Exhibit 10.6
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), made this 15th
day of January, 2004, by and between Northgate Innovations, Inc., a Delaware
corporation, having an office at 000 X. Xxxxxxx Xxxxxx, Xxxx of Industry,
California 91748 (the "Company") and Xxxx X. Xxxxxx, an individual having a
residence at 00 Xx. Xxxxxxxx Xxxxxx Xx., Xxxxxx, XX 00000 ("Optionee").
W I T N E S S E T H:
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WHEREAS, pursuant to an Employment Agreement, dated January
14, 2004, by and between the Company and Optionee (the "Employment Agreement"),
the Company desires to afford Optionee the opportunity to acquire the Company's
common stock, $0.03 par value per share ("Common Stock"), so that Optionee may
have a direct proprietary interest in the Company's success; and
WHEREAS, the Compensation Committee of the Board of Directors
of the Company (the "Committee") has approved the grant of the stock option
contemplated hereunder on January 15, 2004.
NOW, THEREFORE, in consideration of the covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. Subject to the term and conditions set
forth herein, the Company hereby grants to Optionee, during the period
commencing on the date of this Agreement and ending on the close of business on
the day of the seventh (7th) anniversary of the date hereof (the "Termination
Date"), the right and option (the right to purchase any one share of Common
Stock hereunder being an "Option") to purchase from the Company, at a price of
$1.01 per share (the "Option Price"), an aggregate of 3,309,587 shares of Common
Stock (the "Option Shares") which is equal to approximately 10% of the
outstanding Common Stock, on a fully diluted basis, as of the Effective Date (as
defined in the Employment Agreement).
2. Limitation on Exercise of Option. Subject to the terms and
conditions set forth herein, the Option will vest and become exercisable as to
4.16667% of the Option Shares subject to the Options on and after the first
monthly anniversary of the Effective Date and as to any additional 4.16667% of
such shares on each monthly anniversary thereafter until the Option is 100%
vested; provided, that, Optionee is still employed by the Company on such
anniversary dates. Notwithstanding the foregoing, upon a Change in Control (as
defined in the Employment Agreement), the unvested portion of the Option shall
become automatically vested and exercisable; provided, that, Optionee is
employed by the Company on the date of such Change in Control.
3. Termination of Employment. Any unvested Options held by
Optionee upon termination of employment for any reason shall terminate and cease
to be exercisable and any vested Options shall remain exercisable and
outstanding for 90 days following such termination (but in no event beyond the
term of the Option), and shall thereafter terminate. Nothing in this Agreement
shall confer upon Optionee any right to continue in the employ of the Company or
limit in any way the right of the Company to terminate Optionee's employment at
any time and for any reason (or no reason).
4. Method of Exercising Option.
(a) Options, to the extent vested and exercisable, may be
exercised, in whole or in part, by giving written notice of exercise to the
Company in such form as may be approved by the Company which shall specify,
among other items, the number of shares of Common Stock to be purchased, any
restrictions imposed on the Option Shares, and any representations, warranties
and agreements regarding Optionee's investment intent and access to information
as may be required by the Company to comply with applicable law. Such notice
shall be accompanied by the payment in full of the Option Price. Such payment
shall be made in cash or by check.
(b) At the time of exercise, Optionee shall pay to the Company
such amount as the Company deems necessary to satisfy its obligation to withhold
Federal, state or local income or other taxes incurred by reason of the exercise
of Options granted hereunder, if any. Such payment shall be made in cash or by
check.
5. Issuance of Shares. Except as otherwise provided in this
Agreement, as promptly as practicable after receipt of such written notification
of exercise and full payment of the Option Price and any required income tax
withholding, the Company shall issue or transfer to Optionee the number of
Option Shares with respect to which Options have been so exercised, and shall
deliver to Optionee a certificate or certificates therefor, registered in
Optionee's name.
6. Representations and Warranties of Optionee. Optionee
represents and warrants to the Company that:
(a) Optionee has received a copy of, and has read and
understands, the terms of this Agreement, and agrees to be bound by its terms
and conditions. Optionee acknowledges that there may be adverse tax consequences
upon the exercise of the Options or disposition of the shares of Common Stock
once exercised, and that Optionee should consult a tax adviser prior to such
time.
(b) Upon exercise, Optionee will receive the Common Stock for
Optionee's own account for investment purposes only and not with a view to, or
for sale in connection with, a distribution of the Common Stock within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
Optionee has no present intention of selling or otherwise disposing of all or
any portion of the Common Stock and no one other than Optionee has any
beneficial ownership of any of the Common Stock.
(c) Optionee has had access to all information regarding the
Company and its present and prospective business, assets, liabilities and
financial condition that Optionee reasonably considers important in making the
decision to purchase the Common Stock, and Optionee has had ample opportunity to
ask questions of the Company's representatives concerning such matters and this
investment.
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(d) Optionee is fully aware of: (i) the highly speculative
nature of the investment in the Common Stock; (ii) the financial hazards
involved; (iii) the lack of liquidity of the Common Stock and the restrictions
on transferability of the Common Stock (e.g., that Optionee may not be able to
sell or dispose of the Common Stock or use them as collateral for loans); (iv)
the qualifications and backgrounds of the management of the Company; and (v) the
tax consequences of investment in the Common Stock. Optionee is capable of
evaluating the merits and risks of this investment, has the ability to protect
Optionee's own interests in this transaction and is financially capable of
bearing a total loss of this investment.
(e) At no time was Optionee presented with or solicited by any
publicly issued or circulated newspaper, mail, radio, television or other form
of general advertising or solicitation in connection with the offer, sale and
purchase of the Common Stock.
(f) Optionee agrees to sign such additional documentation as
may reasonably be required from time to time by the Company.
(g) Optionee's principal residence is located in the State of
Texas.
(h) Optionee represents that he is an "Accredited Investor"
within the meaning of Rule 501(a) of Regulation D, as promulgated under Section
5 of the Securities Act.
7. Compliance with Securities Laws. Optionee understands and
acknowledges that the Common Stock has not been registered with the Securities
Exchange Commission (the "SEC") under the Securities Act and that,
notwithstanding any other provision of the Agreement to the contrary, the
vesting and holding of the Common Stock is expressly conditioned upon compliance
with the Securities Act and all applicable state securities laws. Optionee
agrees to cooperate with the Company to ensure compliance with such laws.
8. Restricted Securities.
(a) Optionee understands that Optionee may not transfer any
shares of Common Stock unless such Common Stock is registered under the
Securities Act or qualified under applicable state securities laws or unless, in
the opinion of counsel to the Company, exemptions from such registration and
qualification requirements are available. Optionee understands that only the
Company may file a registration statement with the SEC and that the Company is
under no obligation to do so with respect to the Common Stock. Optionee has also
been advised that exemptions from registration and qualification may not be
available or may not permit Optionee to transfer all or any of the Common Stock
in the amounts or at the times proposed by Optionee.
(b) In addition, Optionee has been advised that SEC Rule 144
promulgated under the Securities Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the Common
Stock and, in any event, requires that the Common Stock be held for a minimum of
one (1) year, and in certain cases two (2) years, after it has been purchased
and paid for (within the meaning of Rule 144). Optionee understands that Rule
144 may indefinitely restrict transfer of the Common Stock so long as
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Optionee remains an "affiliate" of the Company or if "current public
information" about the Company (as defined in Rule 144) is not publicly
available.
9. Restrictive Legends and Stop-Transfer Orders. Optionee
understands and agrees that the Company may place legends on any stock
certificate(s) evidencing the Common Stock that may be required by state or U.S.
Federal securities laws, the Company's Certificate of Incorporation or Bylaws.
In addition, the Company may issue appropriate "stop-transfer" instructions to
its transfer agent, if any, and if the Company transfers its own securities, it
may make appropriate notations to the same effect in its own records. The
Company will not be required (a) to transfer on its books any Common Stock that
have been sold or otherwise transferred in violation of any of the provisions of
this Agreement or (b) to treat as owner of such shares, or to accord the right
to vote or pay dividends to any purchaser or other transferee to whom such
shares have been so transferred.
10. Optionee. Whenever the word "Optionee" is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the beneficiaries, the executors, the
administrators, or the person or persons to whom the Options may be transferred
by will or by the laws of descent and distribution, the word "Optionee" shall be
deemed to include such person or persons.
11. Non-Transferability. The Options are not transferable by
Optionee otherwise than to a designated beneficiary upon death or by will or the
laws of descent and distribution, and are exercisable during Optionee's lifetime
only by him/her. No assignment or transfer of the Options, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise (except to a designated beneficiary, upon death, by will or the laws
of descent and distribution), shall vest in the assignee or transferee any
interest or right herein whatsoever, but immediately upon such assignment or
transfer the Options shall terminate and become of no further effect.
12. Rights as Shareholder. Optionee or a transferee of the
Options shall have no rights as shareholder with respect to any Option Shares
until he/she shall have become the holder of record of such share, and no
adjustment shall be made for dividends or distributions or other rights in
respect of such Option Shares for which the record date is prior to the date
upon which he shall become the holder of record thereof.
13. Adjustments.
(a) Capitalization Adjustments. In the event of any dividend
or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets or stock of the
Company, or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event (an
"Event"), and in the Company's opinion, such event
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affects the Common Stock such that an adjustment is determined by the Company to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under this Agreement, then the
Company shall, in such manner as it may deem equitable, including, without
limitation, adjust any or all of the following: (i) the number and kind of
shares of Common Stock (or other securities or property) subject to any
outstanding Options and (ii) the Option Price with respect to any Option. The
Company's determination under this Section 13(a) shall be made in its sole
discretion.
(b) Termination of Options. Upon the occurrence of an Event or
similar corporate event or transaction in which outstanding Options are not to
be assumed or otherwise continued following such an Event or similar corporate
event or transaction, the Company may provide that such Option shall be
exercisable (whether or not vested) as to all shares covered thereby for at
least ten (10) days prior to such Event or similar corporate event or
transaction and shall thereafter terminate.
(c) Future Transactions. The existence of this Option
Agreement and the Options granted hereunder shall not affect or restrict in any
way the right or power of the Company or the shareholders of the Company to make
or authorize any adjustment, recapitalization, reorganization or other change in
the Company's capital structure or its business, any merger or consolidation of
the Company, any issue of stock or of options, warrants or rights to purchase
stock or of bonds, debentures, preferred or prior preference stocks whose rights
are superior to or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
14. Compliance with Law. Notwithstanding any of the provisions
hereof, Optionee hereby agrees that he/she will not exercise the Options, and
that the Company will not be obligated to issue or transfer any shares to
Optionee hereunder, if the exercise hereof or the issuance or transfer of such
shares shall constitute a violation by Optionee or the Company of any provisions
of any law or regulation of any governmental authority. Any determination in
this connection by the Company shall be final, binding and conclusive. The
Company shall in no event be obliged to register any securities pursuant to the
Securities Act as now in effect or as hereafter amended) or to take any other
affirmative action in order to cause the exercise of the Options or the issuance
or transfer of shares pursuant thereto to comply with any law or regulation of
any governmental authority.
15. Notice. Every notice or other communication relating to
this Agreement shall be in writing, and shall be mailed to or delivered to the
party for whom it is intended at such address as may from time to time be
designated by it in a notice mailed or delivered to the other party as herein
provided; provided, that, unless and until some other address be so designated,
all notices or communications by Optionee to the Company shall be mailed or
delivered to the Company at its principal executive office, and all notices or
communications by the Company to Optionee may be given to Optionee personally or
may be mailed to him at his address as recorded in the records of the Company.
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16. Nonqualified Stock Options. The Options granted hereunder
are not intended to be incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
17. Binding Effect. Subject to Section 11 hereof, this
Agreement shall be binding upon the heirs, executors, administrators and
successors of the parties hereto.
18. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of California, without
regard to its conflicts of law principles.
19. Severability.If any provisions of this Agreement as
applied to any circumstance shall be adjudged by a court to be invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances or the
validity or enforceability of this Agreement.
20. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, written or oral, with
respect thereto. Option acknowledges that this Agreement fully satisfies the
Company's obligations under the Employment Agreement with respect to the subject
matter hereof.
21. Amendment. No term of this Agreement may be amended, nor
may the observance of any term of this Agreement be waived (either generally or
in a particular instance and either retroactively or prospectively), except by
an instrument in writing and signed by the party against whom such amendment or
waiver is sought to be enforced.
22. Counterparts.This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
23. Jurisdiction.Optionee consents to the personal
jurisdiction of the courts of the County of Los Angeles and State of California
and of the United States District Court for the Southern District of California,
each as may have competent jurisdiction, with respect to any dispute or
controversy arising under or in connection with this Agreement and agrees that
process issued out of any such court or in accordance with the rules of practice
of such court may be served by mail or other form of substituted service to at
the address provided in the Preamble. Optionee also agrees not to bring any
dispute or controversy arising under or in connection with this Agreement in any
other court. Optionee waives any defense of inconvenient forum to the
maintenance of any dispute or controversy so brought and waives any bond,
surety, or other security that may be required of any other party hereto with
respect such dispute or controversy. Nothing contained herein shall be deemed to
prevent the Company from effecting service of process upon Optionee in any other
manner permitted by law or from commencing any action in any court having
competent jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
NORTHGATE INNOVATIONS, INC.
By:
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Name:
Title:
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
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