Exhibit 99.1
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ELECTRONIC SENSOR TECHNOLOGY, INC.
RESTRICTED STOCK AWARD AGREEMENT
This RESTRICTED STOCK AWARD AGREEMENT (this "Agreement"), effective as
of January 25, 2006 is made between Electronic Sensor Technology, Inc., a Nevada
corporation (the "Company"), and Xxxxxxx X. Xxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, on May 16, 2005, the Company and the Executive entered into an
Offer Letter of Employment (the "Employment Agreement") wherein the Company
agreed to grant to the Executive 75,000 shares of restricted common stock of the
Company at the time of the Executive's employment and 75,000 shares of
restricted common stock of the Company on the first anniversary of the
Executive's date of employment;
WHEREAS, the Company and the Executive mutually agreed to delay the
grant of the initial 75,000 shares of restricted common stock of the Company;
and
WHEREAS, the Company now desires to grant to the Executive the initial
75,000 shares of restricted common stock of the Company, par value $.001 per
share (the "Restricted Stock") provided for herein pursuant to the terms and
subject to the conditions and restrictions of this Agreement.
NOW, THEREFORE, in consideration of the Executive's services in the
employ of the Company, and other good and valuable consideration, receipt of
which is hereby acknowledged, the Company hereby awards to the Executive 75,000
shares of Restricted Stock pursuant to the terms and subject to the conditions
and restrictions set forth in this Agreement, including the right of first
refusal described in paragraph 1 of this Agreement, and in connection with such
award, the Company and the Executive hereby agree as follows:
1. The Executive shall not transfer, sell, assign, exchange or
otherwise dispose of (collectively referred to herein as a "Transfer") all or
any portion of the Restricted Stock unless the Executive first offers to sell
such Restricted Stock to the Company in accordance with the terms of this
Agreement. Prior to the Transfer of all or a portion of Restricted Stock, the
Executive shall provide written notice to the Company of the Executive's intent
to Transfer such Restricted Stock, which notice (the "Offer Notice") shall
include (a) the number of shares of Restricted Stock that the Executive intends
to Transfer, (b) the price per share at which the Executive intends to Transfer
such shares of Restricted Stock, which price may be expressed in the form of a
seller limit order or a market sell order (the "Purchase Price") and (c) an
offer to sell to the Company such Restricted Stock at the Purchase Price (which,
in the case of a seller limit order, shall be the limit price, and which, in the
case of a market sale order, shall be the closing price on the date, if any,
upon which the Company accepts the Executive's offer to sell) minus $0.34 per
share (the fair market value of the common stock of the Company as of the date
first hereinabove set forth, calculated with reference to the closing bid price
of the Company's common stock quoted on the Over the Counter Bulletin Board on
Tuesday, January 24, 2006) (the "Company Price"). The Company may accept the
Executive's offer to sell with
respect to all or a portion of the Restricted Stock included in the Offer Notice
by providing written notice of its acceptance (the "Acceptance Notice") to the
executive within two (2) business days of the Company's receipt of the Offer
Notice. Upon receipt of the Acceptance Notice, the Executive must sell the
number of shares of Restricted Stock included in the Acceptance Notice to the
Company at the Company Price. If the number of shares of Restricted Stock
included in the Acceptance Notice is less than the number of shares included in
the Offer Notice, the Executive may Transfer the number of shares of Restricted
Stock representing the difference for no less than the Purchase Price stated in
the Offer Notice. If the Company does not respond in writing to the Executive
within two (2) business days of its receipt of the Offer Notice or if the
Company rejects the offer sell by providing written notice of its rejection to
the Executive, the Executive may Transfer such shares of Restricted Stock that
were included in the Offer Notice for no less than the Purchase Price stated in
the Offer Notice.
2. The Executive acknowledges that upon receipt of a stock
certificate representing the Restricted Stock, registered in the Executive's
name, such certificate shall bear the following legend and such other legends as
may be required by law or contract:
"The shares represented by this certificate are subject to the restrictions,
terms and conditions, including a first right of refusal to Electronic
Sensor Technology, Inc. (the "Company"), set forth in a Restricted Stock
Award Agreement, effective as of January 25, 2006 between the Company and
the registered owner (the "Agreement"). Copies of the Agreement are on file
in the offices of the Secretary, Electronic Sensor Technology, Inc., 0000
Xxxxxxxx Xxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000."
3. The Executive hereby represents and warrants as follows:
(a) The Executive is capable of evaluating the merits and
risks of its investment in the Company and has the capacity to protect
its own interests.
(b) The Executive is acquiring the Restricted Stock for
investment for his own account, not as a nominee or agent, and not with
the view to, or for resale in connection with, any distribution thereof.
The Executive understands that the Restricted Stock has not been and
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), by reason of a specific exemption from the
registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Executive's representations as expressed
herein.
(c) The Executive is an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act.
(d) The Executive acknowledges that the Restricted Stock
must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is
available. The Executive is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of
shares purchased in a private placement subject to the satisfaction of
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certain conditions, including, among other things, the existence of a
public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one
year after a party has purchased and paid in full for the security to be
sold (i.e., one year after the investor relations services have been
provided in full), the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" and the
number of shares being sold during any three-month period not exceeding
specified limitations.
(e) In acquiring the Restricted Stock, the Executive has not
received, is not relying upon, and is not aware of, any form of general
solicitation or general advertising on the part of the Company or any
person on its behalf.
4. The Executive acknowledges the existence of Federal, state and
local income tax and employment tax withholding obligations with respect to the
Restricted Stock and agrees that such must be met. If required by applicable
law, the Executive shall be required to pay such taxes, if any, to the Company
in cash upon written notice to the Executive from the Company of such employment
tax withholding obligations, or such earlier dates as the Executive elects
pursuant to Section 83(b) of the Code, or as of which the value of any shares of
Restricted Stock first becomes includible in the Executive's gross income for
income tax purposes. In the event that the Executive elects immediate Federal
income taxation with respect to all or any portion of this award of Restricted
Stock pursuant to Section 83(b) of the Code, the Executive agrees to deliver a
copy of such election to the Company within ten (10) days after filing such
election with the Internal Revenue Service.
5. The award of Restricted Stock set forth in this Agreement shall
be subject to cancellation by the Company unless within twenty (20) days of the
date first hereinabove set forth the Executive delivers or mails a copy of this
Agreement, duly executed by the Executive, to the Company.
6. This Agreement and the obligation of the Company to transfer
shares of Stock hereunder shall be subject to (a) all applicable Federal and
state laws, rules and regulations and (b) any registration, qualification,
approvals or other requirements imposed by any government or regulatory agency
or body which the Company shall, in its sole discretion, determine to be
necessary or applicable.
7. This Agreement shall not confer on the Executive any right to,
or continuance of, employment or any other service with the Company or its
subsidiaries, nor shall it interfere in any way with the right of the Company or
its subsidiaries to terminate his or her employment or other service at any time
with or without cause.
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8. Any notice or other communication required or permitted
hereunder shall be in writing, signed and delivered in person or by registered
or certified mail or reputable overnight courier, postage prepaid, and, if to
the Executive, addressed to the Executive at his last known address as set forth
in the Company's payroll records, and, if to the Company, addressed as follows:
Electronic Sensor Technology, Inc.
0000 Xxxxxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Secretary
9. This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts executed and to
be performed entirely within such state, without regard to the conflict of law
provisions thereof.
10. This Agreement may not be transferred, assigned, pledged or
hypothecated by either party hereto, other than by operation of law. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns, including, in the
case of the Executive, his estate, heirs, executors, legatees, administrators,
designated beneficiary and personal representatives.
11. This Agreement may not be modified or amended, nor may any
provision hereof be waived, in any way except in writing signed by the party
against whom enforcement thereof is sought.
12. This Agreement may be executed in counterparts, each of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by a duly authorized officer, and the Executive has executed this Agreement,
both as of the day and year first above written.
ELECTRONIC SENSOR TECHNOLOGY, INC.
Date: January 30, 2006 By /s/ Xxxxxxx Xxxxx
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Name: Xxxxxxx Xxxxx
Title: CFO
Agreed to this 30th day of
January, 2006
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
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