XESP 8-K
Electronic Servitor Publication Network, Inc. (XESP)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
(Exact name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
(
(Address, including zip code, and new telephone number, including area code,
of registrant's principal executive offices)
c/o INCORPORATING SERVICES, LTD.
3500 SOUTH DUPONT HWY.
DOVER, DE 19901, USA
Tel. 800-346-4646
(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
Name of each exchange on which registered |
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ELECTRONIC SERVITOR PUBLICATION NETWORK INC.
Form 8-K
Current Report
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On October 12, 2023, the Company entered into a revised Stock Option Grant and Stock Option Agreement with Greg Shockey (the “Shockey Grant and Agreement”), in accordance with the terms of the Company’s 2023 Equity Incentive Plan. The Shockey Grant and Agreement supersedes his previous Stock Option Grant and Stock Option Agreement dated April 12, 2023. Pursuant to the terms of the Shockey Grant and Agreement, the Company agreed to issue Greg Shockey options to purchase 3,840,000 shares of the Company’s common stock, with 1,140,000 of the shares vesting on October 12, 2023 and one-ninth (1/9th) of the remaining shares vesting on the first day of each fiscal quarter thereafter, subject to Greg Shockey continuing to be a service provider through each such date.
ITEM 5.02 ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
On October 12, 2023, the Company entered into a revised Stock Option Grant and Agreement with Peter Hager, President and Chief Executive Officer (the “Hager Grant and Agreement”), in accordance with the terms of the Company’s 2023 Equity Incentive Plan. The Hager Grant and Agreement supersedes his previous Stock Option Grant and Agreement dated February 1, 2023. Pursuant to the terms of the Hager Grant and Agreement, the Company agreed to issue Peter Hager options to purchase 6,400,000 shares of the Company’s common stock, with 1,900,000 of the shares vesting on October 12, 2023 and one-ninth (1/9th) of the remaining shares vesting on the first day of each fiscal quarter thereafter, subject to Peter Hager continuing to be a service provider through each such date.
On October 12, 2023, the Company entered into a new Employment Agreement and Stock Option Grant and Agreement with Thomas Spruce, Chief Operating Officer and sole Director (the “Spruce Employment Agreement and Grant”), in accordance with the terms of the Company’s 2023 Equity Incentive Plan. The Spruce Employment Agreement and Grant supersedes his previous Employment Agreement and Stock Option Grant and Agreement, each dated February 1, 2023. Thomas Spruce’s new Employment Agreement provides a 36-month term of employment from October 12, 2023, under the same compensation terms as the previous Agreement, except that the number of Stock Options granted increased from 500,000 per year to 1,200,000 per year in line with Mr. Spruce’s responsibilities in moving the Company from start-up to being fully operational. Pursuant to the terms of the Spruce Employment Agreement and Grant, the Company agreed to issue Thomas Spruce options to purchase 4,850,000 shares of the Company’s common stock, with 1,550,000 of the shares vesting on October 12, 2023 and one-eleventh (1/11th) of the remaining shares vesting on the first day of each fiscal quarter thereafter, subject to Thomas Spruce continuing to be a service provider through each such date.
On October 12, 2023, the Company entered into a new Employment Agreement and Stock Option Grant and Agreement with Jim Kellogg, Chief Financial Officer (the “Kellogg Employment Agreement and Grant”), in accordance with the terms of the Company’s 2023 Equity Incentive Plan. The Kellogg Employment Agreement and Grant supersedes his previous Employment Agreement and Stock Option Grant and Agreement dated November 16, 2022. The new Employment Agreement provides a 36-month term of employment from October 12, 2023, under the same compensation terms as the previous Agreement, except that the number of Stock Options granted increased from 300,000 per year to 400,000 per year. Pursuant to the terms of the Kellogg Employment Agreement and Grant, the Company agreed to issue Jim Kellogg options to purchase 1,500,000 shares of the Company’s common stock, with 300,000 of the shares vesting on October 12, 2023 and one-twelfth (1/12th) of the remaining shares vesting on the first day of each fiscal quarter beginning on January 1, 2024, subject to Jim Kellogg continuing to be a service provider through each such date.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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ELECTRONIC SERVITOR PUBLICATION NETWORK INC.
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| Date: October 19, 2023 | By: | /s/ Peter Hager |
| Peter Hager | ||
| Chief Executive Officer | ||
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Exhibit 99.1
ELECTRONIC SERVITOR PUBLICATION NETWORK inc.
2023 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
As of the Date of Grant below, this Agreement terminates and replaces the Stock Option Grant dated February 1, 2023. Unless otherwise defined herein, the terms defined in the 2023 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Stock Option Agreement (the “Option Agreement”).
I. NOTICE OF STOCK OPTION GRANT
Name: Greg Shockey
Address: (on file)
The undersigned Participant has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
| Date of Grant: | October 12, 2023 | |
| Vesting Commencement Date: | October 12, 2023 | |
| Exercise Price per Share: | $ 0.07 | |
| Total Number of Shares Granted: | 3,840,000 | |
| Total Exercise Price: | $ 268,800 | |
| Type of Option: | Incentive Stock Option | |
| X | Nonstatutory Stock Option | |
| Expiration Date: | October 12, 2033 | |
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the following vesting schedule:
One million one hundred forty thousand (1,140,000) of the Shares subject to the Option shall vest on the Vesting Commencement Date, and one-ninth (1/9th) of the remaining Shares subject to the Option shall vest on the first day of each fiscal quarter thereafter, subject to Participant continuing to be a Service Provider through each such date.
Termination Period:
This Option shall be exercisable for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option shall be exercisable for twelve (12) months after Participant ceases to be a Service Provider. Notwithstanding the foregoing sentence, in no event may this Option be exercised after the Term/Expiration Date as provided above and this Option may be subject to earlier termination as provided in Section 13 of the Plan.
II. AGREEMENT
1. Grant of Option. The Administrator of the Company hereby grants to the Participant named in the Notice of Stock Option Grant in Part I of this Option Agreement (“Participant”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Stock Option Grant, at the exercise price per Share set forth in the Notice of Stock Option Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 18 of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Stock Option Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as an NSO granted under the Plan. In no event shall the Administrator, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Stock Option Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) or in a manner and pursuant to such procedures as the Administrator may determine, which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable tax withholding. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable tax withholding.
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Participant on the date on which the Option is exercised with respect to such Shares.
3. Participant’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), at the time this Option is exercised, Participant shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Participant hereby agrees that Participant shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Participant (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred and eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Participant shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred and eighty (180) day (or other) period. Participant agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
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5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Participant:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) shall be valued at its Fair Market Value on the date of exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances or security interests, if accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option.
(a) This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant.
(b) Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration of Options under the Exchange Act as set forth in Rule 12h-1(f) promulgated under the Exchange Act (the “Reliance End Date”), Participant shall not transfer this Option or, prior to exercise, the Shares subject to this Option, in any manner other than (i) to persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act) through gifts or domestic relations orders, or (ii) to an executor or guardian of Participant upon the death or disability of Participant. Until the Reliance End Date, the Options and, prior to exercise, the Shares subject to this Option, may not be pledged, hypothecated or otherwise transferred or disposed of, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than as permitted in clauses (i) and (ii) of this paragraph.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Stock Option Grant and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
9. Drag-Along. If the holders of a majority of the shares of the Company’s voting stock then-outstanding (the “Majority Holders”) propose to sell, assign or transfer, directly or indirectly, all of their shares of capital stock of the Company to any third party (a “Drag-Along Transfer”), the Majority Holders may exercise drag-along rights in accordance with and subject to the terms, conditions and procedures set forth in this Section 9 (“Drag-Along Rights”).
(a) The Majority Holders shall give written notice (a “Drag-Along Notice”) at least fifteen (15) days prior to the consummation of such proposed Drag-Along Transfer to Participant of any election by the Majority Holders to exercise their Drag-Along Rights hereunder, setting forth (i) the shares proposed to be transferred, (ii) the consideration to be received for such shares, (ii) the identity of the prospective transferee, and (iv) any other material terms and conditions of the proposed transaction. Such notice shall also specify the aggregate number of shares Participant shall be required to transfer. Any transfer of shares by Participant pursuant to the terms hereof shall be for the same amount and form of consideration per share as the Majority Holders will receive in such Drag-Along Transfer, as specified in the Drag-Along Notice.
(b) Within seven (7) days of delivery of the Drag-Along Notice, Participant shall deliver to the Majority Holders such instruments of transfer as shall be reasonably requested by the Majority Holders or the prospective transferee, including, as applicable, one or more stock certificates, properly endorsed for transfer to the transferee, together with a limited power-of-attorney authorizing the Majority Holders to transfer such Shares on the terms set forth in the Drag-Along Notice.
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(c) In the event that any transfer pursuant to this Section 9 is structured as a merger, consolidation or business combination, or any sale of all or substantially all assets, Participant must further agree to (i) vote or provide a written consent in favor of the transaction, (ii) take such other action within its power, at no cost to it (other than fees and expenses payable to its advisors, which shall be paid by Participant), as may be required to effect such transaction, and (iii) take all action to waive any dissenters, appraisal or other similar rights with respect thereto.
(d) If the Drag-Along Transfer is not consummated within one hundred and eighty (180) days after delivery of the Drag-Along Notice, the Majority Holders shall (i) return to each Drag-Along Holder the limited power-of-attorney and all certificates representing the shares that Participant delivered pursuant to this Section 9 and any other documents in the possession of the Majority Holders executed by Participant in connection with the proposed Drag-Along Transfer.
(e) Notwithstanding the foregoing, a Drag-Along Holder will not be required to comply with this Section 9 in connection with any proposed Drag-Along Transfer, unless:
(i) Any representations and warranties to be made by Participant in connection with the Drag-Along Transfer are limited to representations and warranties related to authority, ownership and the ability to convey title to the Shares, including, but not limited to, representations and warranties that (i) Participant holds all right, title and interest in and to the Shares that Participant purports to hold, free and clear of all liens and encumbrances, (ii) the obligations of Participant in connection with the transaction have been duly authorized, if applicable, (iii) the documents to be entered into by Participant have been duly executed by Participant and delivered to the acquirer and are enforceable against Participant in accordance with their respective terms; and (iv) neither the execution and delivery of documents to be entered into in connection with the transaction, nor the performance of Participant’s obligations thereunder, will cause a breach or violation of the terms of any agreement, law or judgment, order or decree of any court or governmental agency;
(ii) Participant shall not be liable for the inaccuracy of any representation or warranty made by any other person in connection with the Drag-Along Transfer, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders);
(iii) the liability for indemnification, if any, of Participant in the Drag-Along Transfer and for the inaccuracy of any representations and warranties made by the Company, the Majority Holders or the Purchaser in connection with such Drag-Along Transfer, is several and not joint (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders), and subject to any provisions of the Company’s certificate of incorporation and bylaws, as amended, related to the allocation of the escrow, is pro rata in proportion to, and does not exceed, the amount of consideration paid to Participant in connection with such Drag-Along Transfer; and
(iv) upon the consummation of the Drag-Along Transfer, Participant will receive the same amount and form of consideration per share for Participant’s shares as is received by the Majority Holders.
(f) All costs and expenses incurred by Participant in connection with any Drag-Along Transfer, including, without limitation, transfer taxes and legal, accounting and investment banking fees, shall be borne by Participant.
(g) Notwithstanding anything herein to the contrary, there shall be no liability on the part of the Majority Holders to Participant if a Drag-Along Transfer is not consummated for any reason, and the Majority Holders shall not be obligated to consummate the proposed Drag-Along Transfer, regardless of whether the Majority Holders have delivered a Drag-Along Notice in respect of such Proposed Drag-Along Transfer.
10. Power of Attorney. In order to secure the performance of Participant’s obligations under Section 9, Participant hereby irrevocably appoints the Chief Executive Officer of the Company as Participant’s attorney-in-fact and proxy of Participant (with full power of substitution) to vote, provide a written consent or take any other action with respect to Participant’s shares if, and only in the event that, Participant fails to vote or provide a written consent with respect to Participant’s shares in accordance with the terms of Section 9 or fails to take any other action in accordance with the terms of Section 9 within three (3) days of a request for such vote, written consent or action. Upon such failure, the Chief Executive Officer of the Company shall have and is hereby irrevocably granted a proxy to vote or provide a written consent with respect to Participant’s shares for purposes of taking actions required by Section 9. Participant intends this proxy to be, and it shall be, irrevocable and coupled with an interest, and Participant shall take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy.
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11. Tax Obligations.
(a) Tax Withholding. Participant agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Participant) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements if applicable to the Option exercise. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
(c) Code Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the date of grant (a “discount option”) may be considered “deferred compensation.” An Option that is a “discount option” may result in (i) income recognition by Participant prior to the exercise of the Option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The “discount option” may also result in additional state income, penalty and interest tax to the Participant. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant, Participant shall be solely responsible for Participant’s costs related to such a determination.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant. This Option Agreement is governed by the internal substantive laws, but not the choice of law rules of, Delaware.
13. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Participant has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Participant further agrees to notify the Company upon any change in the residence address indicated below.
| PARTICIPANT | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | |
| _______________________________________ | _____________________________________ | |
| Signature | Signature | |
| Greg Shockey | Peter Hager, CEO |
[Signature Page to Stock Option Agreement]
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EXHIBIT A
2023 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
ELECTRONIC SERVITOR PUBLICATION NETWORK INC.
400 1ST Ave N., Suite 100
Minneapolis, MN 55401
Attention: Chief Executive Officer
1. Exercise of Option. Effective as of today, ________________, ____, the undersigned (“Participant”) hereby elects to exercise Participant’s option (the “Option”) to purchase ________________ shares of the Common Stock (the “Shares”) of ELECTRONIC SERVITOR PUBLICATION NETWORK INC. (the “Company”) under and pursuant to the 2023 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated ______________, _____ (the “Option Agreement”).
2. Delivery of Payment. Participant herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to an Award, notwithstanding the exercise of the Option. The Shares shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.
5. Company’s Right of First Refusal. Before any Shares held by Participant or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 5 (the “Right of First Refusal”).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section 5 shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section 5, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred and twenty (120) days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section 5 shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section 5 notwithstanding, the transfer of any or all of the Shares during the Participant’s lifetime or on the Participant’s death by will or intestacy to the Participant’s immediate family or a trust for the benefit of the Participant’s immediate family shall be exempt from the provisions of this Section 5. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section 5, and there shall be no further transfer of such Shares except in accordance with the terms of this Section 5.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) the first sale of Common Stock of the Company to the general public, or (ii) a Change in Control in which the successor corporation has equity securities that are publicly traded.
6. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD OF TIME FOLLOWING THE EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER PRIOR TO THE EXPIRATION OF SUCH PERIOD WITHOUT THE CONSENT OF THE COMPANY OR THE MANAGING UNDERWRITER.
(b) Stop-Transfer Notices. Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) 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 shall have been so transferred.
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8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
10. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Delaware. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant.
| Submitted by: | Accepted by: | |
| PARTICIPANT | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | |
| Signature | By | |
| Greg Shockey | ||
| Print Name | Print Name | |
| Title | ||
| Address: | Address: | |
| (on file) | 400 1st Ave. N., Suite 100 | |
| (on file) | Minneapolis, MN 55401 | |
| Date Received |
[Signature Page to Exercise Notice]
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
| PARTICIPANT: | __________________________________________________ |
| COMPANY: | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. |
| SECURITY: | COMMON STOCK |
| SHARE AMOUNT: | _________________________ |
| DATE: | _________________________ |
In connection with the purchase of the above-listed Securities, the undersigned Participant represents to the Company the following:
(a) Participant is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Participant is acquiring these Securities for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).
(b) Participant acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. In this connection, Participant understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Participant’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one (1) year or any other fixed period in the future. Participant further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Securities. Participant understands that the certificate evidencing the Securities shall be imprinted with any legend required under applicable state securities laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise shall be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of the applicable conditions specified by Rule 144, including in the case of affiliates (1) the availability of certain public information about the Company, (2) the amount of Securities being sold during any three (3) month period not exceeding specified limitations, (3) the resale being made in an unsolicited “broker’s transaction,” transactions directly with a “market maker” or “riskless principal transactions” (as those terms are defined under the Securities Exchange Act of 1934) and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require (i) the availability of current public information about the Company; (ii) the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Securities; and (iii) in the case of the sale of Securities by an affiliate, the satisfaction of the conditions set forth in sections (2), (3) and (4) of the paragraph immediately above.
(d) Participant further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption shall be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 shall have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Participant understands that no assurances can be given that any such other registration exemption shall be available in such event.
PARTICIPANT
Signature
Print Name
Date
[Signature Page to Investment Representation Statement]
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Exhibit 99.2
ELECTRONIC SERVITOR PUBLICATION NETWORK inc.
2023 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
As of the Date of Grant below, this Agreement terminates and replaces the Stock Option Grant dated February 1, 2023. Unless otherwise defined herein, the terms defined in the 2023 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Stock Option Agreement (the “Option Agreement”).
I. NOTICE OF STOCK OPTION GRANT
Name: Peter Hager
Address: (on file)
The undersigned Participant has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
| Date of Grant: | October 12, 2023 | |
| Vesting Commencement Date: | October 12, 2023 | |
| Exercise Price per Share: | $ 0.07 | |
| Total Number of Shares Granted: | 6,400,000 | |
| Total Exercise Price: | $ 448,000 | |
| Type of Option: | Incentive Stock Option | |
| X | Nonstatutory Stock Option | |
| Expiration Date: | October 12, 2033 | |
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the following vesting schedule:
One million nine-hundred thousand (1,900,000) of the Shares subject to the Option shall vest on the Vesting Commencement Date, and one-ninth (1/9th) of the remaining Shares subject to the Option shall vest on the first day of each fiscal quarter thereafter, subject to Participant continuing to be a Service Provider through each such date.
Termination Period:
This Option shall be exercisable for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option shall be exercisable for twelve (12) months after Participant ceases to be a Service Provider. Notwithstanding the foregoing sentence, in no event may this Option be exercised after the Term/Expiration Date as provided above and this Option may be subject to earlier termination as provided in Section 13 of the Plan.
II. AGREEMENT
1. Grant of Option. The Administrator of the Company hereby grants to the Participant named in the Notice of Stock Option Grant in Part I of this Option Agreement (“Participant”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Stock Option Grant, at the exercise price per Share set forth in the Notice of Stock Option Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 18 of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Stock Option Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as an NSO granted under the Plan. In no event shall the Administrator, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Stock Option Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) or in a manner and pursuant to such procedures as the Administrator may determine, which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable tax withholding. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable tax withholding.
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Participant on the date on which the Option is exercised with respect to such Shares.
3. Participant’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), at the time this Option is exercised, Participant shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Participant hereby agrees that Participant shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Participant (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred and eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Participant shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred and eighty (180) day (or other) period. Participant agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
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5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Participant:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) shall be valued at its Fair Market Value on the date of exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances or security interests, if accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option.
(a) This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant.
(b) Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration of Options under the Exchange Act as set forth in Rule 12h-1(f) promulgated under the Exchange Act (the “Reliance End Date”), Participant shall not transfer this Option or, prior to exercise, the Shares subject to this Option, in any manner other than (i) to persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act) through gifts or domestic relations orders, or (ii) to an executor or guardian of Participant upon the death or disability of Participant. Until the Reliance End Date, the Options and, prior to exercise, the Shares subject to this Option, may not be pledged, hypothecated or otherwise transferred or disposed of, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than as permitted in clauses (i) and (ii) of this paragraph.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Stock Option Grant and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
9. Drag-Along. If the holders of a majority of the shares of the Company’s voting stock then-outstanding (the “Majority Holders”) propose to sell, assign or transfer, directly or indirectly, all of their shares of capital stock of the Company to any third party (a “Drag-Along Transfer”), the Majority Holders may exercise drag-along rights in accordance with and subject to the terms, conditions and procedures set forth in this Section 9 (“Drag-Along Rights”).
(a) The Majority Holders shall give written notice (a “Drag-Along Notice”) at least fifteen (15) days prior to the consummation of such proposed Drag-Along Transfer to Participant of any election by the Majority Holders to exercise their Drag-Along Rights hereunder, setting forth (i) the shares proposed to be transferred, (ii) the consideration to be received for such shares, (ii) the identity of the prospective transferee, and (iv) any other material terms and conditions of the proposed transaction. Such notice shall also specify the aggregate number of shares Participant shall be required to transfer. Any transfer of shares by Participant pursuant to the terms hereof shall be for the same amount and form of consideration per share as the Majority Holders will receive in such Drag-Along Transfer, as specified in the Drag-Along Notice.
(b) Within seven (7) days of delivery of the Drag-Along Notice, Participant shall deliver to the Majority Holders such instruments of transfer as shall be reasonably requested by the Majority Holders or the prospective transferee, including, as applicable, one or more stock certificates, properly endorsed for transfer to the transferee, together with a limited power-of-attorney authorizing the Majority Holders to transfer such Shares on the terms set forth in the Drag-Along Notice.
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(c) In the event that any transfer pursuant to this Section 9 is structured as a merger, consolidation or business combination, or any sale of all or substantially all assets, Participant must further agree to (i) vote or provide a written consent in favor of the transaction, (ii) take such other action within its power, at no cost to it (other than fees and expenses payable to its advisors, which shall be paid by Participant), as may be required to effect such transaction, and (iii) take all action to waive any dissenters, appraisal or other similar rights with respect thereto.
(d) If the Drag-Along Transfer is not consummated within one hundred and eighty (180) days after delivery of the Drag-Along Notice, the Majority Holders shall (i) return to each Drag-Along Holder the limited power-of-attorney and all certificates representing the shares that Participant delivered pursuant to this Section 9 and any other documents in the possession of the Majority Holders executed by Participant in connection with the proposed Drag-Along Transfer.
(e) Notwithstanding the foregoing, a Drag-Along Holder will not be required to comply with this Section 9 in connection with any proposed Drag-Along Transfer, unless:
(i) Any representations and warranties to be made by Participant in connection with the Drag-Along Transfer are limited to representations and warranties related to authority, ownership and the ability to convey title to the Shares, including, but not limited to, representations and warranties that (i) Participant holds all right, title and interest in and to the Shares that Participant purports to hold, free and clear of all liens and encumbrances, (ii) the obligations of Participant in connection with the transaction have been duly authorized, if applicable, (iii) the documents to be entered into by Participant have been duly executed by Participant and delivered to the acquirer and are enforceable against Participant in accordance with their respective terms; and (iv) neither the execution and delivery of documents to be entered into in connection with the transaction, nor the performance of Participant’s obligations thereunder, will cause a breach or violation of the terms of any agreement, law or judgment, order or decree of any court or governmental agency;
(ii) Participant shall not be liable for the inaccuracy of any representation or warranty made by any other person in connection with the Drag-Along Transfer, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders);
(iii) the liability for indemnification, if any, of Participant in the Drag-Along Transfer and for the inaccuracy of any representations and warranties made by the Company, the Majority Holders or the Purchaser in connection with such Drag-Along Transfer, is several and not joint (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders), and subject to any provisions of the Company’s certificate of incorporation and bylaws, as amended, related to the allocation of the escrow, is pro rata in proportion to, and does not exceed, the amount of consideration paid to Participant in connection with such Drag-Along Transfer; and
(iv) upon the consummation of the Drag-Along Transfer, Participant will receive the same amount and form of consideration per share for Participant’s shares as is received by the Majority Holders.
(f) All costs and expenses incurred by Participant in connection with any Drag-Along Transfer, including, without limitation, transfer taxes and legal, accounting and investment banking fees, shall be borne by Participant.
(g) Notwithstanding anything herein to the contrary, there shall be no liability on the part of the Majority Holders to Participant if a Drag-Along Transfer is not consummated for any reason, and the Majority Holders shall not be obligated to consummate the proposed Drag-Along Transfer, regardless of whether the Majority Holders have delivered a Drag-Along Notice in respect of such Proposed Drag-Along Transfer.
10. Power of Attorney. In order to secure the performance of Participant’s obligations under Section 9, Participant hereby irrevocably appoints the Chief Executive Officer of the Company as Participant’s attorney-in-fact and proxy of Participant (with full power of substitution) to vote, provide a written consent or take any other action with respect to Participant’s shares if, and only in the event that, Participant fails to vote or provide a written consent with respect to Participant’s shares in accordance with the terms of Section 9 or fails to take any other action in accordance with the terms of Section 9 within three (3) days of a request for such vote, written consent or action. Upon such failure, the Chief Executive Officer of the Company shall have and is hereby irrevocably granted a proxy to vote or provide a written consent with respect to Participant’s shares for purposes of taking actions required by Section 9. Participant intends this proxy to be, and it shall be, irrevocable and coupled with an interest, and Participant shall take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy.
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11. Tax Obligations.
(a) Tax Withholding. Participant agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Participant) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements if applicable to the Option exercise. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
(c) Code Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the date of grant (a “discount option”) may be considered “deferred compensation.” An Option that is a “discount option” may result in (i) income recognition by Participant prior to the exercise of the Option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The “discount option” may also result in additional state income, penalty and interest tax to the Participant. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant, Participant shall be solely responsible for Participant’s costs related to such a determination.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant. This Option Agreement is governed by the internal substantive laws, but not the choice of law rules of, Delaware.
13. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Participant has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Participant further agrees to notify the Company upon any change in the residence address indicated below.
| PARTICIPANT | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | |
| _______________________________________ | _____________________________________ | |
| Signature | Signature | |
| Peter Hager | Thomas Spruce, COO, Director |
[Signature Page to Stock Option Agreement]
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EXHIBIT A
2023 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
ELECTRONIC SERVITOR PUBLICATION NETWORK INC.
400 1ST Ave N., Suite 100
Minneapolis, MN 55401
Attention: Chief Executive Officer
1. Exercise of Option. Effective as of today, ________________, ____, the undersigned (“Participant”) hereby elects to exercise Participant’s option (the “Option”) to purchase ________________ shares of the Common Stock (the “Shares”) of ELECTRONIC SERVITOR PUBLICATION NETWORK INC. (the “Company”) under and pursuant to the 2023 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated ______________, _____ (the “Option Agreement”).
2. Delivery of Payment. Participant herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to an Award, notwithstanding the exercise of the Option. The Shares shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.
5. Company’s Right of First Refusal. Before any Shares held by Participant or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 5 (the “Right of First Refusal”).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section 5 shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section 5, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred and twenty (120) days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section 5 shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section 5 notwithstanding, the transfer of any or all of the Shares during the Participant’s lifetime or on the Participant’s death by will or intestacy to the Participant’s immediate family or a trust for the benefit of the Participant’s immediate family shall be exempt from the provisions of this Section 5. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section 5, and there shall be no further transfer of such Shares except in accordance with the terms of this Section 5.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) the first sale of Common Stock of the Company to the general public, or (ii) a Change in Control in which the successor corporation has equity securities that are publicly traded.
6. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD OF TIME FOLLOWING THE EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER PRIOR TO THE EXPIRATION OF SUCH PERIOD WITHOUT THE CONSENT OF THE COMPANY OR THE MANAGING UNDERWRITER.
(b) Stop-Transfer Notices. Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
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(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) 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 shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
10. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Delaware. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant.
| Submitted by: | Accepted by: | |
| PARTICIPANT | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | |
| Signature | By | |
| Print Name | Print Name | |
| Title | ||
| Address: | Address: | |
| (on file) | 400 1st Ave. N., Suite 100 | |
| (on file) | Minneapolis, MN 55401 | |
| Date Received |
[Signature Page to Exercise Notice]
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
| PARTICIPANT: | __________________________________________________ |
| COMPANY: | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. |
| SECURITY: | COMMON STOCK |
| SHARE AMOUNT: | _________________________ |
| DATE: | _________________________ |
In connection with the purchase of the above-listed Securities, the undersigned Participant represents to the Company the following:
(a) Participant is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Participant is acquiring these Securities for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).
(b) Participant acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. In this connection, Participant understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Participant’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one (1) year or any other fixed period in the future. Participant further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Securities. Participant understands that the certificate evidencing the Securities shall be imprinted with any legend required under applicable state securities laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise shall be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of the applicable conditions specified by Rule 144, including in the case of affiliates (1) the availability of certain public information about the Company, (2) the amount of Securities being sold during any three (3) month period not exceeding specified limitations, (3) the resale being made in an unsolicited “broker’s transaction,” transactions directly with a “market maker” or “riskless principal transactions” (as those terms are defined under the Securities Exchange Act of 1934) and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require (i) the availability of current public information about the Company; (ii) the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Securities; and (iii) in the case of the sale of Securities by an affiliate, the satisfaction of the conditions set forth in sections (2), (3) and (4) of the paragraph immediately above.
(d) Participant further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption shall be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 shall have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Participant understands that no assurances can be given that any such other registration exemption shall be available in such event.
PARTICIPANT
Signature
Print Name
Date
[Signature Page to Investment Representation Statement]
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Exhibit 99.3
EMPLOYMENT AGREEMENT
As of the Effective Date, this Agreement terminates and replaces the Employment Agreement dated 2/01/2023
This EMPLOYMENT AGREEMENT (“Agreement”), dated as of October 12, 2023, is made by and among Electronic Servitor Publication Network, Inc., a corporation organized under the laws of Delaware (the “Company”) and Thomas Spruce (the “Executive”). Each of the Company and the Executive are referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS:
WHEREAS, the Company wishes to employ the Executive as its Chief Operations Officer (“COO”) and Secretary, and to extend his appointment as Director, and the Executive wishes to accept such employment and extended appointment, on the terms set forth below, effective as of October 12, 2023 (“Effective Date”);
NOW, THEREFORE, in consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to be legally bound, hereby agree as follows:
1. Term. The Company hereby employs the Executive, and the Executive hereby accepts such employment, for an initial term of 36 months commencing as of the Effective Date and continuing through October 11, 2026, unless sooner terminated in accordance with the provisions of Section 5 hereof (the “Initial Term”), with such employment to continue for successive 6-month periods (with each successive period of employment referred to herein as a “Renewal Term”) in accordance with the terms of this Agreement (subject to termination as aforesaid) unless either Party notifies the other Party of non-renewal in writing prior to three months before the expiration of the initial term and each annual renewal, as applicable. (The period during which the Executive is employed hereunder being hereinafter referred to as the “Term”).
2. Duties. During the Term, the Executive shall be employed by the Company as its COO and Secretary. The Executive shall devote a reasonable amount of his working time, energy, attention, skill and best efforts to the affairs of the Company consistent with the faithful performance of the duties of said offices and shall faithfully perform such other duties of an executive, managerial or administrative nature as shall be specified and designated from time to time by the Company’s CEO or Board of Directors.
3. Compensation; Vacation and Leave.
(a) Compensation. As the only consideration due Executive regarding the subject matter of this Agreement, Company will compensate Executive as (and only as) expressly stated in Exhibit A unless changed at the reasonable discretion of the CEO or Board of Directors and communicated in writing to the Executive with an effective date of the change to start at the beginning of the next respective payroll or bonus period.
(b) Vacation and Leave. The Executive shall be entitled to four (4) weeks paid vacation, but Executive will not take more than two (2) weeks consecutive vacation. Unused vacation days in one calendar year shall not carry over to the following calendar year. Executive shall also be entitled to all paid holidays given by the Company to its employees generally. Vacation and leave may change at the reasonable discretion of management, according to company policy and communicated in writing to the Executive.
(c) Other Benefits. The Executive shall be entitled to additional benefits such as health, dental, 401k, LTD, Life, etc.as may be provided according to company policy.
4. Termination of Employment; Change of Control.
(a) Termination upon Death or Disability. This Agreement and Executive’s employment hereunder shall automatically terminate on the date on which Executive dies or becomes permanently incapacitated. Executive shall be deemed to have become “permanently incapacitated” on the date that is ninety (90) days after the Company has determined that Executive has suffered a Permanent Incapacity (as defined below) and so notifies Executive or Executive’s personal representative. For purposes of this Agreement, “Permanent Incapacity” shall mean that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the service provider’s employer.
(b) Termination by the Company for Cause. The Company may terminate this Agreement and Executive’s employment hereunder for Cause (as defined below), effective upon delivery of written notice to Executive given at any time during the Term (without any necessity for prior notice). For purposes of this Agreement, “Cause” shall mean the Executive’s: (i) conviction of any felony or any other crime involving moral turpitude, (ii) conviction of fraud against the Company or any of its subsidiaries or affiliates or theft of or maliciously intentional damage to the property of the Company or any of their subsidiaries or affiliates, (iii) willful breach of Executive’s fiduciary duties to the Company, or (iv) breach by Executive of any material provision of this Agreement after 30 days written notice and 15 days allowed to cure such breach as determined by the Company.
(c) Termination by Company without Cause. The Company may terminate this Agreement and Executive’s employment hereunder without Cause, effective upon delivery of written notice to Executive given at any time during the Term (without any necessity for prior notice) provided that the Company complies with all provisions of this Agreement.
(d) Termination by the Executive for Good Reason. The Executive may terminate this Agreement and Executive’s employment hereunder with Good Reason (as defined below). For purposes of this Agreement, “Good Reason” shall mean (i) the material reduction of the Executive’s title, authority, duties, compensation, and responsibilities or the assignment to the Executive of duties materially inconsistent with the Executive’s position or positions with the Company; (ii) the Company’s material breach of this Agreement; or (iii) any change in the geographic location at which Executive must perform the services under this Agreement, which change is reasonably material to Executive. Notwithstanding the foregoing, (A) Good Reason shall not be deemed to exist unless notice of termination on account thereof (specifying a termination date no later than thirty (30) days from the date of such notice) is given no later than 30 days after the time at which the event or condition purportedly giving rise to Good Reason is first known by Executive and (B) if there exists (without regard to this clause (B)) an event or condition that constitutes Good Reason, the Company shall have fifteen (15) days from the date notice of such a termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute Good Reason hereunder.
(e) Termination by the Executive other than for Good Reason. The Executive may terminate this Agreement and Executive’s employment hereunder other than for Good Reason, provided that the Executive gives the Company no less than thirty (30) days prior written notice of such termination.
(f) Change of Control. If the Executive is terminated by the Company without “Cause”, other than for death or disability, or the Executive terminates for “Good Reason” at any time during the period that is three (3) months prior to the execution of a definitive agreement evidencing a Change in Control through the date that is twenty four (24) months following the closing date of a Change in Control, then the Executive will be entitled to the 100% acceleration of vesting of unvested stock as of the date of termination (i.e., accelerated vesting of all remaining shares that are then unvested). To receive the benefits described in this section, Executive must execute (and not revoke) a general release of claims of all known and unknown claims that Executive may then have against the Company and persons affiliated with the Company and return all Company property, in each case within thirty (30) days after the termination (the “Deadline”).
(g) For purposes of this Agreement, “Change of Control” shall mean the occurrence of any of the following:
(i) Change in Ownership. A change in ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, excluding the acquisition of additional stock by a person or more than one person acting as a group who is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company.
(ii) Change in Effective Control. A change in effective control of the Company occurs on the date that either: (A) any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing thirty percent (30%) or more of the total voting power of the stock of the Company; or (B) a majority of the members of the Company’s Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election; provided, that this paragraph (ii) will apply to the Company only if no other corporation is a majority shareholder of the Company.
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(iii) Change in Ownership of Substantial Assets. A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
(iv) Intended Interpretation. It is the intent of the Parties that the definition of Change in Control under this Agreement be construed consistent with the definition of “Change in Control” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the applicable Treasury Regulations, as amended from time to time.
5. Payments Upon Termination.
(a) Upon termination of this Agreement and Executive’s employment hereunder due to Executive’s death or disability pursuant to Section 4(a) hereof, the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall be entitled to receive (i) any compensation earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination); and (ii) an amount equal to 2.0 times the highest annualized Base Salary amount paid to Executive in any fiscal quarter in the most recent 6 fiscal quarters prior to the date of Termination; and (iii) immediate vesting of all options due to be vested in the current Agreement year and the following two quarters; and (iv) payment of Other Benefits (3c) consistent with employment for a period of 12 months; and (v) an amount equal to the greater of the most recent Annual Bonus earned or the estimated annualized bonus of the current Annual Bonus period. If, after the Effective Date, the Executive is covered by a formal Company death and/or disability benefit plan, respectively, the terms and payments of the plan(s) will supercede and replace (i) through (v) above. The Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall have no further rights to any other compensation or benefits hereunder, or any other rights hereunder
(b) Upon termination of this Agreement and Executive’s employment hereunder by the Company for Cause or by Executive other than for Good Reason, (i) the Company shall pay to Executive an amount equal to Executive’s then Base Salary (if any) and other benefits (including any bonus for a calendar year completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive shall have no further rights to any other compensation or benefits under this Agreement on or after the termination of employment.
(c) Upon termination of this Agreement and Executive’s employment hereunder (i) by the Company without Cause or (ii) by Executive for Good Reason, the Company shall pay to Executive (A) an amount equal to Executive’s then Base Salary (if any) and other benefits (including any bonus for a calendar year completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination); and (B) an amount equal to 2.0 times the highest annualized Base Salary amount paid to Executive in any fiscal quarter in the most recent 6 fiscal quarters prior to the date of Termination; and (C) immediate vesting of all options due to be vested in the current Agreement year and the following two quarters; and (D) payment of Other Benefits (3c) consistent with employment for a period of 12 months; and (E) an amount equal to the greater of the most recent Annual Bonus earned or the estimated annualized bonus of the current Annual Bonus period. The Executive shall have no further rights to any other compensation or benefits under this Agreement on or after the termination of employment.
(d) Nothing contained in this Section 5 shall affect the terms of any employee stock options, stock grants, or other equity-based compensation that may have been issued by the Company to Executive, which in the event of termination of Executive’s employment with the Company shall continue to be governed by their own terms and conditions.
(e) Unless the payment is required to be delayed pursuant to Code Section 409A (as defined below), the cash amounts payable to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) under this Section 6 shall be paid to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) in a single-sum payment within 60 days following the effective date of termination of this Agreement and Executive’s employment hereunder.
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6. Parachutes. If any amount payable to or other benefit receivable by the Executive pursuant to this Agreement would be deemed to constitute a Parachute Payment (as defined below), alone or when added to any other amount payable or paid to or other benefit receivable or received by the Executive which is deemed to constitute a Parachute Payment (whether or not under an existing plan, arrangement or other agreement), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code, then the Parachute Payments shall be reduced (but not below zero) so that the maximum amount of the Parachute Payments (after reduction) shall be one dollar ($1.00) less than the amount which would cause the Parachute Payments to be subject to the excise tax imposed by Section 4999 of the Code. Any such reduction shall be made by first reducing severance benefits (if any). Notwithstanding the foregoing, if the reduction of Parachute Payments under this Section 6 would be equal to or greater than $50,000, then there shall be no such reduction and the amount of the Parachute Payment that shall be payable will be the amount that will result in the greatest after-tax amount for the Executive. “Parachute Payment” shall mean a “parachute payment” as defined in Section 280G of the Code. The calculations under this Section 6 shall be as determined by the Company’s accountants and verified by the Executive’s accountants.
7. Execution of Release. The Executive acknowledges that, if required by the Company prior to making the payments and benefits set forth in Section 5 (other than accrued but unpaid Base Salary and other benefits), all such payments and benefits are subject to his execution of a general release from liability of the Company and its Officers (including his successor), Directors/Managers and employees, and such release becoming irrevocable by its terms. If Executive fails to execute such release, or such release does not become irrevocable, all such payments and benefits set forth in Section 5 hereof shall be forfeited.
8. Application of Code Section 409A.
(a) This Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code (“Code Section 409A”). If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Code Section 409A, then such benefit or payment will be provided in full (to the extent not paid in part at earlier date) at the earliest time thereafter when such sanctions will not be imposed. For purposes of Code Section 409A, all payments to be made upon a termination of employment under this Agreement may only be made upon Executive’s “separation from service” (within the meaning of such term under Code Section 409A) with the Company, each payment made under this Agreement will be treated as a separate payment, and the right to a series of installment payments under this Agreement will be treated as a right to a series of separate payments. In no event will Executive, directly or indirectly, designate the calendar year of payment, except as permitted under Code Section 409A.
(b) Notwithstanding anything herein to the contrary, if, at the time of Executive’s “separation from service” with the Company, the Company has securities which are publicly traded on an established securities market and Executive is a “specified employee” (as such term is defined in Code Section 409A) and it is necessary to postpone the commencement of any payments or benefits otherwise payable under this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under Code Section 409A, then the Company will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive), until the first payroll date that occurs after the date that is six (6) months following Executive’s “separation of service” with the Company. If any payments are postponed due to such requirements, such postponed amounts will be paid with interest at the applicable federal rate as provided under Section 7872(f)(2)(A) of the Code in a lump sum to Executive on the first payroll date that occurs after the date that is six (6) months following Executive’s “separation of service” with the Company. If Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of Code Section 409A will be paid to the personal representative of Executive’ s estate within sixty (60) days after the date of Executive’s death. Payments pursuant to Section 6 of this Agreement are intended to satisfy the short-term deferral exception under Code Section 409A.
(c) All reimbursements and in-kind benefits provided under this Agreement will be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement will be for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.
(d) To the extent applicable, all grants, awards, bonuses or other payments made to Executive or for which Executive is eligible under any Company bonus, incentive, deferred compensation plan or program or any other compensation arrangement will be structured to comply with the requirements of Code Section 409A or an exception from such requirements.
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9. Covenants of the Executive.
(a) Confidentiality. During the Term, the Company has and will continue to provide Executive with access to, and may confide in him, information, business methods and systems, techniques and methods of operation developed at great expense by the Company and which are assets of the Company. Executive recognizes and acknowledges that: (i) all Confidential Information (defined below) is the property of the Company and is unique, extremely valuable and developed and acquired by great expenditures of time, effort and cost; (ii) the misuse, misappropriation or unauthorized disclosure by Executive of the Confidential Information would constitute a breach of trust and would cause serious irreparable injury to the Company; and (iii) it is essential to the protection of the Company’s goodwill and to the maintenance of the Company’s competitive position that the Confidential Information be kept secret and that Executive not disclose the Confidential Information to others or use same to his own advantage or to the advantage of others. Accordingly, Executive shall not, during the Term or thereafter, directly or indirectly, in any manner, utilize or disclose to any person, firm, corporation, association or other entity, or use on his own behalf, any confidential and proprietary information of the Company, including, but not limited to, information relating to strategic plans, sales, costs, client lists, client preferences, client identities, investment strategies, computer programs, profits or the business affairs and financial condition of the Company, or any of its clients, or any of the Company’s business methods, systems, marketing materials, clients or techniques (collectively “Confidential Information”), except for (A) such disclosures where required by law, but only after written notice to the Company detailing the circumstances and legal requirement for the disclosure; or (B) as authorized during the performance of Executive’s duties for such use or purpose as are reasonably believed by Executive to be in the best interests of the Company. At any time, upon request, Executive shall deliver to the Company all of its property including, but not limited to, its Confidential Information (whether electronically stored or otherwise) which are in his possession or under his control. Property to be returned includes, but is not limited to, notebook pages, documents, records, prototypes, client files, drawings, electronically stored data, computer media or any other materials or property in Executive’s possession. Notwithstanding any of the foregoing, subject to applicable securities laws, nothing herein shall prevent the Executive from taking Confidential Information into account when purchasing or selling the stock of the Company for Executive's own account.
(b)Noninterference. The Parties acknowledge the obligations promised and restricted hereunder, which were negotiated in good faith and consideration received hereunder. During the Term and for a period of twelve (12) months following the end of the Term (the “Restricted Period”), for whatever reason, he will not, directly or indirectly, for himself or on behalf of any third party, at any time or in any manner without prior written approval from the Company, which will reasonably be granted as it applies to Executive’s employees and clients as of the Effective Date that are subsequently brought into the Company:
(i)persuade, induce, solicit, influence or attempt to influence, or cause any person who is an employee of the Company to terminate his or her relationship with the Company or refer any such employee to anyone, without prior written approval from the Company;
(ii)request or cause any of the Company’s clients or potential clients to cancel, modify or terminate any existing or continuing or, to Executive’s knowledge, prospective business relationship with the Company;
(iii)engage in or participate in any effort or act to induce, or in any way cause, any client or, to Executive’s knowledge, prospective client of the Company, to deal with Executive or any other person or entity except in a capacity as representative of the Company or in a way that is non-competitive with the Company, or otherwise take any action which might reasonably be expected to be disadvantageous to the Company;
(iv)persuade, induce, solicit, influence or attempt to influence, or cause any client or, to Executive’s knowledge, prospective client of the Company to cease or refrain from doing business, or to decline to do business, or to change or alter any existing or prospective business relationship, with the Company;
(v)accept business from, or perform or provide any services for, any client, or to Executive’s knowledge, prospective client of the Company, but only if such business or services were competitive with those of the Company;
(vi)contract with or communicate with, in either case in connection with services, any client or, to Executive’s knowledge, prospective client of the Company, but only if such services were competitive with those of the Company; or
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(vii)misappropriate or provide any third party with any information concerning any client, or to Executive’s knowledge, prospective client of the Company, including but not limited to, the disclosure of any client name or data, in whatever form, to such third party, but only if such third party was a competitor of the Company or such information was Confidential Information.
(c) Noncompetition.
(i) The Parties acknowledge the obligations promised and restricted hereunder, which were negotiated in good faith and consideration received hereunder. Executive acknowledges that he will have received material, nonpublic information upon the effective date, and have access to the Company’s Confidential Information, including the procedures, policies, and processes of the Company, which are deemed valuable to the Company and the Company’s competitors. During the Term and for twelve (12) months afterwards, Executive shall not, directly or indirectly, engage or participate in, or become employed by, or affiliated with, or enter into or maintain a contractual relationship with, or render advisory or any other services to, any person or business entity or organization, of whatever form, that competes with or is a direct competitor to the Company in the United States or any other location in which the Company conducts business prior to the termination date without prior written approval from the Company, which will reasonably be granted as it applies to Executive’s personal or business entity or organization relationships before the Effective Date.
(ii) The terms in (i) are not applicable in the event of Termination of Employment without Cause or for Good Reason.
(d) Injunctive Relief. Executive acknowledges that his compliance with the covenants in Sections 9(a), 9(b) and 9(c) hereof (the “Restrictive Covenants”) is necessary to protect the good will, Confidential Information and other proprietary interests of the Company, that such covenants are supported by adequate and sufficient consideration, and that, in the event of any violation or threatened violation by Executive of any such provision, the Company will sustain serious, irreparable and substantial harm to its business, the extent of which will be difficult to determine and impossible to remedy by an action at law for money damages. Accordingly, Executive agrees that, in the event of such violation or threatened violation by him, the Company shall be entitled to seek an injunction from any court of competent jurisdiction as a matter of course and upon the posting of a bond, in addition to all such other legal and equitable remedies as may be available to the Company. Executive further acknowledges that he has carefully considered the nature and extent of the restrictions contained herein and the rights and remedies conferred upon the Company under this Agreement, and hereby acknowledges and agrees that the same are reasonable, are designed to protect the legitimate business interests of the Company, and do not confer benefits upon the Company disproportionate to the detriment upon him. In the event that Executive violates any of the covenants in this Agreement and the Company commences legal action for injunctive or other relief, the Company shall have the benefit of the remaining period of the covenants taking into account the period before the date it was determined the covenants were breached, computed from the date Executive ceased violation of the covenants, either by order of the court or otherwise. Executive acknowledges that any claim or cause of action he may have against the Company shall not constitute a defense to the enforcement by the Company of his covenants in Article 5 of this Agreement (e.g., these covenants are independent of any other provision in this Agreement and of any other promise made to Executive). Executive also acknowledges that his experience and capabilities are such that he can obtain suitable employment otherwise than in violation of the covenants in this Agreement and that the enforcement of these covenants will not prevent the earning of a livelihood nor cause undue hardship.
(e) Remedies Cumulative and Concurrent. The rights and remedies of the Company as provided in this Section 9 shall be cumulative and concurrent and may be pursued separately, successively or together, at the sole discretion of the Company, and may be exercised as often as occasion therefor shall arise. The failure to exercise any right or remedy shall in no event be construed as a waiver or release thereof.
(f) Executive’s Authorization. Executive authorizes the Company to inform any third parties, including future employers, prospective employers and the Company’s clients or prospective clients, of the existence of this Agreement and his obligations under it.
(g) Survivability. The provisions of this Section 9 shall survive the cessation of Executive's employment for any reason, as well as the expiration of this Agreement at the end of its Term or at any time prior thereto.
(h) Definition of Company. For purposes of this Section 9, the term “Company” shall include the Company and any affiliates that the Executive manages or controls.
(i) Definition of Executive. For purposes of this Section 9, the term Executive includes any employment role as officer, director, or any other role with or approved by the Board of Directors.
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10. Other Provisions.
(a) Severability. The Executive acknowledges and agrees that (i) he has had an opportunity to seek advice of independent legal counsel and a tax accountant in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any term or provision, including, without limitation, the Restrictive Covenants, of this Agreement is held to be illegal, unenforceable, invalid, void, or incapable of being enforced, such term or provision shall be excluded to the extent of such invalidity or unenforceability; all other terms or provisions hereof shall remain in full force and effect; and, to the extent permitted and possible, the invalid or unenforceable term or provision shall be reformed, rewritten, revised, and/or deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of such invalid or unenforceable term or provision.
(b) Indemnification. To the extent permitted by law, Company shall defend, indemnify and hold Executive harmless from and against any and all losses, liabilities, damages, expenses (including attorneys’ fees and costs), actions, causes of action or proceedings arising directly or indirectly from Executive’s performance of this Employment Agreement or services as an employee of Company, acting within the scope of Executive’s employment.
(c) Duration and Scope of Covenants. If any court or arbitrator of competent jurisdiction determines that any of the Restrictive Covenants contained in this Agreement, including, without limitation, any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, then, after such determination has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
(d) Arbitration.
(i) Subject to the limitations of this Section 10(d), if any dispute arises between the Parties under or concerning this Agreement or the terms hereof, or regarding the manner in which Executive was treated while employed by the Company, the termination of his employment, or any alleged violation by the Company of Executive’s rights under any common law theory, or any applicable federal, state, or local law, statute, regulation, or ordinance (including without limitation 42 U.S.C. § 1981, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and any other local, state, or federal legislation that pertains to employee rights or discrimination in employment), the Parties agree to submit such issue to final and binding arbitration in accordance with the then existing National Rules for the Resolution of Employment Disputes of the American Arbitration Association. Nothing in this Section 10(d), however, will preclude the Company from seeking the judicial relief set forth under Section 9 of this Agreement.
(ii) The Parties agree that the interpretation and enforcement of the arbitration provisions in this Agreement will be governed exclusively by the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., provided that they are enforceable under the FAA, and will otherwise be governed by the law of the State of California.
(iii) The Parties agree and understand that one of the objectives of this arbitration agreement is to resolve disputes expeditiously, as well as fairly, and to those ends it is the obligation of all Parties to raise any disputes subject to arbitration hereunder in an expeditious manner. Accordingly, the Parties agree that, as to any dispute that can be brought hereunder, a demand for arbitration must be postmarked or delivered in person to the other Party no later than six (6) months after the date the demanding Party knows or should have known of the event or events giving rise to the claim. Failure to demand arbitration on a claim within these time limits is intended to, and will to the furthest extent permitted by law, be a waiver and release with respect to such claims. If, and only if, the waiver and release of claims referenced in the immediately preceding sentence is found by a court of competent jurisdiction to be unenforceable as against Executive or the Company under this Agreement, then the Parties will nevertheless submit such claims to arbitration pursuant to this Section 10(d) within the time permitted by law.
(iv) The Company and Executive will be jointly and equally responsible for the arbitrator’s fees. The Company shall initially cover all of the fees and the Executive shall then reimburse their portion owed following the final judgement, by cash or a deduction from any settlement or severance due from the Company.
(v) Unless otherwise agreed by the Parties, arbitration will take place in County of Orange in the State of California.
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(vi) In rendering an award, the arbitrator will determine the rights and obligations of the Parties according to federal law and the substantive law of the State of California without regard to any principles governing conflicts of laws and the arbitrator’s decision will be governed by state and federal substantive law, including state and federal discrimination laws referenced in Section 10(d)(i) hereof, as though the matter were before a court of law.
(vii) Any arbitration award will be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The decision of the arbitrator will be made within thirty (30) days following the close of the hearing. The Parties agree that the award will be enforceable exclusively by any state or federal court of competent jurisdiction within the County of Orange in the State of California.
(viii) It is understood and agreed by the Parties that their agreement herein concerning arbitration does not contain, and cannot be relied upon Executive to contain, any promises or representations concerning the duration of the employment relationship, or the circumstances under or procedures by which the employment relationship may be modified or terminated.
(ix) If any part of this arbitration procedure is in conflict with any mandatory requirement or applicable law, the law will govern, and that part of this arbitration procedure will be reformed and construed to the maximum extent possible in conformance with the applicable law. The arbitration procedure will remain otherwise unaffected and enforceable.
(e) Notices. All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the business day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding business day. If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 10(e), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day after the notice is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable, or, if more current, to the business and personal contact information the Company has on file:
| If to the Company, to: | Electronic Servitor Publication Network Inc. 400 First Avenue North, Suite 100 Minneapolis, MN 55401 Attention: CEO Telephone No.: 833.991.0800 Email Address: [email protected] | |
| If to the Executive, to: | Thomas Spruce 1962 Port Edward Place Newport Beach, CA 92660 Telephone No.: 949.500.0015 Email Address: [email protected]
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Any such person may by notice given in accordance with this Section 10(e) to the other Parties hereto designate another address or person for receipt by such person of notices hereunder.
(f) Section Headings. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to or “Section” or “Sections” refer to the corresponding Article or Section or Sections of this Agreement, unless the context indicates otherwise.
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(g) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided, the word “including” shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant. All words used in this Agreement will be construed to be of such gender or number as the circumstances require.(h)
(h)Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
(i) Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.
(j) Waivers and Amendments. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.
(k) Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company; provided, however, that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law.
(l) Withholding. The Company shall be entitled to withhold from any payments or deemed payments any amount of tax withholding it reasonably determines to be required by law.
(m) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, permitted assigns, heirs, executors and legal representatives.
(n) Survival. Anything contained in this Agreement to the contrary notwithstanding, the provisions of Section 9 and any other provisions of this Agreement expressly imposing obligations that survive termination of Executive’s employment hereunder, and the other provisions of this Section 10 to the extent necessary to effectuate the survival of such provisions, shall survive termination of this Agreement and any termination of the Executive’s employment hereunder.
(o) Existing Agreements. The Executive represents to the Company that he is not subject or a Party to any employment or consulting agreement, non-competition covenant or other agreement, covenant or understanding which might prohibit him from executing this Agreement or limit his ability to fulfill his responsibilities hereunder.
(p) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION.
[Signatures follow on next page]
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IN WITNESS WHEREOF, the Company and the Executive have caused their respective signature pages to this Agreement to be duly executed as of the date first written above.
| COMPANY: | ||
| ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | ||
| By: | ||
| Name: | Peter Hager | |
| Title: | CEO | |
| EXECUTIVE: | ||
| Name: | Thomas Spruce | |
EXHIBIT A
BASE SALARY
The Company shall pay the Executive during the Term a salary of 1.25% of Company revenue up to a maximum of $240,000.00 per annum beginning on the Effective Date (the “Base Salary”), in accordance with the standard payroll practices of the Company applicable to senior executives; provided, however, the Company’s CEO (or compensation committee of the Company’s Board, the “Committee”) may review the Executive’s Base Salary and may provide for such increases therein as it may, in its discretion, deem appropriate. (Any such increased salary shall constitute the “Base Salary” as of the time of the increase.).
BONUS
During the Term, in addition to the Base Salary, for each fiscal year of the Company ending during the Term, the Executive may be entitled to an annual bonus (the “Annual Bonus”) if the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) exceeds the forecasted EBITDA approved by the Board at the beginning of such year. Any acquisitions by the Company following Board approval of forecasted EBITDA shall be excluded from the calculation of EBITDA for such year. Any bonus shall be payable as soon as the Company's cash flow permits. However, the Company’s Board (or compensation committee of the Company’s Board, the “Committee”) may review the Annual Bonus and may change the plan, in its discretion.
STOCK AWARDS
Subject to the approval of Company’s Board of Directors and the terms and conditions of each applicable stock grant agreement, Executive shall be granted restricted shares of the Common Stock of the Company, in accordance with the following schedule:
| i. | At the commencement of the Initial Term and subject to the approval of Company’s Board of Directors and the terms and conditions of the applicable stock grant agreement, Executive shall be granted options to purchase 1,550,000 restricted shares of the Company’s Common Stock (as currently constituted) at signing and an additional 1,200,000 shares per year. |
| ii. | At the commencement of each Renewal Term and subject to the approval of Company’s Board of Directors and the terms and conditions of the applicable stock grant agreement, Executive shall be granted options to purchase 600,000 restricted shares of the Company’s Common Stock (as currently constituted). |
EXPENSES
Per Company policy, expense reimbursement is limited to required, reasonable telephone expenses and long-distance travel (transportation, lodging and meals) authorized in writing by Company in advance. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to the Company. In no event shall any reimbursement be made to Executive for such fees and expenses incurred after the date of Executive’s termination of employment with the Company.
Exhibit 99.4
ELECTRONIC SERVITOR PUBLICATION NETWORK, inc.
2023 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 2023 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Stock Option Agreement (the “Option Agreement”). This document terminates and replaces the Stock Option Grant dated February 1, 2023, with the Participant retaining the shares vested and surrendering any remaining unvested shares as of the Date of Grant below.
I. NOTICE OF STOCK OPTION GRANT
Name: Thomas Spruce
Address: 1962 Port Edward Place
Newport Beach CA 92660
The undersigned Participant has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
| Date of Grant: | 10/12/2023 | |
| Vesting Commencement Date: | 10/12/2023 | |
| Exercise Price per Share: | $0.07 | |
| Total Number of Shares Granted: | 4,850,000 | |
| Total Exercise Price: | $ 339,500 | |
| Type of Option: | Incentive Stock Option | |
| X | Nonstatutory Stock Option | |
| Term/Expiration Date: | 10/12/2033 | |
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the following vesting schedule:
One million five hundred fifty thousand (1,550,000) of the Shares subject to the Option shall vest on the Vesting Commencement Date, and one-eleventh (1/11th) of the remaining Shares subject to the Option shall vest on the first day of each fiscal quarter thereafter, subject to Participant continuing to be a Service Provider through each such date.
Termination Period:
This Option shall be exercisable for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option shall be exercisable for twelve (12) months after Participant ceases to be a Service Provider. Notwithstanding the foregoing sentence, in no event may this Option be exercised after the Term/Expiration Date as provided above and this Option may be subject to earlier termination as provided in Section 13 of the Plan.
II. AGREEMENT
1. Grant of Option. The Administrator of the Company hereby grants to the Participant named in the Notice of Stock Option Grant in Part I of this Option Agreement (“Participant”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Stock Option Grant, at the exercise price per Share set forth in the Notice of Stock Option Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 18 of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Stock Option Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a NSO granted under the Plan. In no event shall the Administrator, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Stock Option Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) or in a manner and pursuant to such procedures as the Administrator may determine, which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable tax withholding. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable tax withholding.
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Participant on the date on which the Option is exercised with respect to such Shares.
3. Participant’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), at the time this Option is exercised, Participant shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Participant hereby agrees that Participant shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Participant (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred and eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Participant shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred and eighty (180) day (or other) period. Participant agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
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5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Participant:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) shall be valued at its Fair Market Value on the date of exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances or security interests, if accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option.
(a) This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant.
(b) Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration of Options under the Exchange Act as set forth in Rule 12h-1(f) promulgated under the Exchange Act (the “Reliance End Date”), Participant shall not transfer this Option or, prior to exercise, the Shares subject to this Option, in any manner other than (i) to persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act) through gifts or domestic relations orders, or (ii) to an executor or guardian of Participant upon the death or disability of Participant. Until the Reliance End Date, the Options and, prior to exercise, the Shares subject to this Option, may not be pledged, hypothecated or otherwise transferred or disposed of, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than as permitted in clauses (i) and (ii) of this paragraph.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Stock Option Grant and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
9. Drag-Along. If the holders of a majority of the shares of the Company’s voting stock then-outstanding (the “Majority Holders”) propose to sell, assign or transfer, directly or indirectly, all of their shares of capital stock of the Company to any third party (a “Drag-Along Transfer”), the Majority Holders may exercise drag-along rights in accordance with and subject to the terms, conditions and procedures set forth in this Section 9 (“Drag-Along Rights”).
(a) The Majority Holders shall give written notice (a “Drag-Along Notice”) at least fifteen (15) days prior to the consummation of such proposed Drag-Along Transfer to Participant of any election by the Majority Holders to exercise their Drag-Along Rights hereunder, setting forth (i) the shares proposed to be transferred, (ii) the consideration to be received for such shares, (ii) the identity of the prospective transferee, and (iv) any other material terms and conditions of the proposed transaction. Such notice shall also specify the aggregate number of shares Participant shall be required to transfer. Any transfer of shares by Participant pursuant to the terms hereof shall be for the same amount and form of consideration per share as the Majority Holders will receive in such Drag-Along Transfer, as specified in the Drag-Along Notice.
(b) Within seven (7) days of delivery of the Drag-Along Notice, Participant shall deliver to the Majority Holders such instruments of transfer as shall be reasonably requested by the Majority Holders or the prospective transferee, including, as applicable, one or more stock certificates, properly endorsed for transfer to the transferee, together with a limited power-of-attorney authorizing the Majority Holders to transfer such Shares on the terms set forth in the Drag-Along Notice.
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(c) In the event that any transfer pursuant to this Section 9 is structured as a merger, consolidation or business combination, or any sale of all or substantially all assets, Participant must further agree to (i) vote or provide a written consent in favor of the transaction, (ii) take such other action within its power, at no cost to it (other than fees and expenses payable to its advisors, which shall be paid by Participant), as may be required to effect such transaction, and (iii) take all action to waive any dissenters, appraisal or other similar rights with respect thereto.
(d) If the Drag-Along Transfer is not consummated within one hundred and eighty (180) days after delivery of the Drag-Along Notice, the Majority Holders shall (i) return to each Drag-Along Holder the limited power-of-attorney and all certificates representing the shares that Participant delivered pursuant to this Section 9 and any other documents in the possession of the Majority Holders executed by Participant in connection with the proposed Drag-Along Transfer.
(e) Notwithstanding the foregoing, a Drag-Along Holder will not be required to comply with this Section 9 in connection with any proposed Drag-Along Transfer, unless:
(i) Any representations and warranties to be made by Participant in connection with the Drag-Along Transfer are limited to representations and warranties related to authority, ownership and the ability to convey title to the Shares, including, but not limited to, representations and warranties that (i) Participant holds all right, title and interest in and to the Shares that Participant purports to hold, free and clear of all liens and encumbrances, (ii) the obligations of Participant in connection with the transaction have been duly authorized, if applicable, (iii) the documents to be entered into by Participant have been duly executed by Participant and delivered to the acquirer and are enforceable against Participant in accordance with their respective terms; and (iv) neither the execution and delivery of documents to be entered into in connection with the transaction, nor the performance of Participant’s obligations thereunder, will cause a breach or violation of the terms of any agreement, law or judgment, order or decree of any court or governmental agency;
(ii) Participant shall not be liable for the inaccuracy of any representation or warranty made by any other person in connection with the Drag-Along Transfer, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders);
(iii) the liability for indemnification, if any, of Participant in the Drag-Along Transfer and for the inaccuracy of any representations and warranties made by the Company, the Majority Holders or the Purchaser in connection with such Drag-Along Transfer, is several and not joint (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders), and subject to any provisions of the Company’s certificate of incorporation and bylaws, as amended, related to the allocation of the escrow, is pro rata in proportion to, and does not exceed, the amount of consideration paid to Participant in connection with such Drag-Along Transfer; and
(iv) upon the consummation of the Drag-Along Transfer, Participant will receive the same amount and form of consideration per share for Participant’s shares as is received by the Majority Holders.
(f) All costs and expenses incurred by Participant in connection with any Drag-Along Transfer, including, without limitation, transfer taxes and legal, accounting and investment banking fees, shall be borne by Participant.
(g) Notwithstanding anything herein to the contrary, there shall be no liability on the part of the Majority Holders to Participant if a Drag-Along Transfer is not consummated for any reason, and the Majority Holders shall not be obligated to consummate the proposed Drag-Along Transfer, regardless of whether the Majority Holders have delivered a Drag-Along Notice in respect of such Proposed Drag-Along Transfer.
10. Power of Attorney. In order to secure the performance of Participant’s obligations under Section 9, Participant hereby irrevocably appoints the Chief Executive Officer of the Company as Participant’s attorney-in-fact and proxy of Participant (with full power of substitution) to vote, provide a written consent or take any other action with respect to Participant’s shares if, and only in the event that, Participant fails to vote or provide a written consent with respect to Participant’s shares in accordance with the terms of Section 9 or fails to take any other action in accordance with the terms of Section 9 within three (3) days of a request for such vote, written consent or action. Upon such failure, the Chief Executive Officer of the Company shall have and is hereby irrevocably granted a proxy to vote or provide a written consent with respect to Participant’s shares for purposes of taking actions required by Section 9. Participant intends this proxy to be, and it shall be, irrevocable and coupled with an interest, and Participant shall take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy.
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11. Tax Obligations.
(a) Tax Withholding. Participant agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Participant) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements if applicable to the Option exercise. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
(c) Code Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the date of grant (a “discount option”) may be considered “deferred compensation.” An Option that is a “discount option” may result in (i) income recognition by Participant prior to the exercise of the Option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The “discount option” may also result in additional state income, penalty and interest tax to the Participant. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant, Participant shall be solely responsible for Participant’s costs related to such a determination.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant. This Option Agreement is governed by the internal substantive laws, but not the choice of law rules of, Delaware.
13. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Participant has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Participant further agrees to notify the Company upon any change in the residence address indicated below.
| PARTICIPANT | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | |
| _______________________________________ | _____________________________________ | |
| Signature | Signature | |
| Thomas Spruce | Peter Hager, CEO |
[Signature Page to Stock Option Agreement]
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EXHIBIT A
2023 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
ELECTRONIC SERVITOR PUBLICATION NETWORK INC.
400 1ST Ave N., Suite 100
Minneapolis, MN 55401
Attention: Chief Executive Officer
1. Exercise of Option. Effective as of today, ________________, ____, the undersigned (“Participant”) hereby elects to exercise Participant’s option (the “Option”) to purchase ________________ shares of the Common Stock (the “Shares”) of ELECTRONIC SERVITOR PUBLICATION NETWORK INC. (the “Company”) under and pursuant to the 2023 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated ______________, _____ (the “Option Agreement”).
2. Delivery of Payment. Participant herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to an Award, notwithstanding the exercise of the Option. The Shares shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.
5. Company’s Right of First Refusal. Before any Shares held by Participant or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 5 (the “Right of First Refusal”).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section 5 shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
(e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section 5, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred and twenty (120) days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section 5 shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section 5 notwithstanding, the transfer of any or all of the Shares during the Participant’s lifetime or on the Participant’s death by will or intestacy to the Participant’s immediate family or a trust for the benefit of the Participant’s immediate family shall be exempt from the provisions of this Section 5. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section 5, and there shall be no further transfer of such Shares except in accordance with the terms of this Section 5.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) the first sale of Common Stock of the Company to the general public, or (ii) a Change in Control in which the successor corporation has equity securities that are publicly traded.
6. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD OF TIME FOLLOWING THE EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER PRIOR TO THE EXPIRATION OF SUCH PERIOD WITHOUT THE CONSENT OF THE COMPANY OR THE MANAGING UNDERWRITER.
(b) Stop-Transfer Notices. Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
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(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) 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 shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
10. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Delaware. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement, and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof, and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant.
| Submitted by: | Accepted by: | |
| PARTICIPANT | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | |
| Signature | By | |
| Greg Shockey | ||
| Print Name | Print Name | |
| Title | ||
| Address: | Address: | |
| (on file) | 400 1st Ave. N., Suite 100 | |
| (on file) | Minneapolis, MN 55401 | |
| Date Received |
[Signature Page to Exercise Notice]
| 3 |
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
| PARTICIPANT: | __________________________________________________ |
| COMPANY: | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. |
| SECURITY: | COMMON STOCK |
| SHARE AMOUNT: | _________________________ |
| DATE: | _________________________ |
In connection with the purchase of the above-listed Securities, the undersigned Participant represents to the Company the following:
(a) Participant is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Participant is acquiring these Securities for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).
(b) Participant acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. In this connection, Participant understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Participant’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one (1) year or any other fixed period in the future. Participant further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Securities. Participant understands that the certificate evidencing the Securities shall be imprinted with any legend required under applicable state securities laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise shall be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of the applicable conditions specified by Rule 144, including in the case of affiliates (1) the availability of certain public information about the Company, (2) the amount of Securities being sold during any three (3) month period not exceeding specified limitations, (3) the resale being made in an unsolicited “broker’s transaction,” transactions directly with a “market maker” or “riskless principal transactions” (as those terms are defined under the Securities Exchange Act of 1934) and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require (i) the availability of current public information about the Company; (ii) the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Securities; and (iii) in the case of the sale of Securities by an affiliate, the satisfaction of the conditions set forth in sections (2), (3) and (4) of the paragraph immediately above.
(d) Participant further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption shall be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 shall have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Participant understands that no assurances can be given that any such other registration exemption shall be available in such event.
PARTICIPANT
Signature
Print Name
Date
[Signature Page to Investment Representation Statement]
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Exhibit 99.5
EMPLOYMENT AGREEMENT
As of the Effective Date, this Agreement terminates and replaces the Employment Agreement dated November 16, 2022.
This EMPLOYMENT AGREEMENT (“Agreement”), dated as of October 12, 2023, is made by and among Electronic Servitor Publication Network, Inc., a corporation organized under the laws of Delaware (the “Company”) and Jim Kellogg (the “Executive”). Each of the Company and the Executive are referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS:
WHEREAS, the Company wishes to employ the Executive as its Chief Financial Officer, and the Executive wishes to accept such employment, on the terms set forth below, effective as of October 12, 2023 (“Effective Date”);
NOW, THEREFORE, in consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to be legally bound, hereby agree as follows:
1. Term. The Company hereby employs the Executive, and the Executive hereby accepts such employment, for an initial term of 36 months commencing as of the Effective Date and continuing through October 11, 2026, unless sooner terminated in accordance with the provisions of Section 5 hereof (the “Initial Term”), with such employment to continue for successive 6-month periods (with each successive period of employment referred to herein as a “Renewal Term”) in accordance with the terms of this Agreement (subject to termination as aforesaid) unless either Party notifies the other Party of non-renewal in writing prior to three months before the expiration of the initial term and each annual renewal, as applicable. (The period during which the Executive is employed hereunder being hereinafter referred to as the “Term”).
2. Duties. During the Term, the Executive shall be employed by the Company as its Chief Financial Officer. The Executive shall devote a reasonable amount of his working time, energy, attention, skill and best efforts to the affairs of the Company consistent with the faithful performance of the duties of said offices and shall faithfully perform such other duties of an executive, managerial or administrative nature as shall be specified and designated from time to time by the Company’s President, CEO, and Board of Directors. Duties include management of tax preparation and filing, financial reporting, accounting functions, financial planning, and compliance with regulatory requirements and the Sarbanes-Oxley Act.
3. Compensation; Vacation and Leave.
(a) Compensation. As the only consideration due Executive regarding the subject matter of this Agreement, Company will compensate Executive as (and only as) expressly stated in Exhibit A.
(b) Vacation and Leave. The Executive shall be entitled to four (4) weeks paid vacation, but Executive will not take more than two (2) weeks consecutive vacation. Unused vacation days in one calendar year shall not carry over to the following calendar year. Executive shall also be entitled to all paid holidays given by the Company to its employees generally.
4. Termination of Employment; Change of Control.
(a) Termination upon Death or Disability. This Agreement and Executive’s employment hereunder shall automatically terminate on the date on which Executive dies or becomes permanently incapacitated. Executive shall be deemed to have become “permanently incapacitated” on the date that is thirty (30) days after the Company has determined that Executive has suffered a Permanent Incapacity (as defined below) and so notifies Executive or Executive’s personal representative. For purposes of this Agreement, “Permanent Incapacity” shall mean that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the service provider’s employer.
(b) Termination by the Company for Cause. The Company may terminate this Agreement and Executive’s employment hereunder for Cause (as defined below), effective upon delivery of written notice to Executive given at any time during the Term (without any necessity for prior notice). For purposes of this Agreement, “Cause” shall mean the Executive’s: (i) conviction of any felony or any other crime involving moral turpitude, (ii) fraud against the Company or any of its subsidiaries or affiliates or theft of or maliciously intentional damage to the property of the Company or any of their subsidiaries or affiliates, (iii) breach of Executive’s fiduciary duties to the Company, or (iv) breach by Executive of any material provision of this Agreement after written notice and a reasonable period allowed to cure such breach as determined by the Company.
(c) Termination by Company without Cause. The Company may terminate this Agreement and Executive’s employment hereunder without Cause, effective upon delivery of written notice to Executive given at any time during the Term (without any necessity for prior notice) provided that the Company complies with all provisions of this Agreement.
(d) Termination by the Executive for Good Reason. The Executive may terminate this Agreement and Executive’s employment hereunder with Good Reason (as defined below). For purposes of this Agreement, “Good Reason” shall mean (i) the material reduction of the Executive’s title, authority, duties and responsibilities or the assignment to the Executive of duties materially inconsistent with the Executive’s position or positions with the Company; (ii) the Company’s material breach of this Agreement; or (iii) any change in the geographic location at which Executive must perform the services under this Agreement, which change is reasonably material to Executive. Notwithstanding the foregoing, (x) Good Reason shall not be deemed to exist unless notice of termination on account thereof (specifying a termination date no later than thirty (30) days from the date of such notice) is given no later than 30 days after the time at which the event or condition purportedly giving rise to Good Reason is first known by Executive and (y) if there exists (without regard to this clause (y)) an event or condition that constitutes Good Reason, the Company shall have fifteen (15) days from the date notice of such a termination is given to cure such event or condition and, if the Company does so, such event or condition shall not constitute Good Reason hereunder.
(e) Termination by the Executive other than for Good Reason. The Executive may terminate this Agreement and Executive’s employment hereunder other than for Good Reason, provided that the Executive gives the Company no less than thirty (30) days prior written notice of such termination.
(f) Change of Control. If the Executive is terminated by the Company without “Cause”, other than for death or disability, or the Executive terminates for “Good Reason” at any time during the period that is three (3) months prior to the execution of a definitive agreement evidencing a Change in Control through the date that is twenty four (24) months following the closing date of a Change in Control, then the Executive will be entitled to the 100% acceleration of vesting of unvested stock as of the date of termination (i.e., accelerated vesting of all remaining shares that are then unvested). To receive the benefits described in this section, Executive must execute (and not revoke) a general release of claims (in a form attached hereto) of all known and unknown claims that Executive may then have against the Company and persons affiliated with the Company and return all Company property, in each case within thirty (30) days after the termination (the “Deadline”).
(g) For purposes of this Agreement, “Change of Control” shall mean the occurrence of any of the following:
(i) Change in Ownership. A change in ownership of the Company occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, excluding the acquisition of additional stock by a person or more than one person acting as a group who is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company.
(ii) Change in Effective Control. A change in effective control of the Company occurs on the date that either: (A) any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing thirty percent (30%) or more of the total voting power of the stock of the Company; or (B) a majority of the members of the Company’s Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election; provided, that this paragraph (2) will apply to the Company only if no other corporation is a majority shareholder of the Company.
(iii) Change in Ownership of Substantial Assets. A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of the assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
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(iv) Intended Interpretation. It is the intent of the Parties that the definition of Change in Control under this Agreement be construed consistent with the definition of “Change in Control” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the applicable Treasury Regulations, as amended from time to time.
5. Payments Upon Termination.
(a) Upon termination of this Agreement and Executive’s employment hereunder due to Executive’s death or disability pursuant to Section 4(a) hereof, (i) the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall be entitled to receive any compensation earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) shall have no further rights to any other compensation or benefits hereunder, or any other rights hereunder (but, for the avoidance of doubt, shall receive such disability and death benefits as may be provided under the Company’s plans and arrangements in accordance with their terms).
(b) Upon termination of this Agreement and Executive’s employment hereunder by the Company for Cause or by Executive other than for Good Reason, (i) the Company shall pay to Executive an amount equal to Executive’s then Base Salary (if any) and other benefits (including any bonus for a calendar year completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination) and (ii) the Executive shall have no further rights to any other compensation or benefits under this Agreement on or after the termination of employment.
(c) Upon termination of this Agreement and Executive’s employment hereunder (i) by the Company without Cause or (ii) by Executive for Good Reason, (x) the Company shall pay to Executive (I) an amount equal to Executive’s then Base Salary (if any) and other benefits (including any bonus for a calendar year completed before termination) earned and accrued under this Agreement prior to the date of termination (and reimbursement under this Agreement for expenses incurred prior to the date of termination); and (II) an amount equal to 1.0 times (a) the average of the Base Salary amounts paid to Executive over the three calendar years prior to the date of Termination (if any), (b) if less than three years have elapsed between the date of this Agreement and the date of termination, the highest Base Salary paid to Executive in any calendar year prior to the date of Termination (if any), or (c) if less than 12 months have elapsed from the date of this Agreement to the date of termination, the highest Base Salary received in any month times 12 (if any); and (y) the Executive shall have no further rights to any other compensation or benefits under this Agreement on or after the termination of employment.
(d) Nothing contained in this Section 5 shall affect the terms of any employee stock options, stock grants, or other equity-based compensation that may have been issued by the Company to Executive, which in the event of termination of Executive’s employment with the Company shall continue to be governed by their own terms and conditions.
(e) Unless the payment is required to be delayed pursuant to Code Section 409A (as defined below), the cash amounts payable to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) under this Section 6 shall be paid to the Executive (or the Executive’s estate or beneficiaries in the case of the death of the Executive) in a single-sum payment within 60 days following the effective date of termination of this Agreement and Executive’s employment hereunder.
6. Parachutes. If any amount payable to or other benefit receivable by the Executive pursuant to this Agreement would be deemed to constitute a Parachute Payment (as defined below), alone or when added to any other amount payable or paid to or other benefit receivable or received by the Executive which is deemed to constitute a Parachute Payment (whether or not under an existing plan, arrangement or other agreement), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code, then the Parachute Payments shall be reduced (but not below zero) so that the maximum amount of the Parachute Payments (after reduction) shall be one dollar ($1.00) less than the amount which would cause the Parachute Payments to be subject to the excise tax imposed by Section 4999 of the Code. Any such reduction shall be made by first reducing severance benefits (if any). Notwithstanding the foregoing, if the reduction of Parachute Payments under this Section 6 would be equal to or greater than $50,000, then there shall be no such reduction and the amount of the Parachute Payment that shall be payable will be the amount that will result in the greatest after-tax amount for the Executive. “Parachute Payment” shall mean a “parachute payment” as defined in Section 280G of the Code. The calculations under this Section 6 shall be as determined by the Company’s accountants.
7. Execution of Release. The Executive acknowledges that, if required by the Company prior to making the payments and benefits set forth in Section 5 (other than accrued but unpaid Base Salary and other benefits), all such payments and benefits are subject to his execution of a general release from liability of the Company and its Officers (including his successor), Directors/Managers and employees, and such release becoming irrevocable by its terms. If Executive fails to execute such release, or such release does not become irrevocable, all such payments and benefits set forth in Section 5 hereof shall be forfeited.
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8. Application of Code Section 409A.
(a) This Agreement shall be interpreted to avoid any penalty sanctions under Section 409A of the Code (“Code Section 409A”). If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under Code Section 409A, then such benefit or payment will be provided in full (to the extent not paid in part at earlier date) at the earliest time thereafter when such sanctions will not be imposed. For purposes of Code Section 409A, all payments to be made upon a termination of employment under this Agreement may only be made upon Executive’s “separation from service” (within the meaning of such term under Code Section 409A) with the Company, each payment made under this Agreement will be treated as a separate payment, and the right to a series of installment payments under this Agreement will be treated as a right to a series of separate payments. In no event will Executive, directly or indirectly, designate the calendar year of payment, except as permitted under Code Section 409A.
(b) Notwithstanding anything herein to the contrary, if, at the time of Executive’s “separation from service” with the Company, the Company has securities which are publicly traded on an established securities market and Executive is a “specified employee” (as such term is defined in Code Section 409A) and it is necessary to postpone the commencement of any payments or benefits otherwise payable under this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under Code Section 409A, then the Company will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive), until the first payroll date that occurs after the date that is six (6) months following Executive’s “separation of service” with the Company. If any payments are postponed due to such requirements, such postponed amounts will be paid with interest at the applicable federal rate as provided under Section 7872(f)(2)(A) of the Code in a lump sum to Executive on the first payroll date that occurs after the date that is six (6) months following Executive’s “separation of service” with the Company. If Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of Code Section 409A will be paid to the personal representative of Executive’ s estate within sixty (60) days after the date of Executive’s death. Payments pursuant to Section 6 of this Agreement are intended to satisfy the short-term deferral exception under Code Section 409A.
(c) All reimbursements and in-kind benefits provided under this Agreement will be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement will be for expenses incurred during Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.
(d) To the extent applicable, all grants, awards, bonuses or other payments made to Executive or for which Executive is eligible under any Company bonus, incentive, deferred compensation plan or program or any other compensation arrangement will be structured to comply with the requirements of Code Section 409A or an exception from such requirements.
9. Covenants of the Executive.
(a) Confidentiality. During the Term, the Company has and will continue to provide Executive with access to, and may confide in him, information, business methods and systems, techniques and methods of operation developed at great expense by the Company and which are assets of the Company. Executive recognizes and acknowledges that: (i) all Confidential Information (defined below) is the property of the Company and is unique, extremely valuable and developed and acquired by great expenditures of time, effort and cost; (ii) the misuse, misappropriation or unauthorized disclosure by Executive of the Confidential Information would constitute a breach of trust and would cause serious irreparable injury to the Company; and (iii) it is essential to the protection of the Company’s goodwill and to the maintenance of the Company’s competitive position that the Confidential Information be kept secret and that Executive not disclose the Confidential Information to others or use same to his own advantage or to the advantage of others. Accordingly, Executive shall not, during the Term or thereafter, directly or indirectly, in any manner, utilize or disclose to any person, firm, corporation, association or other entity, or use on his own behalf, any confidential and proprietary information of the Company, including, but not limited to, information relating to strategic plans, sales, costs, client lists, client preferences, client identities, investment strategies, computer programs, profits or the business affairs and financial condition of the Company, or any of its clients, or any of the Company’s business methods, systems, marketing materials, clients or techniques (collectively “Confidential Information”), except for (i) such disclosures where required by law, but only after written notice to the Company detailing the circumstances and legal requirement for the disclosure; or (ii) as authorized during the performance of Executive’s duties for such use or purpose as are reasonably believed by Executive to be in the best interests of the Company. At any time, upon request, Executive shall deliver to the Company all of its property including, but not limited to, its Confidential Information (whether electronically stored or otherwise) which are in his possession or under his control. Property to be returned includes, but is not limited to, notebook pages, documents, records, prototypes, client files, drawings, electronically stored data, computer media or any other materials or property in Executive’s possession. Notwithstanding any of the foregoing, subject to applicable securities laws, nothing herein shall prevent the Executive from taking Confidential Information into account when purchasing or selling the stock of the Company for Executive's own account.
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(b) Noninterference. The Parties acknowledge the obligations promised and restricted hereunder, which were negotiated in good faith and consideration received hereunder. During the Term and for a period of two (2) years following the end of the Term (the “Restricted Period”), for whatever reason, he will not, directly or indirectly, for himself or on behalf of any third party, at any time or in any manner:
(i) persuade, induce, solicit, influence or attempt to influence, or cause any person who is an employee of the Company to terminate his or her relationship with the Company or refer any such employee to anyone, without prior written approval from the Company;
(ii) request or cause any of the Company’s clients or potential clients to cancel, modify or terminate any existing or continuing or, to Executive’s knowledge, prospective business relationship with the Company;
(iii) engage in or participate in any effort or act to induce, or in any way cause, any client or, to Executive’s knowledge, prospective client of the Company, to deal with Executive or any other person or entity except in a capacity as representative of the Company or in a way that is non-competitive with the Company, or otherwise take any action which might reasonably be expected to be disadvantageous to the Company;
(iv) persuade, induce, solicit, influence or attempt to influence, or cause any client or, to Executive’s knowledge, prospective client of the Company to cease or refrain from doing business, or to decline to do business, or to change or alter any existing or prospective business relationship, with the Company;
(v) accept business from, or perform or provide any services for, any client, or to Executive’s knowledge, prospective client of the Company, but only if such business or services were competitive with those of the Company;
(vi) contract with or communicate with, in either case in connection with services, any client or, to Executive’s knowledge, prospective client of the Company, but only if such services were competitive with those of the Company; or
(vii) misappropriate or provide any third party with any information concerning any client, or to Executive’s knowledge, prospective client of the Company, including but not limited to, the disclosure of any client name or data, in whatever form, to such third party, but only if such third party was a competitor of the Company or such information was Confidential Information.
(c) Noncompetition. The Parties acknowledge the obligations promised and restricted hereunder, which were negotiated in good faith and consideration received hereunder. Executive acknowledges that he will have received material, nonpublic information upon the effective date, and have access to the Company’s Confidential Information, including the procedures, policies, and processes of the Company, which are deemed valuable to the Company and the Company’s competitors. During the Term and Restricted Period, Executive shall not, directly or indirectly, engage or participate in, or become employed by, or affiliated with, or enter into or maintain a contractual relationship with, or render advisory or any other services to, any person or business entity or organization, of whatever form, that competes with or is a direct competitor to the Company in the United States or any other location in which the Company conducts business prior to your termination date.
(d) Injunctive Relief. Executive acknowledges that his compliance with the covenants in Sections 9(a), 9(b) and 9(c) hereof (the “Restrictive Covenants”) is necessary to protect the good will, Confidential Information and other proprietary interests of the Company, that such covenants are supported by adequate and sufficient consideration, and that, in the event of any violation or threatened violation by Executive of any such provision, the Company will sustain serious, irreparable and substantial harm to its business, the extent of which will be difficult to determine and impossible to remedy by an action at law for money damages. Accordingly, Executive agrees that, in the event of such violation or threatened violation by him, the Company shall be entitled to seek an injunction before trial from any court of competent jurisdiction as a matter of course and upon the posting of a bond, in addition to all such other legal and equitable remedies as may be available to the Company. Executive further acknowledges that he has carefully considered the nature and extent of the restrictions contained herein and the rights and remedies conferred upon the Company under this Agreement, and hereby acknowledges and agrees that the same are reasonable, are designed to protect the legitimate business interests of the Company, and do not confer benefits upon the Company disproportionate to the detriment upon him. In the event that Executive violates any of the covenants in this Agreement and the Company commences legal action for injunctive or other relief, the Company shall have the benefit of the remaining period of the covenants taking into account the period before the date it was determined the covenants were breached, computed from the date Executive ceased violation of the covenants, either by order of the court or otherwise. Executive acknowledges that any claim or cause of action he may have against the Company shall not constitute a defense to the enforcement by the Company of his covenants in Article 5 of this Agreement (e.g., these covenants are independent of any other provision in this Agreement and of any other promise made to Executive). Executive also acknowledges that his experience and capabilities are such that he can obtain suitable employment otherwise than in violation of the covenants in this Agreement and that the enforcement of these covenants will not prevent the earning of a livelihood nor cause undue hardship.
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(e) Remedies Cumulative and Concurrent. The rights and remedies of the Company as provided in this Section 9 shall be cumulative and concurrent and may be pursued separately, successively or together, at the sole discretion of the Company, and may be exercised as often as occasion therefor shall arise. The failure to exercise any right or remedy shall in no event be construed as a waiver or release thereof.
(f) Executive’s Authorization. Executive authorizes the Company to inform any third parties, including future employers, prospective employers and the Company’s clients or prospective clients, of the existence of this Agreement and his obligations under it.
(g) Survivability. The provisions of this Section 9 shall survive the cessation of Executive's employment for any reason, as well as the expiration of this Agreement at the end of its Term or at any time prior thereto.
(h) Definition of Company. For purposes of this Section 9, the term “Company” shall include the Company and any of its parents, subsidiaries, affiliates or any related companies including their respective successors and assigns.
10. Other Provisions.
(a) Severability. The Executive acknowledges and agrees that (i) he has had an opportunity to seek advice of independent legal counsel and a tax accountant in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographical and temporal scope and in all other respects. If any term or provision, including, without limitation, the Restrictive Covenants, of this Agreement is held to be illegal, unenforceable, invalid, void, or incapable of being enforced, such term or provision shall be excluded to the extent of such invalidity or unenforceability; all other terms or provisions hereof shall remain in full force and effect; and, to the extent permitted and possible, the invalid or unenforceable term or provision shall be reformed, rewritten, revised, and/or deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of such invalid or unenforceable term or provision.
(b) Duration and Scope of Covenants. If any court or arbitrator of competent jurisdiction determines that any of the Restrictive Covenants contained in this Agreement, including, without limitation, any of the Restrictive Covenants, or any part thereof, is unenforceable because of the duration or geographical scope of such provision, then, after such determination has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.
(c) Arbitration.
(i) Subject to the limitations of this Section 10(c), if any dispute arises between the Parties under or concerning this Agreement or the terms hereof, or regarding the manner in which Executive was treated while employed by the Company, the termination of his employment, or any alleged violation by the Company of Executive’s rights under any common law theory, or any applicable federal, state, or local law, statute, regulation, or ordinance (including without limitation 42 U.S.C. § 1981, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and any other local, state, or federal legislation that pertains to employee rights or discrimination in employment), the Parties agree to submit such issue to final and binding arbitration in accordance with the then existing National Rules for the Resolution of Employment Disputes of the American Arbitration Association. Nothing in this Section 10(c), however, will preclude the Company from seeking the judicial relief set forth under Section 9 of this Agreement.
(ii) The Parties agree that the interpretation and enforcement of the arbitration provisions in this Agreement will be governed exclusively by the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., provided that they are enforceable under the FAA, and will otherwise be governed by the law of the State of California.
(iii) The Parties agree and understand that one of the objectives of this arbitration agreement is to resolve disputes expeditiously, as well as fairly, and to those ends it is the obligation of all Parties to raise any disputes subject to arbitration hereunder in an expeditious manner. Accordingly, the Parties agree that, as to any dispute that can be brought hereunder, a demand for arbitration must be postmarked or delivered in person to the other Party no later than six (6) months after the date the demanding Party knows or should have known of the event or events giving rise to the claim. Failure to demand arbitration on a claim within these time limits is intended to, and will to the furthest extent permitted by law, be a waiver and release with respect to such claims. If, and only if, the waiver and release of claims referenced in the immediately preceding sentence is found by a court of competent jurisdiction to be unenforceable as against Executive or the Company under this Agreement, then the Parties will nevertheless submit such claims to arbitration pursuant to this Section 10(c) within the time permitted by law.
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(iv) The Company and Executive will jointly and equally pay the arbitrator’s fees.
(v) Unless otherwise agreed by the Parties, arbitration will take place in County of Orange in the State of California.
(vi) In rendering an award, the arbitrator will determine the rights and obligations of the Parties according to federal law and the substantive law of the State of California without regard to any principles governing conflicts of laws and the arbitrator’s decision will be governed by state and federal substantive law, including state and federal discrimination laws referenced in Section 10(c)(i) hereof, as though the matter were before a court of law.
(vii) Any arbitration award will be accompanied by a written statement containing a summary of the issues in controversy, a description of the award, and an explanation of the reasons for the award. The decision of the arbitrator will be made within thirty (30) days following the close of the hearing. The Parties agree that the award will be enforceable exclusively by any state or federal court of competent jurisdiction within the County of Hennepin in the State of Minnesota.
(viii) It is understood and agreed by the Parties that their agreement herein concerning arbitration does not contain, and cannot be relied upon Executive to contain, any promises or representations concerning the duration of the employment relationship, or the circumstances under or procedures by which the employment relationship may be modified or terminated.
(ix) If any part of this arbitration procedure is in conflict with any mandatory requirement or applicable law, the law will govern, and that part of this arbitration procedure will be reformed and construed to the maximum extent possible in conformance with the applicable law. The arbitration procedure will remain otherwise unaffected and enforceable.
(d) Notices. All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission or other electronic means, including email, on the business day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding business day. If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 10(d), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day after the notice is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable:
| If to the Company, to: |
Electronic Servitor Publication Network Inc. 400 First Ave. North, Suite 100 Minneapolis MN 55401 Attention: CEO Telephone: 833.991.0800 Email Address: [email protected] | |||
| If to the Executive, to: |
Jim Kellogg 1972 Moreno Way Placentia, CA 92870 Telephone: 714.496.7152 Email: [email protected] | |||
Any such person may by notice given in accordance with this Section 10(d) to the other Parties hereto designate another address or person for receipt by such person of notices hereunder.
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(e) Section Headings. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to or “Section” or “Sections” refer to the corresponding Article or Section or Sections of this Agreement, unless the context indicates otherwise.
(f) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided, the word “including” shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant. All words used in this Agreement will be construed to be of such gender or number as the circumstances require.(g)
(h) Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
(i) Entire Agreement. This Agreement contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.
(j) Waivers and Amendments. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Parties or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.
(k) Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company; provided, however, that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law.
(l) Withholding. The Company shall be entitled to withhold from any payments or deemed payments any amount of tax withholding it reasonably determines to be required by law.
(m) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, permitted assigns, heirs, executors and legal representatives.
(n) Survival. Anything contained in this Agreement to the contrary notwithstanding, the provisions of Section 9 and any other provisions of this Agreement expressly imposing obligations that survive termination of Executive’s employment hereunder, and the other provisions of this Section 10 to the extent necessary to effectuate the survival of such provisions, shall survive termination of this Agreement and any termination of the Executive’s employment hereunder.
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(o) Existing Agreements. The Executive represents to the Company that he is not subject or a Party to any employment or consulting agreement, non-competition covenant or other agreement, covenant or understanding which might prohibit him from executing this Agreement or limit his ability to fulfill his responsibilities hereunder.
(p) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION.
[Signatures follow on next page]
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IN WITNESS WHEREOF, the Company and the Executive have caused their respective signature pages to this Agreement to be duly executed as of the date first written above.
| COMPANY: | ||
| ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | ||
| By: | ||
| Name: | Peter Hager | |
| Title: | Chief Executive Officer | |
| EXECUTIVE: | ||
| Name: | Jim Kellogg | |
EXHIBIT A
BASE SALARY
The Company shall pay the Executive during the Term a salary at a minimum rate of $1.00 per annum for the period beginning on the Effective Date through the first anniversary of the Effective Date (the “Base Salary”), in accordance with the standard payroll practices of the Company applicable to senior executives; provided, however, the Company’s Board (or compensation committee of the Company’s Board, the “Committee”) may review the Executive’s Base Salary and may provide for such increases therein as it may, in its discretion, deem appropriate. (Any such increased salary shall constitute the “Base Salary” as of the time of the increase.).
BONUS
During the Term, in addition to the Base Salary, for each fiscal year of the Company ending during the Term, the Executive may be entitled to an annual bonus (the “Annual Bonus”) if the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) exceeds the forecasted EBITDA approved by the Board at the beginning of such year. Any acquisitions by the Company following Board approval of forecasted EBITDA shall be excluded from the calculation of EBITDA for such year. Any bonus shall be payable as soon as the Company's cash flow permits.
STOCK AWARDS
Subject to the approval of Company’s Board of Directors and the terms and conditions of each applicable stock grant agreement, Executive shall be granted restricted shares of the Common Stock of the Company, in accordance with the following schedule:
| i. | At the commencement of the Initial Term and subject to the approval of Company’s Board of Directors and the terms and conditions of the applicable stock grant agreement, Executive shall be granted options to purchase 1,500,000 restricted shares of the Company’s Common Stock (as currently constituted). |
| ii. | At the commencement of each Renewal Term and subject to the approval of Company’s Board of Directors and the terms and conditions of the applicable stock grant agreement, Executive shall be granted options to purchase 200,000 restricted shares of the Company’s Common Stock (as currently constituted). |
EXPENSES
Expense reimbursement is limited to required, reasonable telephone expenses and long-distance coach class (or equivalent) travel (transportation, lodging and meals) authorized in writing by Company in advance. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to the Company. In no event shall any reimbursement be made to Executive for such fees and expenses incurred after the date of Executive’s termination of employment with the Company.
Exhibit 99.6
ELECTRONIC SERVITOR PUBLICATION NETWORK, inc.
2023 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
As of the Date of Grant, this Agreement terminates and replaces the Stock Option Grant dated November 16, 2022. Unless otherwise defined herein, the terms defined in the 2023 Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this Stock Option Agreement (the “Option Agreement”).
I. NOTICE OF STOCK OPTION GRANT
Name: Jim Kellogg
Address: 1072 Moreno Way, Placentia, CA 92870
The undersigned Participant has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
| Date of Grant: | 10/12/2023 | |
| Vesting Commencement Date: | 10/12/2023 | |
| Exercise Price per Share: | $ 0.07 | |
| Total Number of Shares Granted: | 1,500,000 | |
| Total Exercise Price: | $ 105,000 | |
| Type of Option: | Incentive Stock Option | |
| X | Nonstatutory Stock Option | |
| Expiration Date: | 10/12/2033 | |
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the following vesting schedule:
Three hundred thousand (300,000) of the Shares subject to the Option shall vest on the Vesting Commencement Date, and one-twelfth (1/12th) of the remaining Shares subject to the Option shall vest on the first day of each fiscal quarter thereafter starting January 1, 2024, subject to Participant continuing to be a Service Provider through each such date.
Termination Period:
This Option shall be exercisable for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability, in which case this Option shall be exercisable for twelve (12) months after Participant ceases to be a Service Provider. Notwithstanding the foregoing sentence, in no event may this Option be exercised after the Term/Expiration Date as provided above and this Option may be subject to earlier termination as provided in Section 13 of the Plan.
II. AGREEMENT
1. Grant of Option. The Administrator of the Company hereby grants to the Participant named in the Notice of Stock Option Grant in Part I of this Option Agreement (“Participant”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Stock Option Grant, at the exercise price per Share set forth in the Notice of Stock Option Grant (the “Exercise Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 18 of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
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If designated in the Notice of Stock Option Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as an NSO granted under the Plan. In no event shall the Administrator, the Company or any Parent or Subsidiary or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
2. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Stock Option Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice in the form attached as Exhibit A (the “Exercise Notice”) or in a manner and pursuant to such procedures as the Administrator may determine, which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable tax withholding. This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable tax withholding.
No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Participant on the date on which the Option is exercised with respect to such Shares.
3. Participant’s Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), at the time this Option is exercised, Participant shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Participant hereby agrees that Participant shall not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Stock (or other securities) of the Company or enter into any swap, hedging or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Common Stock (or other securities) of the Company held by Participant (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed one hundred and eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act (or such other period as may be requested by the Company or the underwriters to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including, but not limited to, the restrictions contained in NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
Participant agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, Participant shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company’s securities pursuant to a registration statement filed under the Securities Act. The obligations described in this Section 4 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of said one hundred and eighty (180) day (or other) period. Participant agrees that any transferee of the Option or shares acquired pursuant to the Option shall be bound by this Section 4.
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5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Participant:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) shall be valued at its Fair Market Value on the date of exercise, and (ii) must be owned free and clear of any liens, claims, encumbrances or security interests, if accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company.
6. Restrictions on Exercise. This Option may not be exercised until such time as the Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any Applicable Law.
7. Non-Transferability of Option.
(a) This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant.
(b) Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration of Options under the Exchange Act as set forth in Rule 12h-1(f) promulgated under the Exchange Act (the “Reliance End Date”), Participant shall not transfer this Option or, prior to exercise, the Shares subject to this Option, in any manner other than (i) to persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act) through gifts or domestic relations orders, or (ii) to an executor or guardian of Participant upon the death or disability of Participant. Until the Reliance End Date, the Options and, prior to exercise, the Shares subject to this Option, may not be pledged, hypothecated or otherwise transferred or disposed of, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than as permitted in clauses (i) and (ii) of this paragraph.
8. Term of Option. This Option may be exercised only within the term set out in the Notice of Stock Option Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
9. Drag-Along. If the holders of a majority of the shares of the Company’s voting stock then-outstanding (the “Majority Holders”) propose to sell, assign or transfer, directly or indirectly, all of their shares of capital stock of the Company to any third party (a “Drag-Along Transfer”), the Majority Holders may exercise drag-along rights in accordance with and subject to the terms, conditions and procedures set forth in this Section 9 (“Drag-Along Rights”).
(a) The Majority Holders shall give written notice (a “Drag-Along Notice”) at least fifteen (15) days prior to the consummation of such proposed Drag-Along Transfer to Participant of any election by the Majority Holders to exercise their Drag-Along Rights hereunder, setting forth (i) the shares proposed to be transferred, (ii) the consideration to be received for such shares, (ii) the identity of the prospective transferee, and (iv) any other material terms and conditions of the proposed transaction. Such notice shall also specify the aggregate number of shares Participant shall be required to transfer. Any transfer of shares by Participant pursuant to the terms hereof shall be for the same amount and form of consideration per share as the Majority Holders will receive in such Drag-Along Transfer, as specified in the Drag-Along Notice.
(b) Within seven (7) days of delivery of the Drag-Along Notice, Participant shall deliver to the Majority Holders such instruments of transfer as shall be reasonably requested by the Majority Holders or the prospective transferee, including, as applicable, one or more stock certificates, properly endorsed for transfer to the transferee, together with a limited power-of-attorney authorizing the Majority Holders to transfer such Shares on the terms set forth in the Drag-Along Notice.
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(c) In the event that any transfer pursuant to this Section 9 is structured as a merger, consolidation or business combination, or any sale of all or substantially all assets, Participant must further agree to (i) vote or provide a written consent in favor of the transaction, (ii) take such other action within its power, at no cost to it (other than fees and expenses payable to its advisors, which shall be paid by Participant), as may be required to effect such transaction, and (iii) take all action to waive any dissenters, appraisal or other similar rights with respect thereto.
(d) If the Drag-Along Transfer is not consummated within one hundred and eighty (180) days after delivery of the Drag-Along Notice, the Majority Holders shall (i) return to each Drag-Along Holder the limited power-of-attorney and all certificates representing the shares that Participant delivered pursuant to this Section 9 and any other documents in the possession of the Majority Holders executed by Participant in connection with the proposed Drag-Along Transfer.
(e) Notwithstanding the foregoing, a Drag-Along Holder will not be required to comply with this Section 9 in connection with any proposed Drag-Along Transfer, unless:
(i) Any representations and warranties to be made by Participant in connection with the Drag-Along Transfer are limited to representations and warranties related to authority, ownership and the ability to convey title to the Shares, including, but not limited to, representations and warranties that (i) Participant holds all right, title and interest in and to the Shares that Participant purports to hold, free and clear of all liens and encumbrances, (ii) the obligations of Participant in connection with the transaction have been duly authorized, if applicable, (iii) the documents to be entered into by Participant have been duly executed by Participant and delivered to the acquirer and are enforceable against Participant in accordance with their respective terms; and (iv) neither the execution and delivery of documents to be entered into in connection with the transaction, nor the performance of Participant’s obligations thereunder, will cause a breach or violation of the terms of any agreement, law or judgment, order or decree of any court or governmental agency;
(ii) Participant shall not be liable for the inaccuracy of any representation or warranty made by any other person in connection with the Drag-Along Transfer, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders);
(iii) the liability for indemnification, if any, of Participant in the Drag-Along Transfer and for the inaccuracy of any representations and warranties made by the Company, the Majority Holders or the Purchaser in connection with such Drag-Along Transfer, is several and not joint (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders), and subject to any provisions of the Company’s certificate of incorporation and bylaws, as amended, related to the allocation of the escrow, is pro rata in proportion to, and does not exceed, the amount of consideration paid to Participant in connection with such Drag-Along Transfer; and
(iv) upon the consummation of the Drag-Along Transfer, Participant will receive the same amount and form of consideration per share for Participant’s shares as is received by the Majority Holders.
(f) All costs and expenses incurred by Participant in connection with any Drag-Along Transfer, including, without limitation, transfer taxes and legal, accounting and investment banking fees, shall be borne by Participant.
(g) Notwithstanding anything herein to the contrary, there shall be no liability on the part of the Majority Holders to Participant if a Drag-Along Transfer is not consummated for any reason, and the Majority Holders shall not be obligated to consummate the proposed Drag-Along Transfer, regardless of whether the Majority Holders have delivered a Drag-Along Notice in respect of such Proposed Drag-Along Transfer.
10. Power of Attorney. In order to secure the performance of Participant’s obligations under Section 9, Participant hereby irrevocably appoints the Chief Executive Officer of the Company as Participant’s attorney-in-fact and proxy of Participant (with full power of substitution) to vote, provide a written consent or take any other action with respect to Participant’s shares if, and only in the event that, Participant fails to vote or provide a written consent with respect to Participant’s shares in accordance with the terms of Section 9 or fails to take any other action in accordance with the terms of Section 9 within three (3) days of a request for such vote, written consent or action. Upon such failure, the Chief Executive Officer of the Company shall have and is hereby irrevocably granted a proxy to vote or provide a written consent with respect to Participant’s shares for purposes of taking actions required by Section 9. Participant intends this proxy to be, and it shall be, irrevocable and coupled with an interest, and Participant shall take such further action and execute such other instruments as may be necessary to effectuate the intent of this proxy.
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11. Tax Obligations.
(a) Tax Withholding. Participant agrees to make appropriate arrangements with the Company (or the Parent or Subsidiary employing or retaining Participant) for the satisfaction of all Federal, state, local and foreign income and employment tax withholding requirements if applicable to the Option exercise. Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such withholding amounts are not delivered at the time of exercise.
(b) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
(c) Code Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per Share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the Fair Market Value of a Share on the date of grant (a “discount option”) may be considered “deferred compensation.” An Option that is a “discount option” may result in (i) income recognition by Participant prior to the exercise of the Option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The “discount option” may also result in additional state income, penalty and interest tax to the Participant. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the Fair Market Value of a Share on the date of grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the Fair Market Value of a Share on the date of grant, Participant shall be solely responsible for Participant’s costs related to such a determination.
12. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant. This Option Agreement is governed by the internal substantive laws, but not the choice of law rules of, Delaware.
13. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Participant has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Participant further agrees to notify the Company upon any change in the residence address indicated below.
| PARTICIPANT | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | |
| _______________________________________ | _____________________________________ | |
| Signature | Signature | |
| Jim Kellogg | Peter Hager, CEO |
[Signature Page to Stock Option Agreement]
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EXHIBIT A
2023 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
ELECTRONIC SERVITOR PUBLICATION NETWORK INC.
400 1ST Ave N., Suite 100
Minneapolis, MN 55401
Attention: Chief Executive Officer
1. Exercise of Option. Effective as of today, ________________, ____, the undersigned (“Participant”) hereby elects to exercise Participant’s option (the “Option”) to purchase ________________ shares of the Common Stock (the “Shares”) of ELECTRONIC SERVITOR PUBLICATION NETWORK INC. (the “Company”) under and pursuant to the 2023 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated ______________, _____ (the “Option Agreement”).
2. Delivery of Payment. Participant herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to an Award, notwithstanding the exercise of the Option. The Shares shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 13 of the Plan.
5. Company’s Right of First Refusal. Before any Shares held by Participant or any transferee (either being sometimes referred to herein as the “Holder”) may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 5 (the “Right of First Refusal”).
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the “Notice”) stating: (i) the Holder’s bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the “Offered Price”), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.
(c) Purchase Price. The purchase price (“Purchase Price”) for the Shares purchased by the Company or its assignee(s) under this Section 5 shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice or in the manner and at the times set forth in the Notice.
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(e) Holder’s Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section 5, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within one hundred and twenty (120) days after the date of the Notice, that any such sale or other transfer is effected in accordance with any applicable securities laws and that the Proposed Transferee agrees in writing that the provisions of this Section 5 shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary contained in this Section 5 notwithstanding, the transfer of any or all of the Shares during the Participant’s lifetime or on the Participant’s death by will or intestacy to the Participant’s immediate family or a trust for the benefit of the Participant’s immediate family shall be exempt from the provisions of this Section 5. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section 5, and there shall be no further transfer of such Shares except in accordance with the terms of this Section 5.
(g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon the earlier of (i) the first sale of Common Stock of the Company to the general public, or (ii) a Change in Control in which the successor corporation has equity securities that are publicly traded.
6. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER FOR A PERIOD OF TIME FOLLOWING THE EFFECTIVE DATE OF THE UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY’S SECURITIES SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY THE HOLDER PRIOR TO THE EXPIRATION OF SUCH PERIOD WITHOUT THE CONSENT OF THE COMPANY OR THE MANAGING UNDERWRITER.
(b) Stop-Transfer Notices. Participant agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
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(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Exercise Notice or (ii) 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 shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
9. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties.
10. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of Delaware. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
11. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant.
| Submitted by: | Accepted by: | |
| PARTICIPANT | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. | |
| Signature | By | |
| Print Name | Print Name | |
| Title | ||
| Address: | Address: | |
| (on file) | 400 1st Ave. N., Suite 100 | |
| (on file) | Minneapolis, MN 55401 | |
| Date Received |
[Signature Page to Exercise Notice]
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
| PARTICIPANT: | __________________________________________________ |
| COMPANY: | ELECTRONIC SERVITOR PUBLICATION NETWORK INC. |
| SECURITY: | COMMON STOCK |
| SHARE AMOUNT: | _________________________ |
| DATE: | _________________________ |
In connection with the purchase of the above-listed Securities, the undersigned Participant represents to the Company the following:
(a) Participant is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Participant is acquiring these Securities for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).
(b) Participant acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. In this connection, Participant understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Participant’s representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one (1) year or any other fixed period in the future. Participant further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Securities. Participant understands that the certificate evidencing the Securities shall be imprinted with any legend required under applicable state securities laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise shall be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold, subject to the satisfaction of the applicable conditions specified by Rule 144, including in the case of affiliates (1) the availability of certain public information about the Company, (2) the amount of Securities being sold during any three (3) month period not exceeding specified limitations, (3) the resale being made in an unsolicited “broker’s transaction,” transactions directly with a “market maker” or “riskless principal transactions” (as those terms are defined under the Securities Exchange Act of 1934) and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require (i) the availability of current public information about the Company; (ii) the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Securities; and (iii) in the case of the sale of Securities by an affiliate, the satisfaction of the conditions set forth in sections (2), (3) and (4) of the paragraph immediately above.
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(d) Participant further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption shall be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 shall have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Participant understands that no assurances can be given that any such other registration exemption shall be available in such event.
PARTICIPANT
Signature
Print Name
Date
[Signature Page to Investment Representation Statement]
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