MAIN STREET AND MAIN INCORPORATED
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") is made as of August 5, 1996, by
and between MAIN STREET AND MAIN INCORPORATED, a Delaware corporation (the
"Company"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇").
WHEREAS, Antioco and the Company have entered into an Employment Agreement
as of August 5, 1996 (the "Employment Agreement"), whereby Antioco will serve as
the Chairman of the Board of the Company; and
WHEREAS, the Employment Agreement provides that the Company will grant to
Antioco an option to purchase shares of the Company's common stock, par value
$.001 per share (the "Common Stock"); and
WHEREAS, the Company considers it desirable and its best interest that
Antioco be given an opportunity to acquire a proprietary interest in the Company
and added incentive to advance the interest of the Company by possessing an
option to purchase shares of Common Stock.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, it is agreed by and between the parties as follows:
1. GRANT OF OPTION. Subject in all respects to the terms, conditions and
provisions of this Agreement, the Company grants to Antioco, as of the date of
this Agreement (the "Grant Date"), the right, privilege and option (the
"Option") to purchase 800,000 shares of Common Stock (the "Optioned Shares").
2. OPTION PRICE AND VESTING.
(a) GENERAL. The purchase price (the "Option Price") of the Optioned
Shares and the time at which the Optioned Shares vest and Antioco or his
permitted assignee(s) (each, an "Optionholder") may thereafter exercise this
Option with respect to such Optioned Shares shall be as follows:
PER SHARE
NUMBER OF OPTION
VESTING DATE OPTIONS PRICE
------------ ------- -----
August 5, 1996 200,000 $2.00
August 5, 1997 200,000 $2.00
August 5, 1998 200,000 $3.00
August 5, 1999 200,000 $5.00
(b) ACCELERATED VESTING AND FORFEITURE OF UNVESTED OPTIONED SHARES.
Notwithstanding the provisions of Section 2(a) hereof, the Optioned Shares that
would otherwise vest on August 5, 1997 will vest immediately on the date on
which the closing sale price of the Common Stock has exceeded $6.00 per share
for 20 consecutive days and the options that would otherwise vest on
August 5, 1998 and August 5, 1999 will vest immediately on the date on which the
closing sale price of the Common Stock exceeds $8.00 per share for 20
consecutive trading days. The Optioned Shares will vest and become exercisable
on the foregoing dates only if the Employment Term (as defined in the Employment
Agreement) has not terminated prior to such dates. Any Optioned Shares granted
pursuant to this Agreement that have not vested prior to the termination of the
Employment Term will be forfeited immediately upon the termination of the
Employment Term. In the event of a "Change of Control" of Employer (as defined
in the Employment Agreement), any unvested Optioned Shares will become fully
vested and exercisable immediately upon such Change of Control. In the event of
a Change of Control that is not approved by at least two-thirds of the members
of Employer's Board of directors, the exercise price for all unexercised
Optioned Shares outstanding on the date of such Change of Control shall be
increased by 100%. Optioned Shares that have vested may be acquired in
accordance with the terms of this Agreement at any time, and from time to time,
in whole or in part, until the Option expires as provided in Section 4 hereof.
3. EXERCISE OF OPTION. All or any portion of the vested Optioned Shares may
be purchased by an Optionholder upon written notice to the Company, addressed to
the Company at its principal place of business. Such notice shall be signed by
the Optionholder and shall state the election to exercise the Option and the
number of Optioned Shares with respect to which it is being exercised. Such
notice shall be accompanied by payment in full of the Option Price for the
number of shares of Common Stock being purchased. Payment may be made in cash or
by check or by tendering duly endorsed certificates representing shares of
Common Stock then owned by the Optionholder. In the sole discretion of the
Company, an Optionholder may be provided with the election to pay for the Option
Price by having the Company withhold, from the Common Stock otherwise issuable,
a portion of those shares of Common Stock with an aggregate fair market value
equal to that portion of the Option Price designated by the Optionholder (not to
exceed 100 percent of the Option Price). Upon the exercise of the Option, the
Company shall deliver, or cause to be delivered, to the Optionholder a
certificate or certificates representing the net shares of Common Stock
purchased upon such exercise as soon as practicable after payment for those
shares has been received by the Company. All shares that are purchased and paid
for in full upon exercise of the Option shall be fully paid and non-assessable.
4. TERMINATION OF OPTION. This Option, to the extent not previously
exercised, shall terminate upon the tenth anniversary of the Grant Date, or as
otherwise set forth in this Agreement.
5. TERMINATION OF EMPLOYMENT. If Antioco's employment with the Company is
terminated pursuant to the Employment Agreement, or as a result of the death or
disability of Antioco, all Optioned Shares that are vested shall be exercisable
by an Optionholder in accordance with Section 3 hereof for a period of 30 days
(one year in the case of a termination as the result of the death or disability
of Antioco) after the expiration of the Employment Term or until the stated
expiration date of the Option, whichever occurs first. Notwithstanding the
foregoing, if Antioco is terminated "for cause" (as defined in the Employment
Agreement), the Option granted hereunder shall become immediately void and no
longer exercisable.
6. NO PRIVILEGE OF COMMON STOCK OWNERSHIP. The Optionholder shall not have
any of the rights of a stockholder with respect to the Optioned Shares until
such Optionholder has exercised the option and paid the Option Price for the
purchased shares of Common Stock.
2
7. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this Option and
the issuance of the Common Stock upon such exercise shall be subject to
compliance by the Company and each Optionholder with all applicable requirements
of law relating thereto and with all applicable regulations of any stock
exchange or trading market on which the shares of the Common Stock may be listed
or traded at the time of such exercise and issuance. In connection with the
exercise of an Option hereunder, an Optionholder shall execute and deliver to
the Company such representations in writing as may be requested by the Company
in order for it to comply with applicable requirements of federal and state
securities laws.
8. LIABILITY OF THE COMPANY. The inability of the Company to obtain
approval from any regulatory body having authority deemed by the Company to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
Agreement shall relieve the Company of any liability with respect to the
nonissuance or sale of the Common Stock as to which such approval shall not have
been obtained. The Company, however, shall use its best efforts to obtain all
such approvals.
9. CAPITAL ADJUSTMENTS. The number of Optioned Shares shall be
proportionately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock of the Company resulting from a subdivision
or consolidation of shares or any other capital adjustment or the payment of a
stock dividend or any other increase or decrease in the number of such shares
effected without the Company's receipt of consideration therefor in money,
services or property.
10. MERGERS, ETC. If the Company is the surviving corporation in any merger
or consolidation (not including a Change of Control), the Option granted herein
shall pertain to and apply to the securities to which a holder of the number of
shares of Common Stock subject to the Option would have been entitled prior to
the merger or consolidation.
11. ASSIGNMENT. The right to acquire Common Stock under this Agreement may
not be assigned, encumbered or otherwise transferred by an Optionholder other
than by will or the laws of descent and distribution.
12. SECURITIES RESTRICTIONS.
(a) LEGEND ON CERTIFICATES. All certificates representing shares of
Common Stock issued hereunder shall be endorsed with a legend reading as
follows:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND ARE 'RESTRICTED SECURITIES' AS
DEFINED BY RULE 144 UNDER THAT ACT. THE SHARES MAY
NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT REGISTERING THE SHARES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR, IN LIEU
THEREOF, AN OPINION OF COUNSEL FOR THIS COMPANY TO
THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER
THAT ACT.
3
(b) PRIVATE OFFERING FOR INVESTMENT ONLY. If the shares to be issued
to an Optionholder upon the exercise of any Option have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), the Arizona
Securities Act (the "Arizona Act") or the securities laws of any other
jurisdiction, those shares will be "restricted securities" within the meaning of
Rule 144 under the 1933 Act and must be held indefinitely without any transfer,
sale or other disposition unless (a) the shares are subsequently registered
under the 1933 Act, the Arizona Act and the securities laws of any other
applicable jurisdiction, or (b) the Optionholder obtains an opinion of counsel
which is satisfactory to counsel for the Company that the shares may be sold in
reliance on an exemption from registration requirements. By the act of accepting
an Option, Antioco agrees (i) that any shares of Common Stock acquired will be
solely for investment and not with any intention to resell or redistribute those
shares and (ii) such intention will be confirmed by an appropriate certificate
at the time the Common Stock is acquired if requested by the Company. The
neglect or failure to execute such a certificate, however, shall not limit or
negate the foregoing agreement. Notwithstanding the foregoing, Antioco may
transfer all or any portion of the Option or the Optioned Shares to his spouse,
child, estate, personal representative, heir or successor or to a trust for the
benefit of Antioco or his spouse, child, or heir. To transfer any portion of the
Option, Antioco shall execute and deliver to the Company an Assignment in the
form attached as Exhibit A hereto.
(c) REGISTRATION STATEMENT. If a registration statement covering the
shares of Common Stock issuable hereunder is filed under the 1933 Act and is
declared effective by the Securities Exchange Commission, the provisions of
Sections 12(a) and (b) shall terminate during the period of time that such
registration statement, as periodically amended, remains effective.
13. TAX WITHHOLDING.
(a) GENERAL. the Company's obligation to deliver Common Stock under
this Agreement shall be subject to Antioco's satisfaction of all applicable
federal, state and local income tax withholding requirements.
(b) Shares to Pay for Withholding. the Company may, in its discretion
and in accordance with the provisions of this Section 13(b) and such
supplemental rules as it may from time to time adopt (including any applicable
safe-harbor provisions of SEC Rule 16b-3), provide Antioco with the right to use
shares of Common Stock in satisfaction of all or part of the federal, state and
local income tax liabilities incurred by Antioco in connection with the receipt
of Common Stock ("Taxes"). Such right may be provided to Antioco in either or
both of the following formats:
(i) STOCK WITHHOLDING. Antioco may be provided with the election
to have the Company withhold, from the Common Stock otherwise issuable, a
portion of those shares of Common Stock with an aggregate fair market value
equal to the percentage of the applicable Taxes (not to exceed 100 percent)
designated by Antioco.
(ii) STOCK DELIVERY. the Company may, in its discretion, provide
Antioco with the election to deliver to the Company, at the time the Option is
exercised, one or more shares of Common Stock previously acquired by Antioco
(other than pursuant to the transaction triggering the Taxes) with an aggregate
fair market value equal to the percentage of the taxes incurred in connection
with such Option exercise (not to exceed 100 percent) designated by Antioco.
4
14. BINDING EFFECT. Subject to the restrictions on transfer set forth in
Sections 11 and 12, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
15. DEFINED TERMS. All capitalized terms herein which are not otherwise
defined therein shall have the same meaning ascribed to such terms in the
Employment Agreement.
16. NOTICES. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Company in care of the Corporate Secretary at its principal corporate offices.
Any notice required to be given or delivered to Antioco at the address indicated
on the signature page hereto. Any permitted assignee hereunder shall notify the
other party hereto of the permitted assignee's address for purposes of this
notice provision. All notices shall be deemed to have been given or delivered
upon personal delivery or upon deposit in the U.S. mail, postage prepaid return
receipt requested, and properly addressed to the party to be notified.
17. INTEGRATION AND MODIFICATION. This Agreement and the Employment
Agreement embody the full understanding of the parties with respect to the
subject matter hereof, superseding any and all prior agreements, and no
amendment or modification thereof shall be effective unless the same shall be in
writing and signed by both of said parties.
18. GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Arizona, without regard to application
of conflicts of law principles.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Agreement or
caused it to be executed on the day and year first above written.
MAIN STREET AND MAIN INCORPORATED
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name:
--------------------------------
Its: President
---------------------------------
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address:
-------------------------------------
-------------------------------------
5
EXHIBIT A
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Options)
FOR VALUE RECEIVED, the undersigned holder of the Options to purchase
shares of common stock, par value $.001 per share, of Main Street and Main
Incorporated, a Delaware corporation (the "Corporation"), described on Schedule
1 attached hereto (the "Options"), hereby sells, assigns and transfers unto the
person or persons below named Options to purchase __________ shares of the
Corporation's common stock and does hereby irrevocably constitute and appoint
__________________________________________________ attorney to transfer said
Options on the books of the Corporation, with full power of substitution in the
premises.
The undersigned agrees not to sell, assign, transfer, pledge or hypothecate
the Options except in compliance with applicable securities laws:
Dated:
-------------------------------------
Signature
Fill in for new Registration of Options:
-------------------------------------
Name
-------------------------------------
Address
-------------------------------------
Please print name and address of assignee
(including zip code number)
--------------------------------------------------------------------------------
NOTICE
The signature to this Assignment must correspond to the name as written as the
registered holder of the Options on the books of the Corporation in every
particular, without alteration or enlargement or any change whatsoever.
--------------------------------------------------------------------------------
Schedule 1
to
Assignment
Optionholder:
Grant Date:
Optioned Shares:
Option Price:
Vesting Schedule:
Number of Options Being Transferred:
The options are nonqualified options.