Exhibit (c)(iii)
OPTION AGREEMENT, dated as of July 7, 1997,
between THE MNI GROUP INC., a New Jersey
corporation (the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Optionee").
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The Company desires, by affording the Optionee an opportunity to purchase
seven hundred fifty thousand (750,000) Common Shares of the Company (the "Common
Shares"), to induce the Optionee to accept the Company's offer of employment as
President and Chief Executive Officer of K.O.S. Industries, Inc. ("KOS") and
NutraPet Labs, Inc. ("NPL") (KOS and NPL are sometimes collectively referred to
as the "Subs"), each a wholly owned subsidiary of the Company, and to intensify
his interest in the future success of the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
1. Grant of Option. The Company hereby irrevocably and unconditionally
grants to the Optionee, as a matter of separate agreement and not in lieu of
salary or any other compensation for services, the right and option (hereinafter
called the "Option") to purchase all or any part of an aggregate of seven
hundred fifty thousand (750,000) Common Shares on the terms and conditions
herein set forth.
2. Exercise Price. The purchase price of the Common Shares subject to
the Option shall be zero dollars and fifty cents ($0.50) per share, the fair
market value determined as a mean of the high and low bid prices of such Common
Shares on the date hereof, as reported by NASDAQ.
3. Limitation of Exercisability of Option. Subject to the provisions of
Section 7 hereof, the Option shall be divided into two components: the
Time-Based Options and the Performance-Based Options (both as defined below).
The Option shall be exercisable, in whole or in part, as follows:
(a) Time-Based Options. The portion of the Option with respect to
Five Hundred Thousand (500,000) Common Shares (the "Time-Based Options") shall
be exercisable, in whole or in part, as follows:
. To the extent of 300,000 Common Shares on or after December
31, 1998 and on or before December 31, 2002;
. To the extent of an additional 100,000 Common Shares on
or after December 31, 1999 and on or before December
31, 2002; and
. To the extent of an additional 100,000 Common Shares on
or after December 31, 2000 and on or before December
31, 2002.
The Time-Based Options shall be exercisable as noted immediately above
purely based on the passage of time, and without consideration of the financial
performance of the Company or the Subs.
(b) Performance-Based Options. The portion of the Option with
respect to Two Hundred Fifty Thousand (250,000) Common Shares (the
"Performance-Based Options") shall be exercisable, in whole or in part, as
follows:
. To the extent of 83,333 Common Shares on or after the Annual
Determination Date (as defined in section 3(c)) and on or
before December 31, 2002 only in the event that the
Company's Revenues (as defined in section 3(c)) equalled or
exceeded $1,425,000 for the fiscal year 1998;
. To the extent of an additional 83,333 Common Shares on or
after the Annual Determination Date and on or before
December 31, 2002 only in the event that the Company's
Revenues equalled or exceeded $1,995,000 for the fiscal year
1999; and
. To the extent of an additional 83,334 Common Shares on
or after the Annual Determination Date and on or before
December 31, 2002 only in the event that the Company's
Revenues equalled or exceeded $2,493,750 for the fiscal
year 2000.
(c) Determination of Performance-Based Options. The following
additional provisions shall apply to the Performance-Based Options:
(i) Determination of Revenues. The Company's independent
certified public accountants (the "Accountants") shall determine
the Revenues on an annual basis as promptly as practicable at the
end of each fiscal year of the Company (such date of
determination is the "Annual Determination Date") in accordance
with generally accepted accounting principles consistently
applied. The Company shall pay all costs, fees and expenses of
the Accountants and the determination of Revenues shall be final
and binding on the parties absent manifest error or gross
negligence. The Accountants shall provide Optionee with (A) a
certified schedule setting forth the total Revenues and Revenues
and units by each product line and each of
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the Subs and (B) access to work papers underlying the
Revenues.
(ii) Calculation of Revenues. As used herein,
"Revenues" shall mean gross revenues of the Company,
including the Subs, determined in accordance with generally
accepted accounting principles consistently applied, from
the sale of pet products and related pet products (the "Pet
Products"). The Revenues targets set forth in section 3(b)
shall be adjusted in the event that the Company or any of
its subsidiaries purchase Pet Products product lines or
businesses ("New Revenues") from third parties or sell Pet
Products product lines or businesses ("Lost Revenues") to
third parties outside of the ordinary course of business. In
such event, the adjustment will, in the event of an
acquisition, add New Revenues to Revenues, and in the event
of a divestiture, subtract Lost Revenues from Revenues, for
the year or years, as applicable, during and after the
closing of the acquisition or divestiture as set forth in
the balance of this subparagraph (ii). The addition of New
Revenues to Revenues or subtraction of Lost Revenues from
Revenues shall be equal to (a) for the year of the closing
of the acquisition or divestiture, Revenues shall be
adjusted by the prorated portion of the New Revenues or Lost
Revenues which accrued in the entire fiscal year prior to
the closing and (b) for the full year or years, as
applicable, following closing, Revenues targets shall be
adjusted (i) in the case of an acquisition, upward by an
amount of New Revenues initially budgeted for such
applicable year for such added product line or business and
(ii) in the case of a divestiture, downward by an amount
equal to the Lost Revenue from such divested product line or
business in the last full fiscal year prior to divestiture.
For Example. On July 1, 1999, the Company or a subsidiary
closed on the purchase of a division from XYZ, an unrelated
entity, which sells Products, and which had gross revenues
during 1998 of $500,000. The Company budgets gross revenues
for such new business to be $600,000 in 2000. Therefore,
Revenues shall be increased by $250,000 for the Revenues
target for the fiscal year 2000 shall be adjusted upwards by
the budgeted amount of $600,000 in 2000.
(iii) Ultimate Exercisability of Performance-Based
Options. In the event that any portion or all of the
Performance-Based Options are not exercisable due to the
fact that the Revenues for a fiscal year or years were less
than the
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minimum level set forth in section 3(b) (the "Unvested
Options"), the Unvested Options shall nonetheless be
exercisable by Optionee at any time between December 31,
2001 and December 31, 2002 in the event that Optionee is
still employed by the Company or any affiliate thereof on
December 31, 2001. In the event that Optionee is not
employed by the Company or any subsidiary thereof on
December 31, 2001 due to a Non-Renewal (as defined herein),
then the Unvested Options shall be immediately exercisable
from the time that the Optionee is no longer employed by the
Company or any subsidiary through December 31, 2002.
"Non-Renewal" shall mean (A) the Company's decision not to
offer in writing to Optionee to extend the term of
Optionee's Employment Agreement (as defined in section 7(a)
hereof) from its current expiration date of July 7, 2000 to
a new expiration date not earlier than December 31, 2001 nor
later than (without Optionee's approval) July 7, 2003 on the
same or better (from Optionee's perspective) terms as
contained in the Employment Agreement (the "Renewal
Agreement"), (B) any of the reasons set forth in section
3(d) or 7, and (C) if the Renewal Agreement is terminated by
the Company prior to December 31, 2001 for any reason other
than "cause" (as such term is defined in the Employment
Agreement).
(d) Immediate Exercisability of Option. Notwithstanding anything
contained in section 3(a) or (b) to the contrary, in the event that both ▇▇▇▇▇▇
▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ are no longer employed by and are no longer serving as
directors of the Company, the entire Option shall become immediately exercisable
as to all of the Common Shares covered hereby.
Further, in the event that all or substantially all of the assets of the
Company or both of the Subs are sold or the Company merges or consolidates with
another entity and does not retain control over the merged or consolidated
entity, the entire Option shall become immediately exercisable as to all of the
Common Shares covered hereby.
4. Expiration of Option. Subject to the provisions of Section 7 hereof,
the Time-Based Option shall not be exercisable after December 31, 2002.
5. No Rights as Shareholder. The Optionee shall have none of the rights
of a shareholder with respect to any of the Common Shares subject to the Option
until such Common Shares shall be issued to him upon the exercise of the Option.
6. Non-Assignability of Option. The Option shall not be transferable
otherwise than by will or the laws of descent and distribution, and the Option
shall be exercisable, during the
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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 as aforesaid), pledged or hypothecated in any way (whether by operation
of law or otherwise), 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. Death or Termination of Employment of Services.
(a) If the employment of the Optionee shall be terminated voluntarily
by the Optionee, or for "cause" (as such term is defined in that certain
Employment Agreement of even date herewith between the Optionee and the
Company), then the unexercised portion of this Option shall expire forthwith.
Except as provided in subsections (b) and (c) of this Section 7, if such
employment shall terminate for any other reason, then this Option may be
exercised at any time within three months after such termination, subject to the
provisions of subparagraph (d) of this Section 7. For purposes hereof, (i)
retirement pursuant to any retirement plan adopted by the Company or at the
normal retirement date prescribed from time to time by the Company shall be
deemed to be termination of such individual's employment other than voluntarily
or for cause, and (ii) if the Optionee leaves the employ of the Company to
become an employee of a subsidiary corporation of the Company or a corporation
(or subsidiary or parent corporation of the corporation or a successor of the
Company or subsidiary corporation) which has assumed the Option of the Company
as a result of a corporate reorganization, etc., the Optionee shall not be
considered to have terminated his employment.
(b) If the Optionee dies (i) while employed by the Company or a
subsidiary corporation of the Company, or (ii) within three months after the
termination of his employment other than voluntarily or for cause, then this
Option may, subject to the provisions of subparagraph (d) of this Section 7, be
exercised by the estate of the Optionee or by a person who acquired the right to
exercise such Option by bequest or inheritance at any time within one year after
such death.
(c) If the Optionee ceases employment because of permanent and total
disability (within the meaning of Section 22(e)(3) of the Internal Revenue Code
of 1986, as amended) while employed by the Company or a subsidiary corporation
of the Company, then such Option may, subject to the provisions of subparagraph
(d) of this Section 7, be exercised at any time within one year after the
Optionee's termination of employment due to such disability.
(d) An Option may not be exercised pursuant to this Section 7 except
to the extent that the holder was entitled to exercise the Option at the time of
termination of employment or
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death, and in any event may not be exercised after the expiration of the Option.
(e) For purposes of this Section 7, the employment relationship of
the Optionee with the Company or of a subsidiary corporation of the Company will
be treated as continuing intact while he is on military or sick leave or other
bona fide leave or absence (such as temporary employment by the Government) if
such leave does not exceed ninety days, if longer, so long as the Optionee's
right to re-employment is guaranteed either by statute or by contract.
8. Adjustments Upon Changes in Capitalization.
(a) If at any time prior to the exercise of the Option in full, the
outstanding Common Shares of the Company are changed by reason or
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, stock dividends or the like, an appropriate
adjustment shall be made by the Company's Board of Directors in the number of
Common Shares subject to this Option and in the exercise price therefor. If the
Company shall be reorganized, consolidated or merged with another corporation,
or if all or substantially all of the assets of the Company shall be sold or
exchanged, the holder of this Option shall be entitled to receive upon the
exercise of this Option the same number and kind of shares of capital stock or
the same amount of property, cash, securities or other consideration as he would
have been entitled to receive if, immediately prior to such event, such holder
would have been the record owner of the Common Shares subject to this Option.
(b) Any adjustment in the number of Common Shares shall apply
proportionately to only the unexercised portion of the Option granted
hereunder. If fractions of a share would result from any such adjustment, the
adjustment shall be revised to the next lower whole number of shares.
9. Method of Exercise of Option. Subject to the terms and conditions of
this Agreement, this Option may be exercised by written notice to the Company at
its principal office, presently located at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇; attention of the Secretary. Such notice shall state the election
to exercise the Option and the number of Common Shares in respect of which it is
being exercised, shall be signed by the person or persons so exercising the
Option and shall either (i) be accompanied by payment in full, by check payable
to the order of the Company, of the purchase price of said shares in which event
the Company shall, subject to the provisions of subparagraphs (b) and (c) of
this Paragraph 9, deliver a certificate or certificates representing said shares
as soon as practicable after the notice shall be received by the Company, or
(ii) fix a date (not less than five (5) no more than ten (10) business days from
the date such notice shall be received by the Company) for the payment of the
full purchase price of said shares against delivery, subject to the
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provisions of subparagraphs (b) and (c) of this Paragraph 9, of a certificate or
certificates representing such shares. The certificate or certificates for the
Common Shares as to which the Option shall have been so exercised shall be
registered in the name of the person or persons so exercising the Option and
shall be delivered as aforesaid to or upon the written order of the person or
persons exercising the Option. In the event the Option shall be exercised
pursuant to Paragraph 7(b) hereof, by any person or persons other than the
Optionee, such notice shall be accompanied by appropriate proof of the right of
such person or persons to exercise the Option. All Common Shares that shall be
purchased upon the exercise of the Option as provided herein shall be fully paid
and nonassessable.
10. Restrictions on Issuance.
(a) Unless prior to the exercise of the Option the Common Shares
issuable upon such exercise have been registered with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, the
notice of exercise shall be accompanied by a representation or agreement of the
individual exercising the Option to the Company to the effect that such shares
are being acquired for investment and not with a view to the resale or
distribution thereof or such other documentation as may be required by the
Company, unless in the opinion of counsel to the Company, such representation,
agreement or documentation is not necessary to comply with said Act.
(b) The Company shall not be obligated to issue and deliver any
Common Shares until they have been listed on each securities exchange on which
Common Shares may then be listed nor until there has been qualification under or
compliance with such state or federal laws, rules or regulations as the Company
may deem applicable. The Company shall use reasonable efforts to obtain such
listing, qualification and compliance.
11. Company Obligations. The Company shall at all times during the term
of the Option reserve and keep available such number of Common Shares as will be
sufficient to satisfy the requirements of this Agreement, shall pay all original
issue and/or transfer taxes with respect to the issue and/or transfer of shares
by the Company pursuant hereto and all other fees and expenses necessarily
incurred by the Company in connection therewith and will from time to time use
its best efforts to comply with all laws and regulations which in the opinion of
counsel for the Company shall be applicable thereto.
12. No Contract of Employment. The execution of this Agreement shall not
be deemed to be a contract of employment or a grant of any right to any employee
optionee to remain in the employ of the Company or any subsidiary.
13. Definition of Certain Terms. As used herein, the terms "subsidiary"
and "subsidiary corporation" shall mean any present or future subsidiary
corporation of the Company coming within the
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definition of "subsidiary corporation" contained in Section 425(f) of the Code.
The term "Common Shares" shall, except as otherwise indicated by the context,
mean the shares of Common Shares of the Company as authorized at the date
hereof.
14. Governing Law. This Option Agreement shall be construed in accordance
with and governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE MNI GROUP INC.
By:/s/▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: President
/s/▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇
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