To: Akis Ltd.
Exhibit
10.2
Date:
August 9, 2007
To:
Akis
Ltd.
THIS
STOCK OPTION AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND
THIS OPTION CANNOT BE EXERCISED BY/ON BEHALF OF ANY U.S. PERSON UNLESS
REGISTERED UNDER THE ACT OR EXEMPTION FROM SUCH REGISTRATION IS AVIALABLE.
THE
TRANSFER OF THIS OPTION IS PROHIBITED EXCEPT IN ACCORDANCE WITH THE PROVISIONS
OF REGULATION S, OR IF REGISTERED OR EXEMPT FROM REGISTRATION; AND BY ACCEPTING
THIS STOCK OPTION, THE HOLDER HEREOF AGREES NOT TO ENGAGE IN HEDGING
TRANSACTIONS WITH REGARD TO THIS OPTION AND THE UNDERLYING SECURITIES UNLESS
IN
COMPLIANCE WITH THE ACT. IN
ADDITION, BY ACCEPTING THIS STOCK OPTION, THE HOLDER HEREOF CERTIFIES THAT
IT IS
NOT A U.S. PERSON AND IS NOT ACQUIRING THE SECURITIES FOR THE ACCOUNT OR BENEFIT
OF ANY U.S. PERSON.
Re:
Grant
Letter
Whereas,
TraceGuard
Technologies Ltd.,
(the
“Subsidiary”),
a
company fully owned and controlled by TraceGuard Technologies Inc. (the
"Company"),
a
company duly formed in Nevada with its principal offices at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇
fl., ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ and Akis Ltd.
(“Consultant”
or
“Optionee”)
are
parties to that certain Consulting Agreement dated
July 12, 2007 (the “Consulting
Agreement”),
to
which this Grant Letter is attached, and pursuant
to which the Subsidiary engaged the Consultant to provide certain services
to
the Subsidiary (the “Services”);
and
Whereas,
pursuant to Section 3 of the Consulting Agreement a grant letter (this
"Grant
Letter")
was to
be granted to the Consultant; and
Whereas,
it was
agreed that the options granted to the Consultant shall be governed by the
terms
and conditions of this Grant Letter subject to the receipt of all approvals
or
exemptions required by law.
Now,
therefore,
in
consideration of the Parties' mutual covenants and other good and valuable
consideration, the sufficiency and receipt of which is hereby acknowledged,
it
is agreed as follows:
| 1. |
Definitions:
|
Unless
otherwise defined herein, all capitalized terms shall have the meanings ascribed
to them in the Consulting Agreement, except the following terms, which, when
capitalized, shall have the following meanings:
| 1.1. |
“Board”
means the Board of Directors of the Company and/or Subsidiary, as
applicable.
|
| 1.2. |
"Cause"
means any of the following (i) conviction of any felony involving
moral
turpitude or affecting the Company or its affiliates; (ii) any refusal
to
carry out a reasonable directive of the Subsidiary's Chief Executive
Officer, Board or the Optionee's direct supervisor, which involves
the
business of the Subsidiary or its affiliates and was capable of being
lawfully performed; (iii) embezzlement of funds of the Subsidiary
or its
affiliates; (iv) any clear breach of the Optionee's fiduciary duties
or
gross breach of its duties of care to the Subsidiary; including without
limitation disclosure of confidential information of the Subsidiary
or its
affiliates; and (v) any conduct (other than conduct in good faith)
reasonably determined by the Board to be materially detrimental to
the
Subsidiary or its affiliates.
|
| 1.3. |
"Ordinance"
means the Israeli Income Tax Ordinance, as now in effect or as hereafter
amended.
|
| 1.4. |
“Date
of Grant”
means the date of the grant of each Option, as set forth
hereinbelow.
|
| 1.5. |
“Exercise
Price”
shall mean Seventy US Cents (US$0.70) per Share, which price has
been
determined in good faith by the Board, after consultation with the
Company’s independent auditors, in accordance with the Ordinance or other
applicable law.
|
| 1.6. |
“Option
Shares”
means the Shares of the Company issued or issuable upon the exercise
of
the Options.
|
| 1.7. |
“Options”
means options to purchase the Shares as granted hereunder.
|
| 1.8. |
“Options
Termination Date”
means the date occurring at the end of the period of three (3) years
commencing as of the Date of Grant of each Option, as
applicable.
|
| 1.9. |
“Optionee”
and “you”
shall mean and refer to the
Consultant.
|
| 1.10. |
"Shares"-
shares of common stock of the Company having a par value of US$0.001
each.
|
| 1.11. |
“Other Subsidiary”
means any company (other than the Subsidiary) in an unbroken chain
of
companies beginning with the Company if, at the time of granting
an
option, each of the companies other than the last company in the
unbroken
chain owns shares possessing fifty percent (50%) or more of the total
combined voting power of all classes of shares in one of the other
companies in such chain.
|
| 1.12. |
“Successor
Company”
means any entity the Company is merged to or is acquired by, in which
the
Company is not the surviving
entity.
|
| 1.13. |
"Milestones"
means the milestones to be achieved by Consultant, as set forth in
Section
3 of the Consulting Agreement.
|
| 1.14. |
“Transaction”
means (i) merger, acquisition or reorganization of the Company, with
one
or more other entities in which the Company, is not the surviving
entity
and the shareholders of the Company hold less than fifty percent
(50%) in
the merged entity, (ii) a sale of all or substantially all of the
assets
and/or the shares of the Company.
|
| 2. |
Grant
of Options
|
The
Company hereby grants you, effective as of the date of the successful
achievement of the applicable Milestone (as set forth in the Consulting
Agreement), subject to the receipt of all approvals required by law, Options
exercisable upon payment of the Exercise Price, as follows:
2
| 2.1. |
Upon
the achievement of the First Milestone - an Option to purchase twenty
thousand (20,000) Shares.
|
| 2.2. |
Upon
the achievement of the Second Milestone - an Option to purchase twenty
thousand (20,000) Shares.
|
| 2.3. |
Upon
the achievement of the Third Milsetone no later than 12 months following
the later of (i) the termination of the Consulting Agreement or (ii)
the
final termination of Consultant’s activities in the service of the Company
- an Option to purchase forty thousand (40,000)
Shares.
|
| 2.4. |
Upon
the successful achievement of the Fourth Milestone no later than
12 months
following the later of (i) the termination of the Consulting Agreement
or
(ii) the final termination of Consultant’s activities in the service of
the Company - an Option to purchase seventy thousand (70,000)
Shares.
|
| 2.5. |
Upon
the successful achievement of the Fifth Milestone no later than 12
months
following the later of (i) the termination of the Consulting Agreement
or
(ii) the final termination of Consultant’s activities in the service of
the Company - an Option to purchase fifty thousand (50,000)
Shares.
|
| 3. |
Tax
Effects.
The Options hereunder will be granted to Consultant under Section
3(i) of
the Ordinance. You should consult with your own tax advisors regarding
the
tax effects of receiving or exercising these Options or disposing
of the
Options Shares.
|
| 4. |
Administration.
N/A.
|
| 5. |
Vesting
of the Options.
|
Each
Option granted to Consultant shall vest immediately upon its grant (as
applicable) and shall be in effect for a period of three (3) years commencing
as
of the date of its grant and shall expire immediately thereafter (the
“Termination
Date”).
| 6. |
Exercise
of the Options
|
| 6.1. |
Method
of Exercise.
Options shall be exercised by the Optionee by giving written notice
to the
Company and/or to any third party designated by the Company (the
“Representative”),
in such form and method as may be determined by the Company, which
exercise shall be effective upon receipt of such notice by the Company
and/or the Representative and the payment of the Exercise Price at
the
Company’s or the Representative’s principal office. The notice shall
specify the number of Option Shares with respect to which the Options
are
being exercised.
|
| 6.2. |
Form
of Payment of Exercise Price.
Such payment shall be made to the Company in cash, check or cash
equivalent or in any other form as may be permitted by the Board
in its
discretion.
|
3
| 6.3. |
Execution
of Documents.
In order for the Company to issue Option Shares upon the exercise
of any
of the Options, you hereby agree and undertake to sign any and all
documents required by any applicable law and/or by the incorporation
documents of the Company.
|
| 6.4. |
As
a condition to the exercise of the Options, the Company may require
you to
satisfy any qualifications that may be necessary, to evidence compliance
with any appli-cable law or regulation and to make any representation
or
▇▇▇▇▇▇-▇▇ with respect thereto as may be requested by the
Company.
|
| 6.5. |
Fractional
Shares.
the Company shall not be required to issue fractional shares upon
the
exercise of the Options.
|
| 6.6. |
Offering.
In connection with a public offering (an "Offering")
of Shares of the the Company, (i) you may not sell, make short sale
of,
loan grant any options for the purchase of, or otherwise dispose
of any
Option Shares obtained by you (other than those shares included in
the
Offering) without the prior written consent of the Company or the
underwriters managing such offering of the Company’s securities for a
period of one hundred and eighty (180) days from the effective date
of the
applicable registration statement, (ii) you may be required to execute
any
agreement reflecting Subsection (i) above as may be requested by
the
Company or the managing underwriters at the time of such offering,
and
(iii) the Option Shares issued to you shall be subject to such
restrictions as required by the appropriate securities’
law.
|
| 7. |
Non-Transferability
of the Options.
Subject to Article 5, the Options may be exercised during the lifetime
of
the Optionee only by the Optionee and may not be assigned or transferred
in any manner except to Mr. Avi Kostelitz or any entity fully controlled
by ▇▇. ▇▇▇▇▇▇▇▇▇, directly or indirectly, by will or by the laws
of
descent and distribution unless otherwise agreed by the Company in
writing. .
|
| 8. |
Termination
of Service; Termination of Options.
|
| 8.1. |
The
Options shall terminate and shall no longer be exercisable upon the
first
to occurance of (a) the Options Termination Date, (b) the date of
termination of the Consulting Agreement by the Company for Cause
as
described in Section 8.2 below; or (c) the last date for exercising
the
Options in connection with the consummation of a Transaction pursuant
to
the provisions of Section 9.2 or in connection with liquidation or
dissolution pursuant to the provisions of Section 9.4 below.
|
| 8.2. |
Notwithstanding
anything to the contrary herein, if the Consulting Agreement is terminated
for Cause, any outstanding unexercised (vested and/or unvested) Options
will immediately expire, and the Optionee shall not have any rights
in
respect of such outstanding
Options.
|
| 9. |
Adjustment.
|
| 9.1. |
In
the event of a Transaction, the unexercised Option Shares then outstanding
shall be assumed or substituted for an appropriate number of shares
of
each class of shares or other securities of the Successor Company
(or a
parent or subsidiary of the Successor Company) as were distributed
to the
shareholders of the Company in connection and with respect to the
Transaction. In the case of such assumption and/or substitution of
the
Options, appropriate adjustments shall be made to the Exercise Price
so as
to reflect such action and all other terms and conditions of this
Grant
Letter shall remain unchanged, including but not limited to the Company’s
obligation to grant Options upon achievement of each Milestone, all
subject to the determination of the Board, which determination shall
be in
their sole discretion and final.
|
4
| 9.2. |
Notwithstanding
the provisions of Section 9.1 above and subject to any applicable
law, in
the event of a Transaction, in which the Successor Company does not
agree
to assume or substitute the Option Shares, any unexercised Option
Shares
not exercised prior to the closing of the Transaction shall terminate
upon
the closing of the Transaction, provided,
however,
that the vesting dates set forth in Section 5 above shall be accelerated
so that any unvested Option Shares shall be immediately vested as
of the
date which is fifteen (15) days prior to the effective date of the
Transaction and the Board shall notify the Optionee that the Options
are
fully exercisable for a period of fifteen (15) days from the date
of such
notice, and the Options shall terminate upon the expiration of such
period. Notwithstanding the aforesaid, any Options that are conditioned
upon Milestones not yet achieved at the date of the Closing of the
Transaction, shall not be granted thereafter, in which case the Consultant
shall be free to discontinue the Services upon 15 days
notice.
|
| 9.3. |
For
the purposes of Section 9.1 above, an Option shall be considered
assumed
or substituted if, following the Transaction, the Option confers
the right
to purchase or receive, for each Option Share underlying the Option
immediately prior to the Transaction, the consideration (whether
shares,
options, cash, or other securities or property) received in the
Transaction by holders of Shares held on the effective date of the
Transaction (and if such holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of
the
outstanding Shares); provided,
however,
that if such consideration received in the Transaction is not solely
common stock (or their equivalent) of the Successor Company or its
parent
or subsidiary, the Board may, with the consent of the Successor Company,
provide for the consideration to be received upon the exercise of
the
Option to be solely common stock (or their equivalent) of the Successor
Company or its parent or subsidiary equal in fair market value to
the per
share consideration received by holders of a majority of the outstanding
Shares in the Transaction, times the number of Option Shares subject
to
the Options.
|
| 9.4. |
If
the Company is liquidated or dissolved while unexercised Option Shares
remain outstanding, the Board, in its own discretion, may determine
that
all such outstanding Option Shares may be exercised in full by the
Optionee as of the effective date of any such liquidation or dissolution
of the Company without regard to the vesting provisions set forth
above.
If the Board determines that the outstanding Option Shares may be
exercised, all such outstanding Option Shares may be exercised in
full by
the Optionee giving notice in writing to the Company of his intention
to
such exercise. If the Options becomes fully vested and exercisable
under
this Section, the Board shall notify the Optionee in writing or
electronically that the Options shall be fully exercisable for a
period of
fifteen (15) days from the date of such notice, and the Options shall
terminate upon the expiration of such period.
|
5
| 9.5. |
If
the outstanding Shares of the Company shall at any time be changed
or
exchanged by declaration of a stock dividend (bonus shares), stock
split,
combination or exchange of shares, recapitalization, or any other
like
event by or of the Company, and as often as the same shall occur,
then the
number, class and kind of the Option Shares therefore granted and
the
Exercise Price, shall be appropriately and equitably adjusted so
as to
maintain the proportionate number of Option Shares, without changing
the
aggregate Exercise Price, provided,
however,
that no adjustment shall be made by reason of the distribution of
subscription rights (rights offering) on outstanding Shares.
|
| 10. |
Rights
as a Shareholder.
You shall not have any of the rights or privileges of shareholders
of the
Company in respect of any Option Shares purchasable upon the exercise
of
the Options, until your registration as holder of such Option Shares
in
the Company’s register of shareholders upon exercise of the Options and
payment of the Exercise Price.
|
| 11. |
Option
Shares Subject to Right of First
Refusal
|
Any
transfer or sale of Option Shares shall be subject to the provisions of the
incorporation documents of the Company and applicable law, including, but not
limited to, US Securities Law and the regulations promulgated thereunder.
| 12. |
Restrictions
on Transfer of Options and Option
Shares.
|
| 12.1. |
You
acknowledge that since the shares of the Company are registered for
trading in a public market, your right to sell Shares is and may
be
subject to limitations and restrictions (including a lock-up period),
as
will be requested by the Company or its underwriters, and you hereby
unconditionally agree and accept any such limitations. In order to
enforce
any of the restrictions set forth herein, the Company may impose
stop-transfer instructions with respect to the exercised
Shares.
|
| 12.2. |
You
shall not dispose of any Option Shares in transactions which violate,
in
the opinion of the Company, any applicable laws, rules and regulations.
|
| 12.3. |
You
agree that the Company shall have the authority to endorse upon the
certificate or certificates representing the Option Shares such legends
referring to the foregoing restrictions, and applicable US federal
or
state secu-rities law restriction on all certificates representing
shares
of Shares subject to the provisions of this Option Agreement and
any other
applicable restrictions as it may deem appropriate (which do not
violate
your rights under this Grant
Letter).
|
| 13. |
Purchase
for Investment.
|
The
Company's obligation to issue or allocate Option Shares upon exercise of the
Options is expressly conditioned upon: (a) the Company's completion of any
registration or other qualifications of such Shares under any state and/or
federal law, ruling or regulations, or otherwise obtaining an exemption in
regard to the same, and/or (b) representations and undertakings by the Optionee
(or his legal representative, heir or legatee, in the event of the Optionee’s
death) to assure that the sale of the Option Shares complies with any
registration exemption requirements which the Company in its sole discretion
shall deem necessary or advisable. Such required representations and
undertakings may include representations and agreements that such Optionee
(or
his legal representative, heir, or legatee): (a) is purchasing such Option
Shares for investment and not with any present intention of selling or otherwise
disposing thereof; and (b) agrees to have placed upon the face and reverse
of
any certificates evidencing such Shares a legend setting forth (i) any
representations and undertakings which such Optionee has given to the Company
or
a reference thereto and (ii) that, prior to effecting any sale or other
disposition of any such Shares, the Optionee must furnish to the Company an
opinion of counsel, satisfactory to the Company, that such sale or disposition
will not violate the applicable laws, rules, and regulations, whether of the
State of Israel or of the United States or any other State having jurisdiction
over the Company and the Optionee.
6
| 14. |
Taxes.
|
| 14.1. |
The
Company and/or the Subsidiary shall withhold taxes according to the
requirements under the applicable laws, rules, and regulations, including
withholding taxes at source.
|
| 14.2. |
the
Company shall not be required to release any share certificate to
the
Optionee until all its statutory payments have been fully
made.
|
| 15. |
Government
Regulations, Law &
Jurisdiction.
|
| 15.1. |
The
granting and exercise of the Options hereunder, and the Company'
obligation to sell and deliver Shares under the Options, are subject
to
all applicable laws, rules and regulations, whether of the United
States
or the State of Israel or any other state having jurisdiction over
the
Company and/or the Subsidiary and you, including the registration
of the
Shares under the United States Securities Act of 1933, and to such
approvals by any governmental agencies or national securities exchanges
as
may be required. Nothing herein shall be deemed to require the Company
to
register the Shares under the securities laws of any
jurisdiction.
|
| 15.2. |
This
Grant Letter shall be governed by and construed and enforced in accordance
with the laws of the State of Israel as applicable to contracts made
and
to be performed therein, without giving effect to the principles
of
conflict of laws, and to the applicable laws of the USA as respects
securities laws matters that are pertinent to the Shares and/or Options.
The competent courts of the State of Israel shall have sole jurisdiction
in any matters pertaining to this Grant
Letter.
|
| 16. |
Miscellaneous.
|
| 16.1. |
No
Obligation to Exercise Options.
The grant and acceptance of these Options imposes no obligation on
you to
exercise it.
|
| 16.2. |
Confidentiality.
You shall regard the information in this Grant Letter and any document
related to the Grant Letter as confidential information and you
shall not
reveal its contents to anyone except when required by law or for
the
purpose of gaining legal or tax
advice.
|
7
| 16.3. |
No
Obligation of Employment or Service.
This Grant Letter does not impose any obligation on the Company or
the
Subsidiary to employ you or contract your services and nothing in
this
Grant Letter shall confer upon you any right to be in the employ
or
service of the Company and/or the Subsidiary or restrict the right
of the
Company, or the Subsidiary to terminate such employment or service
at any
time.
|
| 16.4. |
Entire
Agreement.
This Grant Letter together with the exhibits hereto constitute the
entire
agreement between the Company and yourself with respect to Options
granted
hereunder, and supersedes all prior agreements, understandings and
arrangements, oral or written, between you and the Company with respect
to
the subject matter hereof.
|
| 16.5. |
Failure
to Enforce - Not a Waiver.
The failure of any party to enforce at any time any provisions of
this
Grant Letter shall in no way be construed to be a waiver of such
provision
or of any other provision hereof.
|
| 16.6. |
Binding
Effect.
This Grant Letter shall inure to the benefit of and be binding upon
the
parties hereto and their respective heirs, executors, administrators,
successors and assigns.
|
| 16.7. |
Termination
or Amendment.
The Board may terminate or amend this Grant Letter at any time;
provided,
however,
that no such termination or amendment may adversely affect the Options
or
any unexercised portion hereof without the consent of the
Optionee.
|
Kindly
indicate your acceptance of the terms and conditions of this Grant Letter by
executing it at the space provided below.
By: /s/
▇▇▇▇▇
▇▇▇-▇▇▇▇
Title: Chief
Financial Officer
Date: August
9,
2007
The
Optionee represents that the Optionee is familiar with the terms and provisions
of this letter, and hereby accepts the Option subject to all of the terms and
provisions hereof.
Akis
Ltd.
/s/Avi
Kostelitz
By: Avi
Kostelitz
Title: Chief
Executive Officer
Date: August
9,
2007
8