Call Option Agreement

Document 1451A www.leaplaw.com

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 CALL OPTION AGREEMENT

This CALL OPTION AGREEMENT dated [DATE] (the Agreement) is made

by and between [COMPANY NAME], a ____________ corporation (the
Corporation) and [PURCHASER NAME], a _____________ corporation (the
Purchaser), (Purchaser and Seller being hereafter, from time to time, referred to as the
"Parties").

RECITALS

WHEREAS, the Seller owns [NUMBER] shares of [COMPANY NAME], a

___________ [corporation] (the Company, whose registered offices are located
_______________ (the Shares).

WHEREAS, the Seller undertook to contribute all of its shares of [COMPANY

NAME] to [RECEIVER NAME] (the "Receiver") wholly-owned by the Purchaser. As a
result of such contribution, the Seller shall own [NUMBER] shares of Receiver (the
"Receiver Shares").

WHEREAS, the Purchaser hereby irrevocably undertakes to grant to the Seller the
right to exchange all of his Receiver Shares for shares of common stock of the Purchaser,
under the terms and conditions set forth hereafter.

WHEREAS, capitalized items used in this agreement (the "Agreement") and not
otherwise defined shall have the meaning assigned to them in the Contribution
Agreement referred to in paragraph 2 above.

NOW THEREFORE, it is agreed as follows:

1. Call Options. Subject to the condition precedent set forth in Section 2 hereafter,
the Seller hereby irrevocably undertakes to allow the Purchaser to proceed with the
exchange of the Receiver Shares for a number of shares of common stock to be issued by
Purchaser (the "Shares") determined in accordance with the formula provide in Exhibit 1
of this Agreement. The right for the Purchaser to call for delivery of the Receiver Shares
held by the Seller in exchange for the Shares shall be hereafter referred to as the "Call
Option".

Should Purchaser elect to exercise the Call Option, it shall exercise it on all the
Receiver Shares then held by the Seller.

2. Duration. The Purchaser shall be entitled to exercise its Call Option at any time
during the period of six (6) months commencing twenty (20) months after the Closing
Date (as this term is defined in the Contribution Agreement) (the "Call Option Period").

Upon expiration of the Call Option Period, the Purchaser shall forfeit the right
under this Agreement to request that the Receiver shares held by the Seller be exchanged
for the Shares.

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 Notwithstanding the provisions of the first paragraph of this Section 2, Purchaser
shall have, at any time during the twenty months following the Closing Date, the right to
exercise its Call Option in connection with any of the following events (the
"Acceleration Date"): (i) trade sale to an unrelated party of more than 50% of the stock
of the Purchaser or of assets of the Purchaser representing over 50% of the value of the
Purchaser, or (ii) any merger or split-off of the Purchaser, or any other similar corporate
restructuring of the Purchaser in which Purchaser is not the survivor, or (iii)winding up of
the Purchaser or any other liquidation procedure. The Purchaser shall notify the Seller
that an Acceleration Event is about to occur as soon as possible after publication of such
event and in no event less than thirty (30) days before the date of said Acceleration
Event. The Seller shall in such event be free to require the exchange of all of the Receiver
Shares that he may own at that time, notwithstanding any provision to the contrary or any
restriction provided for in this Agreement.

3. Restrictions. For a period of two (2) years following the Closing Date, the Seller
shall not sell, assign, transfer, convey or otherwise deliver to any third party, in whole or
in part, the ownership of any of his/its Receiver Shares, pledge such shares or grant any
right on such shares to any third party, except as provided for in the Put Option
Agreement between Seller and Purchaser dated [DATE].

4. Completion. The Purchaser will notify the Seller (with copy to Receiver and the
transfer agent appointed by Purchaser (the "Transfer Agent")) of Purchaser's decision to
exercise the Call Option. Such notification will confirm: (a) the number of Receiver
Shares to be acquired by Purchaser, (b) the number of Shares to be transferred by
Purchaser in exchange for the Receiver Shares, and (c) the name of the Transfer Agent.
Within two business days after receiving such notification, the Seller will notify
Purchaser (with a copy to the Transfer Agent and Receiver) of the name of the brokerage
agent with whom Seller has opened an account, the applicable account number, and other
reference information reasonably requested by Purchaser for such account.

The exchange of shares shall take place promptly after the Seller's notification is
issued, and upon receiving such notification: (a) Purchaser will instruct Transfer Agent to
issue the appropriate number of Shares and certificates evidencing such Shares, and the
Transfer Agent will transfer such Shares to the Seller's designated brokerage agent; (b)
Receiver shall amend its register of shares to properly reflect the transfer of the
exchanged Receiver Shares to the Purchaser; and (c) Receiver will immediately notify
such transfer to the Purchaser, the Transfer Agent, and the Seller.

With respect to any Receiver Shares held in escrow, completion will be

accomplished under the provisions set forth in the applicable escrow agreement between
the parties.

The Purchaser and the Seller agree to use their reasonable commercial efforts
prior to the Closing Date to implement a completion process that will result in an
exchange transaction being completed as quickly as possible and in any event within four
(4) business days from Purchaser's notification.

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5. Representations and Warranties.

5.1 The Purchaser represents and warrants that the Shares, when issued in
accordance with the terms and provisions of this Agreement, will be duly authorized,
validly issued, fully paid and non assessable and will not be subject to any preemptive or
other statutory right of stockholders and, subject to Seller's representations and warranties
set forth below, will be issued in compliance with applicable U.S. federal and state, and
foreign securities laws. During the term of this Agreement, the Purchaser will at all times
have authorized, and reserved for issuance and delivery upon exercise of the Call Option,
a sufficient number of shares of its common stock from time to time issuable upon
exercise of the Call Option.

5.2 The Seller represents and warrants that he/it shall have complete and
unrestricted power to enter into and perform this Agreement and transfer, assign and
deliver any Receiver Share upon which the Purchaser may exercise its Call Option, and
that such Receiver Shares shall be free and clear from any security interests, liens,
encumbrances, restrictions, or rights to the benefit of any third party.

5.3 (a) Seller is aware (i) that the Shares will not be issued pursuant to a
registration statement under the Securities Act of 1933, as Amended (the "Act"), but will
instead be issued in reliance on the exemption from registration set forth in Section 4(2)
of the Act and in Regulation D under the Act and (ii) that the issuance of such common
stock of Purchaser has not been approved or reviewed by the SEC or any other
governmental agency.

(b) Seller is aware that the Shares cannot be resold unless registered
under the Act or unless an exemption from registration is available. Seller is also aware
that: (i) except pursuant to the Registration Rights Agreement, Purchaser is under no
obligation to file a registration statement with respect to the Shares, and (ii) the
provisions of Rule 144 under the Act will permit resale of Shares under only limited
circumstances, and such Shares must be held by the Seller for at least one (1) year before
it can be sold pursuant to Rule 144.

(c) The Shares will be acquired by Seller for investment and for his or
its own account, and not with a view to, or for resale in connection with, any unregistered
distribution thereof.

(d) Seller has examined Purchaser's SEC filings, including Purchaser's

Annual Report on Form 10-K and associated definitive proxy statement for the year
ended [DATE], its Quarterly Reports on Form 10-Q for the quarters ended [DATE],
[DATE], and [DATE], and its Current Report on Form 8-K filed in [DATE], including
the risk factors described therein. Without limiting the generality of the foregoing, the
Seller specifically acknowledges that the price of Purchaser's Common Stock has been,
and will likely continue to be, volatile.

(e) Seller has been given the opportunity (i) to ask questions of, and
receive answers from, persons acting on behalf of the Purchaser concerning the

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contemplated issuance of the Shares and the business of Purchaser, and (ii) to obtain
additional information necessary to verify the accuracy of the information set forth in the
documents made available to Seller.

(f) Seller is knowledgeable, sophisticated and experienced in making,

and is qualified to make, decisions with respect to investments in securities like the
Shares.

(g) Seller is an "accredited investor" (as such term is defined in Rule

501 under the Act).

(h) Seller understands that stop transfer instructions will be given to

Purchaser's transfer agent with respect to the Shares, and that there will be placed on the
certificate or certificates representing the Shares a legend similar in effect to the
following:

"The shares represented by this certificate have not been registered under
the Securities and Exchange Act of 1933 (the Act) and may not be
offered, sold or otherwise transferred, assigned, pledged or hypothecated
unless registered under the Act or unless an exemption from registration
requirements of the Act is available.

(i) Seller acknowledges that Purchaser will rely upon these

representations and warranties of Seller for purposes of determining the availability of an
exemption from the registration requirements of the Act.

6. Stock Split. All numbers contained in, and all calculations required to be made
pursuant to this Agreement shall be adjusted as appropriate in order to reflect any stock
split, reverse stock split, stock dividend or similar transaction effected by the Purchaser
and/or Receiver after the date hereof.

7. Miscellaneous.

7.1 Governing Law; Arbitration This Agreement and the rights and
obligations of the Parties hereto shall be governed by and construed and enforced in
accordance with the laws of the State of [STATE].

7.2 Disputes. Arbitration. Any controversy, claim or dispute arising out of or

relating to this Agreement, shall be settled by binding arbitration in [CITY/STATE].
Such arbitration shall be conducted in accordance with the then prevailing commercial
arbitration rules of [NAME OF ARBITRATOR], with the following exceptions if in
conflict: (a) one arbitrator shall be chosen by [ARBITRATOR]; (b) each party to the
arbitration will pay its pro rata share of the expenses and fees of the arbitrator, together
with other expenses of the arbitration incurred or approved by the arbitrator; and (c)
arbitration may proceed in the absence of any party if written notice (pursuant to the
arbitrators rules and regulations) of the proceeding has been given to such party. The
parties agree to abide by all decisions and awards rendered in such proceedings. Such
decisions and awards rendered by the arbitrator shall be final and conclusive and may be

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entered in any court having jurisdiction thereof as a basis of judgment and of the issuance
of execution for its collection. All such controversies, claims or disputes shall be settled
in this manner in lieu of any action at law or equity, provided however, that nothing in
this subsection shall be construed as precluding brining an action for injunctive relief or
other equitable relief. The arbitrator shall not have the right to award punitive damages
or speculative damages to either party and shall not have the power to amend this
Agreement. IF FOR ANY REASON THIS ARBITRATOPM CLAUSE BECOMES
NOT APPLICABLE, THEN EACH PARTY, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELTING
TO THIS AGREEMENT OR ANY OTHER MATTER INVOLVING THE PARTIES
HERETO.

7.3 Amendment. This Agreement may be amended, modified, or

supplemented only by an instrument in writing executed by the Parties hereto.

7.4 Assignment. The Purchaser may at any time assign all or any part of its
rights and/or obligations under this Agreement to any of its Affiliates or any other person,
and any assignee of the Purchaser shall succeed to and be possessed of the rights of the
Purchaser hereunder to the extent of the assignment made, provided, however, that any
such assignment by the Purchaser shall not relieve the Purchaser of its obligations
hereunder.

7.5 Parties in Interest No Third Party Beneficiaries. Except as otherwise

provided herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective heirs, legal representatives, successors and assigns of
the Parties hereto. Neither this Agreement nor any other agreement contemplated herein
shall be deemed to confer upon any person not a Party hereto or thereto any rights or
remedies hereunder or thereunder.

7.6 Waiver. No waiver by any Party of any default or breach by the other
Party of any representation, warranty, covenant or condition contained in this Agreement,
or in any exhibit or any document, instrument, or certificate contemplated herein, shall be
deemed to constitute a waiver of any subsequent default or breach by such Party of the
same or any other representation, warranty, covenant or condition. No act, delay,
omission or course of dealing on the part of any Party in exercising any right, power, or
remedy under this Agreement or at Law shall operate as a waiver thereof or otherwise
prejudice any of such Party's rights, powers and remedies. All remedies shall be
cumulative and the election of any one or more shall not constitute a waiver of the right
to pursue other available remedies.

7.7 Costs, Expenses and Legal Fees. Whether or not the transactions
contemplated herein are consummated, each Party hereto shall bear its own costs and
expenses (including attorneys' fees), except that each Party hereto agrees to pay the costs
and expenses (including reasonable attorneys' fees and expenses) incurred by the other

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Party in successfully (i) enforcing any of the terms of this Agreement, or (ii) proving that
the other Party breached any of the terms of this Agreement.

7.8 Entire Agreement. This Agreement constitutes the entire agreement of the
Parties regarding the subject matter hereof, and supersedes all prior agreements and
understandings, both written and oral, among the Parties, with respect to the subject
matter hereof.

7.9 Severability. If any provision of this Agreement is held to be illegal,

invalid, or unenforceable under present or future legal requirements effective during the
term hereof, such provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision was never a
part hereof; and the remaining provisions hereof shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by its severance
herefrom.

7.10. Notices. Any notice or communication hereunder must be in writing and

given (i) by depositing the same in the mail, addressed to the Party to be notified, postage
prepaid and registered with return receipt requested and received, (ii) by sending the
same by express courier, or (iii) by delivering the same in person. Such notice shall be
deemed received on the date on which it is hand-delivered or on the second business day
following the date on which it was sent by express courier. If sent by registered mail,
such notice shall be deemed received on the third business day following the date on
which it is so mailed, then mailed within the same country, or on the tenth business day
following the date on which it is so mailed, when mailed from a country different from
the country of destination.

For purposes of giving notice, the addresses of the Parties shall be:

For the Seller:

______________________
______________________
______________________
Attn: _________________

For the Purchaser:

______________________
______________________
______________________
Attn: _________________

Any Party may change its address for notice by written notice given to the other
Party in accordance with this Section 7.10.

7.11 Confidentiality Publicity and Disclosures.

7.11.1 Each Party shall keep this Agreement and its terms confidential, and shall
make no press release or public disclosure, either written or oral, regarding the

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transactions contemplated herein without the prior knowledge and written consent of the
other Party hereto. The foregoing shall not prohibit any disclosure: (i) required by legal
requirements or regulatory authorities to be made by one of the Parties, provided that the
Party required to make such disclosure shall first consult with the other Party with respect
to the form and substance of the proposed disclosure; (ii) to attorneys, accountants,
investment bankers, or other agents of the Parties assisting the Parties in connection with
the transactions contemplated herein; and (iii) by the Purchaser in order to comply with
the law or the regulations of the Stock Exchange (Nasdaq) on which the Purchaser is
traded.

7.11. In the event that the transactions contemplated herein are not
consummated for any reason whatsoever, the Parties hereto agree not to disclose any
confidential, proprietary and/or non public information they may have concerning the
affairs of the other Parties, except for information that is required by Legal Requirements
to be disclosed; provided that, in the event that the transactions contemplated herein are
not consummated, nothing contained herein shall be construed to prohibit the Parties
hereto from operating businesses in competition with those of other Party.

7.12 Governing Law; Arbitration This Agreement and the rights and
obligations of the Parties hereto shall be governed by and construed and enforced in
accordance with the laws of the State of [STATE].

[Remainder of this page has been intentionally left blank. Signature page follows.]

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 IN WITNESS WHEREOF, the Parties have signed this Call Option Agreement on
the date first written above.

[COMPANY NAME]

By: __________________
Its:

[PURCHASER NAME]

By: __________________
Its:

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