exercised as set forth
above.
2.3 Delivery of Stock Certificates. As soon as
practicable, but not exceeding 10 business days, after exercise of this
Warrant, Company, at its expense, shall cause to be issued in the name of the
Holder and deliver to the Holder a certificate for the number of fully paid and
nonassessable Shares so purchased.
2.4 Record Date of Transfer of Shares. Irrespective of
the date of issuance and delivery of certificates for any Shares of Common
Stock or other securities issuable upon the exercise of this Warrant, each
person in whose name any such certificate is to be issued shall for all
purposes be deemed to have become the holder of record of the Shares of Common
Stock or other securities represented thereby immediately prior to the close of
business on the date on which a duly executed Subscription Form containing
notice of exercise of this Warrant and payment for the number of Shares as to
which this Warrant shall have been exercised shall have been delivered to
Company.
3. Adjustments. In the event that the outstanding shares of
Common Stock of Company are at any time increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of
Company or of another corporation through reorganization, merger,
consolidation, liquidation, recapitalization, stock split, combination of
shares or stock dividends payable with respect to such shares of Common Stock,
appropriate adjustments in the number, kind and price of such securities then
subject to this Warrant shall be made effective as of the date of such
occurrence so that the position of the Holder upon exercise will be the same as
it would have been had the Holder owned immediately prior to the occurrence of
such event the number of shares of Common Stock subject to this Warrant. Such
adjustment shall be made successively whenever any event listed above shall
occur and Company will notify the Holder of each such adjustment. Any fraction
of a share resulting from any adjustment shall be eliminated and the price per
share of the remaining shares subject to this Warrant adjusted accordingly.
4. Transfer of Warrant and Shares.
4.1 Restrictions on Transfer. The Holder, by the
Holder's acceptance hereof, represents, warrants, covenants, and agrees that
(a) the Holder has knowledge of the business and affairs of Company, and (b)
this Warrant and the Shares issuable upon the exercise of this Warrant are
being acquired for investment and not with a view to the distribution hereof,
and that absent an effective registration statement under the Securities Act of
1933, as amended ("1933 Act"), covering the disposition of this Warrant or the
Shares issued or issuable upon exercise of this Warrant, they will not be sold,
<PAGE> 3
transferred, assigned, hypothecated or otherwise disposed of without first
providing Company with an opinion of counsel, reasonably satisfactory to
Company, to the effect that such sale, transfer, assignment, hypothecation or
other disposal will be exempt from the registration and prospectus delivery
requirements of the 1933 Act, and the Holder consents to Company making a
notation in its records or giving to any transfer agent of the Warrant or the
Shares an order to implement such restriction on transferability.
5. Payment of Taxes. All Shares issued upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable, and Company
shall pay all taxes and other governmental charges that may be imposed in
respect of the issue or delivery thereof. Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any Shares into any name other than that of the Holder
surrendered in connection with the purchase of such Shares, and in such case
Company shall not be required to issue or deliver any stock certificate until
such tax or other charge has been paid or it has been established to Company's
satisfaction that no tax or other charge is due.
6. Reservation of Common Stock. Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the exercise of this Warrant,
such number of shares of Common Stock as shall be issuable upon the exercise
hereof.
7. Piggyback Registration Rights. Company acknowledges and
agrees that the Holder will have the following "piggyback" registration rights
with respect to the Shares of Common Stock purchased by the Holder pursuant to
the Holder's exercise of this Warrant:
(a) If any time Company proposes to register any of its
shares of Common Stock under the 1933 Act (other than in connection with a
merger, acquisition or exchange offer or pursuant to Form S-8 or successor
form), Company will give written notice, by registered mail, at least 30 days
prior to the filing of such registration statement to the Holder of its
intention to do so. Upon written request of the Holder given within 15 days
after receipt of any such notice of the Holder's desire to include any of the
Shares purchasable by the Holder pursuant to this Warrant in such proposed
registration statement, Company shall afford the Holder the opportunity to have
such Shares registered under such registration (subject to the underwriter's
approval thereof). The "piggyback" registration rights described in this
Section 7(a) shall terminate as to any Shares elected to be purchased by Holder
on the date which is one year after issuance of such Shares. Any sales of such
Shares by the Holder pursuant to such registration statement shall be effected
through the underwriter of such registered offering, if any, and the Holder
shall compensate the underwriter in accordance with its customary compensation
practices.
<PAGE> 4
(b) Notwithstanding anything to the contrary contained in
the provisions of this Section 7, Company shall have the right at any time
after it shall have given written notice pursuant to this Section 7
(irrespective of whether a written request for inclusion of any such Shares
shall have been made by the Holder) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
(c) Company shall indemnify and hold harmless the Holder
from and against any and all losses, claims, damages and liabilities caused by
any untrue statement of a material fact contained in any registration statement
filed by Company under the 1933 Act by reason of this Section 7, any
post-effective amendment to such registration statement, or any prospectus
included therein, or caused by any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission based upon information
furnished or required to be furnished in writing to the Company by the Holder
(or the authorized representatives or agents of the Holder) expressly for use
therein, which indemnification shall include each person, if any, who controls
the Holder within the meaning of the 1933 Act and each officer, director,
employee and agent of the Holder; provided, however, that the indemnification
in this Section 7(c) with respect to any prospectus shall not inure to the
benefit of the Holder (or to the benefit of any person controlling the Holder)
on account of any such loss, claim, damage or liability arising from the sale
of such Shares by the Holder, if a copy of a subsequent prospectus correcting
the untrue statement or omission in such earlier prospectus was provided to the
Holder of such Shares by Company prior to the subject sale and the subsequent
prospectus was not delivered or sent by the Holder to the purchaser of such
Shares prior to such sale; and provided further that Company shall not be
obligated to so indemnify the Holder of such Shares or any other person
referred to above unless the Holder or such other person, as the case may be,
shall at the same time indemnify Company, its directors, each officer signing
the registration statement and each person, if any, who controls Company within
the meaning of the 1933 Act, from and against any and all losses, claims,
damages and liabilities caused by any untrue statement of a material fact
contained in any registration statement or any prospectus required to be filed
or furnished in connection with such public offering or caused by any omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission based
upon information furnished in writing to Company by Holder of such Shares
expressly for use therein.
(d) If for any reason the indemnification provided for in
Section 7(c) above is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim, damage,
liability or expense referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by the
<PAGE> 5
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the indemnified party and the indemnifying party, but also the relative
fault of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations.
(e) All expenses, filing fees and other costs incurred by
Company in connection with any registration of securities pursuant to this
Section 7 (exclusive of underwriting discounts and selling commissions
applicable to any sale of registered securities) shall be borne by Company.
(f) In the case of any registration effected by Company
pursuant to the provisions of this Section 7, Company will: (i) furnish to the
Holder of such Shares such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the 1933 Act,
and such other documents as the Holder may reasonably request in order to
facilitate the disposition of such Shares owned by the Holder, and (ii) notify
the Holder of such Shares covered by such registration statement at any time
when a prospectus relating thereto is required to be delivered under the 1933
Act of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(g) Notwithstanding anything to the contrary contained
herein, the Holder acknowledges and agrees that, with the exception of private
sales or transfers which are not effected through a broker-dealer, neither the
Holder nor any affiliate of the Holder or any transferees or assignees of the
Holder or any affiliate of the Holder will sell, pledge, assign or otherwise
transfer or hypothecate any Shares through any person or other entity other
than such entity which is or shall be the Company's underwriter in a public
offering, in which event such underwriter is to be compensated by the Holder of
such Shares, an affiliate of the Holder of such Shares or such transferee or
assignee of such Shares in accordance with the underwriter's customary
compensation practices.
8. Notices.
8.1 Notices to be Given. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof the right to
vote or to consent or to receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any other matter or
as having any rights whatsoever as a shareholder of Company. If, however, at
any time prior to the expiration of the Warrant and prior to its exercise,
Company intends to issue a cash dividend, then Company shall give written
notice of such issuance of such cash dividend to the Holder at least 15 days
prior to the date fixed for issuance of such cash dividend.
<PAGE> 6
8.2 Addresses. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, postage
prepaid, return receipt requested, to the parties at the following addresses:
(a) If to Holder:
_______________________
_______________________
_______________________
(b) If to Company:
Wanderlust Interactive, Inc.
5301 Beethoven Street, Suite 255
Los Angeles, CA 90066
Attn: Jay Smith, III, Chief
Executive Officer
9. Miscellaneous.
9.1 Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to Company of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and (in the case of loss, theft or
destruction) upon delivery of an indemnity agreement in an amount reasonably
satisfactory to Company, or (in the case of mutilation) upon surrender and
cancellation of the mutilated Warrant, Company will execute and deliver, in
lieu thereof, a new Warrant of like tenor.
9.2 Successors. All the covenants, agreements,
representations and warranties contained in this Warrant shall bind the parties
hereto and their respective heirs, executors, administrators, distributees,
successors and assigns, except Holder may not assign or transfer this Warrant.
9.3 Change; Waiver. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
9.4 Headings. The section headings in this Warrant are
inserted for purposes of convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, Company has caused this Warrant to be signed by
its duly authorized officer, and this Warrant to be dated as of January 14,
1998.
WANDERLUST INTERACTIVE, INC.
By:________________________________________________
Jay Smith III, Chief Executive Officer
<PAGE> 7
EXHIBIT A
SUBSCRIPTION FORM
To: Wanderlust Interactive, Inc.
The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to exercise the purchase right represented by that Warrant
for, and to purchase under that Warrant, ________ shares of Common Stock of
Wanderlust Interactive, Inc., a Delaware corporation, and herewith makes payment
of ____________________________________ ($) for those shares, and requests that
the certificates for those shares be issued in the name of
____________________________________ and delivered
to____________________________________________ whose address is _______
________________________________________.
Dated: _____________________
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") dated as of December 16, 1997,
between WANDERLUST INTERACTIVE, INC., a Delaware corporation with its principal
place of business in the United States at 5301 Beethoven Street, Los Angeles,
CA 90066 (herein called the "Company") and Jay Smith III (herein called the
"Employee") residing at 348 Bentel Avenue, Los Angeles, CA 90049.
1. EMPLOYMENT. The company hereby employs Employee as the Company's
President and Chief Executive Officer reporting to the Company's Board of
Directors. Employee will be responsible for management and supervision of the
Company's operations for the term of this Agreement, and the Employee hereby
accepts such employment upon the terms and conditions hereinafter set forth.
2. TERM. The term of this Agreement shall commence as of November 1,
1997 (the "Employment Date") and shall continue in effect for a term of 36
months, unless previously terminated in accordance with the provisions of
Section 6 of this Agreement. Thereafter, this Agreement shall be automatically
renewed on a year-to-year basis unless either party shall provide the other
with notice in writing of the termination of this Agreement at least 60 days'
prior to the expiration of this Agreement at the end of its original term or
any renewal thereof. For purposes of this Agreement, the "term of this
Agreement" shall refer to the initial term and all renewal terms thereof. In
the event of termination by the Company prior to the expiration of this
Agreement at the end of its original term or any renewal thereof, the Company
shall pay the Employee severance pay and benefits required by Section 6(e) of
this Agreement unless termination by the Company is for a reason specified in
Sections 6(a), 6(b) or 6(c) hereunder.
3. COMPENSATION. For all services rendered by the Employee under this
Agreement, the Company shall pay the Employee a salary and fringe benefits as
follows;
(a) Cash Compensation: The company shall pay the Employee a base
salary during the term of this Agreement, payable monthly, at the rate
of $150,000 per year per annum. Employee will be eligible to receive
a fiscal annual performance bonus of up to 50% of base salary based
upon achievement of reasonable and achievable Company goals as
determined and approved in good faith by the Board of Directors to be
paid no later than 90 days from end of such year. Employee shall be
eligible for annual performance appraisal and merit increase. Company
may, but is not obligated to, increase Employee's salary as Company
deems appropriate.
<PAGE> 2
(b) Stock Options: The Company shall grant the Employee Stock
Options to purchase 700,000 common shares of the Company at $0.62 per
share (110% of the closing bid price of $0.5625 per share as of
December 15, 1997) which shall vest in equal quarterly increments over
a period of 12 quarters from the Employment Date as set forth in the
Stock Option Agreement.
(c) Medical, Insurance, and Other Benefits: The Employee shall at
his option be entitled to participate with other employees of the
Company in all group fringe benefit plans or other group arrangements
authorized and adopted from time to time. Employee shall also receive
such other benefits including vacation, holidays, and sick leave, as
Company generally provides to its employees holding similar positions
as that of Employee.
(d) Expenses: The Company shall either pay directly or reimburse
Employee for reasonable travel, entertainment and other business
expenses incurred by Employee in the performance of his duties
hereunder; provided that the incurring of such expenses shall be
subject to such policies as shall be established by the Board of
Directors of the Company from time to time, and Employee shall submit
to the Company such documentation to substantiate such expenses as the
Company shall reasonably request.
Nothing herein shall be deemed to preclude the Company from awarding additional
compensation or benefits to Employee during the term of this Agreement, upon
approval of Company's Board of Directors, whether in the form of raises,
bonuses, additional fringe benefits, or otherwise.
4. DUTIES. During the term of this Agreement, the Employee hereby
promises to perform and discharge faithfully the duties which may be assigned
to him from time to time by the Board of Directors in connection with the
conduct of its business so long as such duties are reasonably related to the
Employee's duties President and Chief Executive Officer of the Company.
Employee will be responsible for all domestic and foreign operations of the
Company and will have all relevant executives and their respective subordinates
report to him. Employee is employed to actively serve on a full-time basis as
an executive officer of the Company and will serve as a member of the Company's
Board of Directors.
5. EXTENT OF SERVICES; OTHER INTERESTS. During the term of this
Agreement, the Employee shall devote all of his working time, attention and
energies which is reasonably required for the performance of his duties and the
business of the Company and shall travel as reasonably required to discharge
the duties of his position with the Company as assigned by its Board of
Directors. The Employee shall not during the term of this Agreement be engaged
in any other business activities that are, or could potentially be, in
competition with the business activities of the Company whether or not such
business activities are pursued for gain, profit or other pecuniary
<PAGE> 3
advantage. Subject to the foregoing, the Employee may engage in investment,
business, professional and continuing education activities so long as such
activities do not substantially interfere with the performance of his duties as
the President and Chief Executive Officer of the Company.
6. TERMINATION. Payment of severance described in this Section 6 shall be paid
no later than ten (10) days after becoming due.
(a) Death: In the event of Employee's death during the term hereof,
this Agreement shall terminate immediately and, except as expressly
set forth in this paragraph, the Company shall have no further
liability hereunder to Employee or his estate. The Company shall
continue to pay to Employee's estate his salary and continued stock
option vesting for a period of one (1) months from and after the date
of death during the term of this Agreement.
(b) Permanent Disability. In the event that Employee becomes totally
disabled during the term hereof and such total disability continues
for a period in excess of ninety (90) days, whether consecutive or in
the aggregate during any 12 month period, at the end of such period of
disability the Employee shall be considered as permanently disabled
and this Agreement shall terminate immediately and, except as
expressly set forth in this paragraph, the Company shall have no
further liability hereunder to Employee. The company shall continue
to pay to Employee his salary and continue stock option vesting for
the period of disability and a period of two (2) months from and after
the date of total disability commencing with the expiration of the
first 90 day period of such disability as severance pay hereunder.
Employee shall be considered as totally disabled if, and when because
of injury, illness or physical or mental disability, he is prevented
from effectively performing the duties of his employment. The
determination of total disability shall be made by the Board of
Directors of the Company, but said decision shall not be unreasonable
or arbitrary and shall be supported by the opinion (at the Company's
expense) of at least one licensed physician unless Employee shall
without justification fail to submit to the necessary physical or
mental examination. It is understood that Employee's occasional
sickness of short duration shall not result in Employee being
considered totally disabled, and Employee shall continue to be
compensated hereunder during such periods of occasional sickness so
long as they shall not exceed twelve (12) days in a calendar year.
(c) Involuntary Termination for Cause. The Company may terminate this
Agreement for cause. For the purposes of this Agreement, a
termination for "cause" shall mean a termination resulting from a good
faith and reasonable determination by the Company's Board of Directors
that Employee (i) has committed a
<PAGE> 4
felony or act of moral turpitude which would materially injure the
Company or its reputation or, (ii) has intentionally or willfully and
repeatedly breached his duties hereunder in a material respect and, if
curable, has failed to cure the same within thirty (30) days after
receiving written notice of such breach from the Board of the Company.
Such notice must be given to Employee following each claimed breach,
whether or not curable. In the event of termination for cause, the
Company shall have no further liability hereunder to Employee from and
after the date of such termination.
(d) Termination Without Cause. Termination of Employee for any reason
other than in paragraphs 6(a), 6(b), and 6(c) hereof shall be
considered Termination Without Cause. In addition, Employee's
resignation from the employ of the Company shall be deemed Termination
Without Cause ("Constructive Discharge") if resulting from: 1) a
reduction of more than 25% of monthly base salary in cash compensation
(excluding performance bonuses) or other benefits other than as a
result of a decrease in compensation payable to Employee and to all
other executive officers of Company on the basis of Company's
financial performance; 2) a chance in reporting relationship t the
Company's Board of Directors or a significant reduction in the nature
or scope of Employee's responsibilities, authorities, powers,
functions or duties as a President and Chief Executive Officer of the
Company; 3) a requirement imposed by the Company that Employee
relocate to an office that is more than 25 miles from the Company's
current headquarters; 4) failure of Company materially to perform its
obligations pursuant to this Agreement. If Employee continues his
employment with the Company after a Constructive Discharge event
occurs, that continuation shall not constitute a waive of Employee's
rights to treat such event as an event of Termination Without Cause
unless (i) his employment under adjusted terms of employment after
the Constructive Discharge Event shall continue for more than 90 days
after such Constructive Discharge Event or (ii) his employment is
subsequently terminated for cause under paragraph 6(c) above.
(e) Salary and Benefit Continuation Upon Termination Without Cause.
Upon the termination of Employee's employment with the Company for any
reason whatsoever prior to the expiration of the original term of any
annual renewal of the term of this Agreement, except for (i)
termination upon death as set forth in paragraph 6(a) hereof; (ii)
termination upon permanent disability as set forth in paragraph 6(b)
hereof; (iii) termination for cause pursuant to paragraph 6(c) hereof;
or (iv) Employee's voluntarily electing not to continue in the
employment of the Company under conditions other than Constructive
Discharge; then the Company within thirty (30) days after such
termination, and in lieu of all other obligations of the Company
hereunder, shall: 1) pay to Employee a lump-sum payment equal to his
then base salary for a period equal to twelve (12) months; 2) will
provide Employee, at Company's cost, with employment benefits
consisting of life, health, dental and long-term disability insurance
for a
<PAGE> 5
period of 12 months after termination; 3) enter into a
Post-termination Consulting Agreement as defined below in paragraph
6(f) hereof; and 4) will grant Employee an exclusive 120-day option to
purchase Western Technologies, Inc., a subsidiary of the Company, for
net book value. Thereafter, any continuation of benefits under the
Consolidated Omnibus Budget Reconciliation Act (COBRA) will be at
Employee's cost.
(f) Post-termination Consulting Agreement. Upon the Termination
Without Cause, Employee will hold himself available to provide
consulting services to the Company for a period terminating one year
after the Termination Date (the "Consulting Period"). Employee will
provide the consulting services only upon the request of the Company's
Chief Executive Officer and for no more than ten hours per week (any
period shorter than one week will include a proportionate number of
hours) at such times and places as are mutually convenient to Employee
and the Company. However, Employee will perform those services at
times and places that do not reasonably conflict with his
responsibilities to his then current employer. Employee will perform
services as an independent contractor with the customary and usual
independence associated therewith, and he will not be deemed an
employee or agent of the Company or have the authority to bind, or to
enter into any contact on behalf of, the Company, unless expressly
authorized in writing to do so. The Company will pay Employee a
consulting fee of $150.00 per hour for each hour actually worked at
the Company's request. The Company's Board of Directors has
determined that Employee will be providing "substantial services" to
the Company during the Consulting Period such that any option held by
Employee on the Termination Date, if not fully vested at the time,
will continue to vest during the Consulting Period according to its
terms. Any option held by Employee at the Termination Date will
remain exercisable for the current term of the option during the
Consulting Period even though the employment of Employee will
terminate on the Termination Date.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee recognizes and
acknowledges that the Company's trade secrets and proprietary processes as they
may exist from time to time are valuable, special and unique assets of the
Company's business, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee will not during or
after the term of his employment, disclose such secrets or processes to any
perform, firm, corporation, association, or other entity for any reason or
purpose whatever, nor shall the Employee make use of any such secrets or
processes for his own purposes or for the benefit of any person, firm,
corporation, or other entity (except the Company) under any circumstances during
or after the term of his Employment; provided that after the term of his
employment these restrictions shall not apply to such secrets and processes
which are then, or from time to time thereafter, in the public domain (provided
that he was not responsible, directly or indirectly, for permitting such secrets
or processes to enter the public domain without the Company's consent).
<PAGE> 6
8. COVENANT NO TO COMPETE OR INTERFERE. With the exception of activities
associated with the purchase and subsequent operation of Western Technologies,
Inc., Employee agrees that during the term of this Agreement or for a period of
one (1) year after the date of Termination under this Agreement, whichever
occurs first; (a) Employee shall not intentionally interfere with, disrupt or
attempt to disrupt the relationship, contractual or otherwise between the
Company and any customer, supplier, lessor or employee of the Company or any of
its subsidiaries and (b) Employee shall not as a sole proprietor or otherwise
for his own account or as a partner, employee, officer, director, manager,
agent, distributor, consultant, marketing representative, associate, investor or
otherwise (except as to a less than 5% interest in a public company listed on
the NASDAQ, a national, or a regional exchange), directly or indirectly, own,
purchase, organize or take preparatory steps for the organization of, finance,
work for, provide services to, advise, acquire, lease, operate, manage or invest
in or permit his name to be used or employed in connection with any business
which engages in providing equipment and/or support services for correct eye
surgery in competition with the Company (the "Business"). Employee further
agrees that the covenants and other provisions of this paragraph shall cover his
activities in the whole of North America, Europe and Asia (the "Territory").
The parties hereto agree that the covenants contained in this paragraph (b)
shall be construed as if the covenants are divided into separate and distinct
covenants in respect of each of the products and services of the Business, each
capacity in which the party is prohibited from competing, and each part of the
world in which such competition is prohibited from taking place. The
territorial restrictions contained in this paragraph (b) are properly required
for the adequate protection of the Business and in the event any covenant or
other provision contained in this paragraph (b) shall be deemed to be illegal,
unenforceable, or unreasonable by a court or other tribunal of competent
jurisdiction. With respect to any part of the Territory or otherwise, such
covenant or provision shall not be affected with respect to any other part of
the Territory or otherwise, and each of the parties hereto agrees and submits to
the reduction of said territorial restriction or other provisions to such an
area or otherwise, as said court shall deem reasonable. The parties further
agree that if any provision of this Agreement is found to be unenforceable, it
shall not affect the enforceability of the remaining provisions and the court
shall enforce all remaining provisions to the extent permitted by law.
9. INVENTIONS. The Employee hereby sells, transfers, and assigns to the
Company, or to any person or entity designated by the Company, at the entire
rights, title and interest of the Employee in and to all inventions, ideas,
disclosure, and improvements, whether patented or unpatented, and copyrightable
material made or conceived by the Employee, solely or jointly during the term
hereof which relate to methods, apparatus, formulae, designs, products,
processes or devices, sold, leased, used, or under consideration or development
by the Company, or which otherwise relate to or pertain to the business,
<PAGE> 7
functions, or operations of the Company. The Employee agrees to communicate
promptly and to disclose to the Company, in such form as the Employee may be
required to do so, all information, details, and data pertaining to the
aforementioned inventions, ideas, disclosure, and improvements and to execute
and deliver to the Company such formal transfers and assignments and such other
papers and documents as may be required of the Employee to permit the Company
or any person or entity designated by the Company to file and prosecute the
patent applications and, as to copyrightable material, to obtain copyright
thereof.
For the purposes of this Agreement, an invention shall be deemed to have been
made during the term of Employee's employment if, during such period, the
invention was conceived or first actually reduced to practice by the Company,
and Employee agrees that any patent application filed within one (1) year after
termination of this employment shall be presumed to relate to an invention
which was made during the term of Employee's employment unless Employee can
provide satisfactory evidence to the contrary. covenants
10. INJUNCTIVE RELIEF. The parties hereto acknowledge that (a) the covenants
and restrictions set forth in Sections 8, 9 and 10 of this Agreement are
necessary, fundamental and required for the protection of the business of the
Company, (b) such and restrictions are material inducements to investors to
enter into agreements to invest in the Company, and (c) a breach of any such
covenants and restrictions by Empo9yee will result in irreparable harm and
damages to the Company which cannot be adequate compensated by a monetary
award. Accordingly, in the event of breach or threatened breach of such
provisions by Employee, Employee expressly agrees that the Company shall be
entitled to the immediate remedy of a temporary restraining order, preliminary
injunction or such other form of injunctive or equitable relief as may be used
by any court of competent jurisdiction to restrain or enjoin the Employee from
breaching any such covenant or provisions or to specifically enforce the
provisions hereof. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies for such breach or threatened breach.
11. INSURANCE. The Company, at its election and for its benefit, may insure
the Employee against accidental loss or death and the Employee shall submit to
such physical examination and supply such information as may be required in
connection therewith.
12. NOTICES. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered or certified mail
to his last known residence in the case of the Employee or to its last known
principal office in the case of the Company.
13. WAIVER OF BREACH. The waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed by a waiver of any
subsequent breach.
<PAGE> 8
14. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California.
15. ASSIGNMENT. The rights and obligations of the parties under this Agreement
shall insure to the benefit of and shall be binding upon the successors of such
parties.
16. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties and supersedes all existing agreements between them. It may not be
changed orally but only by an agreement in writing signed by the party against
whom enforcement of any waiver, modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
first written above.
EMPLOYEE: _______________________________________
Jay Smith III
COMPANY Wanderlust Interactive, Inc.
By:____________________________________
Thomas A. Schultz
Chairman, Compensation Committee
of the Board
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