EXHIBIT 10.88
NEITHER THIS OPTION NOR THE UNDERLYING COMMON SHARES HAVE BBEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS OPTION OR
THE UNDERLYING COMMON SHARES UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION
COVERING SUCH OPTION OR SUCH SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES
ACT OF 1933 AND APPLICABLE STATES SECURITIES LAWS, (II) IT FIRST RECEIVES A
LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS,
STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE
STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144
UNDER THE SECURITIES ACT OF 1933.
INNOVO GROUP, INC.
NON-QUALIFIED SHARE OPTION AGREEMENT
This Agreement is entered into this 11th day of December, 2002 by and between
INNOVO GROUP INC., a Delaware corporation with its offices located at 5900 S.
Eastern Ave, Suite 104, Commerce, CA 90040, ("Corporation"), and Pat
Anderson,("Anderson"), a Tennessee resident.
WHEREAS, The Corporation desires to retain Anderson's services as
President of the Corporation;
WHEREAS, this Option will provide equity incentives for Pat Anderson to
remain the President of the Corporation by granting such person options to
purchase shares of the Corporation's common stock ("Shares");
WHEREAS, the Board has determined to grant to Anderson a non-qualified
share option ("Option") to purchase 100,000 shares upon and subject to the
terms and conditions stated in this Agreement.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Grant of Option. Subject to the terms and conditions of this
Agreement,the Corporation hereby grants to Anderson, during the period from
the date of this Agreement until 5:00 p.m. Los Angeles CA time on December
11, 2007 ("Expiration Date"), the option to purchase from the Corporation,
from time to time, at a price of $2.40 per Share ("Exercise Price"), up to,
but not to exceed, an aggregate of 100,000 Shares ("Option Shares").
Section 2. Exercise of Option.
2.1 Date Exercisable. This Option shall become exercisable immediately
by Anderson with respect to 100,000 Shares.
2.2 Manner of Exercise. This Option may be exercised in whole or in part
by delivery to the Corporation, from time to time, of a written notice in
substantially the form set forth in Exhibit A hereto, signed by Anderson,
specifying the number of Option Shares that Anderson then desires to
purchase, together with cash, certified check, or bank draft payable to the
order of the Corporation, or other form of payment acceptable to the
Corporation, for an amount of United States dollars equal to the Exercise
Price of such shares. If the Corporation, in its sole discretion, elects
to allow payment of all or a portion of the Exercise Price secured by a
pledge, also in form satisfactory to the Corporation, of the Shares
purchased by such exercise of this Option. At Anderson's election, Anderson
shall have the right to a "cashless exercise" in which Anderson shall be
entitled to receive a certificate for the number of shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common
Stock on the Trading Day preceding the date of such election;
(B) = the Exercise Price of the Warrant; and
(X) = the number of shares issuable upon exercise of the Warrant in
accordance with the terms of this Warrant.
2.3 Certificates. Promptly after any exercise in whole or in part of
this Option by Anderson, the Corporation shall deliver to Anderson a
certificate or certificates for the number of Option Shares with respect to
which this Option was so exercised, registered in Anderson's name.
2.4 Duration of Option. This Option, to the extent not previously
exercised, shall terminate upon the earliest of the following dates:
2.4.1 the Expiration Date
2.5 Restrictive Legends. Each certificate for Shares issued to the
Anderson or to a subsequent transferee (except as a result of a transfer
determined by Corporation's counsel to be free from such restrictions)
shall include a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), IN RELIANCE UPON THE
EXEMPTION FROM REGISTRATION PROVIDED BY SECTION
4(2) OF THE 1933 ACT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES LAWS OF APPLICABLE STATES IN
RELIANCE UPON APPLICABLE EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES LAWS OF SUCH
STATES. THESE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED
FOR SALE, HYPOTHECATED, SOLD OR TRANSFERRED, NOR
WILL ANY ASSIGNEE OR TRANSFEREE THEREOF BE
RECOGNIZED BY THE COMPANY AS HAVING ANY INTEREST
IN THESE SHARES, IN THE ABSENCE OF (i) AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO
THE SHARES UNDER THE 1933 ACT AND APPLICABLE
STATE SECURITIES LAWS OR (ii) COMPLIANCE WITH
APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER THE
1933 ACT AND APPLICABLE STATE SECURITIES LAWS.
THE COMPANY MAY, IF IT DEEMS APPROPRIATE IN ITS
SOLE DISCRETION, REQUIRE AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT THE OFFER, SALE,
HYPOTHECATION OR TRANSFER OF THESE SHARES IS
EXEMPT FROM REGISTRATION UNDER THE 1933 ACT AND
APPLICABLE STATE SECURITIES LAWS.
2.6 Notice of Proposed Transfers. Prior to any proposed transfer of the
Shares other than a transfer (i) subject to an effective registration
statement under the 1933 Act, (ii) to an affiliate of the Anderson which is
an "accredited investor" within the meaning of Rule 501(a) under the 1933
Act, provided that any such transferee shall agree to be bound by the terms
of this Agreement, and (iii) to be made in reliance on Rule 144 under the
1933 Act, the holder thereof shall give written notice to the Corporation
of such holder's intention to effect such transfer, setting forth the
manner and circumstances of the proposed transfer, which shall be
accompanied by an opinion of counsel to the Corporation, confirming that
such transfer does not give rise to a violation of the 1933 Act,
satisfactory representation letters in form and substance reasonably
satisfactory to the Corporation to ensure compliance with the provisions of
the 1933 Act and letters in form and substance reasonably satisfactory to
the Corporation from each such transferee stating such transferee's
agreement to be bound by the terms of this Agreement. Such proposed
transfer may be effected only if the Corporation shall have received such
notice of transfer, opinion of counsel, representation letters and other
letters referred to in the immediately preceding sentence, whereupon the
holder of such Shares shall be entitled to transfer such Shares in
accordance with the terms of the notice delivered by the holder to the
Corporation.
2.7 Registration. The Corporation will use its best efforts to file a
registration statement on Form S-8 for the for the underlying Shares under
the 1933 Act as soon as is reasonably practical following the signing of
this document, but in no event later than 45 days after demand is made by
Anderson for such registration,unless delayed by Anderson. The Issuer shall
seek to have such registration statement declared effective or to be
effective as regards Anderson's resales as soon after filing as is
reasonably practicable.
2.8 Other Agreements Respecting Registration of Shares. In connection
with the filing of a registration statement by the Corporation which covers
any of the Shares, the parties agree that:
(a) The Corporation shall bear all reasonable costs and expense s to be
incurred in connection with any registration statement covering any of the
Shares, including printing costs, the fees of the registrant's counsel and
accountants, and SEC and NASD filing fees; however, the Corporation shall
not be responsible for the fees and expenses of any counsel engaged by the
Anderson, or any underwriter engaged by the Anderson, and shall not be
responsible for the underwriters', brokers' or dealers' commissions, fees,
expenses, discounts or other compensation attributable to the offer or
sale of any of the shares of the Anderson.
(b) If the Corporation conducts an underwritten offering for the account
of the Corporation and the managing underwriter(s) advise the Corporation
in writing, that in their reasonable good faith opinion, marketing or other
factors dictate that a limitation on the number of shares of common stock
which may be sold by affiliates of the Corporation is necessary to
facilitate and not adversely affect the proposed offering, then Anderson
shall enter into the same restrictive "lock-up" agreements regarding sales
of the Shares as the underwriter requires from other Corporation officers
and directors.
(c) The Corporation shall not be obligated to register the offer and sale
of any of the Shares if, at the time of the demand or request for
registration or at the time thereafter up to the time of the filing of the
registration statement, there has been any default or breach by the
Anderson in the terms of this Agreement.
Section 3. Nontransferability.
3.1 Restriction. This Option is not transferable by Anderson otherwise
than by testamentary will or the laws of descent and distribution and,
during Anderson's lifetime, may be exercised only by Anderson or
Anderson's guardian or legal representative. Except as permitted by the
preceding sentence,neither this Option nor any of the rights and privileges
conferred thereby shall be transferred, assigned, pledged, or hypothecated
in any way (whether by operation of law or otherwise), and no such option,
right, or privilege shall be subject to execution, attachment, or similar
process. Upon any attempt to transfer this Option, or of any right or
privilege conferred thereby, contrary to the provisions hereof, , or upon
the levy of any attachment or similar process upon such option, right,
or privilege, this Option and any such rights and privileges shall
immediately become null and void.
3.2 Exercise in Event of Death or Disability. Whenever the word
"Anderson" is used in any provision of this Agreement under circumstances
when the provision should logically be construed to apply to Anderson's
guardian, legal representative, executor, administrator, or the person or
persons to whom this Option may be transferred by testamentary will or by
the laws of descent and distribution,the word "Anderson" shall be deemed to
include such person or persons.
3.3. No Rights As Shareholder Prior To Exercise. Anderson shall not, by
virtue hereof, be entitled to any rights of a shareholder in the
Corporation, either at law or equity, unless and until this Option s
exercised. The rights of Anderson are limited to those expressed in this
Option and are not enforceable against the Corporation except to the extent
set forth herein.
Section 4. Anti-Dilution Provisions.
4.1 The number and kind of Shares purchasable upon the exercise of this
Option and the Exercise Price shall be subject to adjustment from time to
time as follows:
4.1.1 In case the Corporation shall (i) pay a dividend or make a
distribution on the outstanding Shares payable in Shares, (ii) subdivide
the outstanding Shares into a greater number of Shares, (iii) combine the
outstanding Shares into a lesser number of Shares, or (iv) issue by
reclassification of the Shares any Shares of the Corporation, Anderson
shall thereafter be entitled, upon exercise, to receive the number and
kind of shares which, if this Option had been exercised immediately
prior to the happening of such event, Anderson would have owned upon such
exercise and been entitled to receive upon such dividend, distribution,
subdivision, combination, or reclassification. Such adjustment shall
become effective on the day next following (v) the record date of such
dividend or distribution or (vi) the day upon which such subdivision,
combination, or reclassification shall become effective.
4.1.2 In case the Corporation shall consolidate or merge into or with
another corporation, or in case the Corporation shall sell or convey to any
other person or persons all or substantially all the property of the
Corporation, Anderson shall thereafter be entitled, upon exercise, to
receive the kind and amount of shares, other securities, cash, and property
receivable upon such consolidation, merger, sale, or conveyance by a holder
of the number of Shares which might have been purchased upon exercise of
this Option immediately prior to such consolidation, merger, sale, or
conveyance, and shall have no other conversion rights. In any such event,
effective provision shall be made, in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contracts
of sale and conveyance, or otherwise so that, so far as appropriate and as
nearly as reasonable may be, the provisions set forth herein for the
protection of the rights of Anderson shall thereafter be made applicable.
4.1.3 Whenever the number of Shares purchasable upon exercise of this
Option is adjusted pursuant to this Section, the Exercise Price per Share
in effect immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon exercise of this
Option immediately prior to such adjustment, and of which the denominator
shall be the number of Shares so purchasable immediately after such
adjustment, so that the aggregate Exercise Price of this Option remains the
same.
4.1.4 No adjustment in the number of Shares which may be purchased upon
exercise of this Option shall be required unless such adjustment would
require an increase or decrease of more than 1/100 of a Share in the number
of Shares which may be so purchased, provided, however, that any
adjustment which by reason of this Section is not required to be made shall
be carried forward cumulatively and taken into account in any subsequent
calculation. All calculations under this Section shall be made to the
nearest cent or to the nearest one-hundredth of a Share, as the case may
be.
4.1.5 In the event that at any time, as a result of an adjustment made
pursuant to this Section, Anderson shall become entitled to receive upon
exercise of this Option cash, property, or securities.
4.1.6 Irrespective of any adjustments in the Exercise Price or in the
number or kind of Shares purchasable upon exercise of this Option, the form
of Options theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in this Option.
Section 5. Officer's Certificate. Whenever the number or kind of
securities purchasable upon exercise of this Option or the Exercise Price
shall be adjusted as required by the provisions of Section 4, the
Corporation shall forthwith file with its Secretary or its Assistant
Secretary at its principal office and with its stock transfer agent, if
any, an officer's certificate showing the adjusted number of kind of
securities purchasable upon exercise of this Option and the adjusted
Exercise Price determined as herein provided and setting forth in
reasonable detail such facts as shall be necessary to show the reason for
and the manner of computing such adjustments. Each such officer's
certificate shall be made available at all reasonable times for inspection
by Anderson and the Corporation shall,forthwith after each such adjustment,
mail by certified mail a copy of such certificate to Anderson.
Section 6. No Effect On Powers of Corporation. The existence of this
Option shall not affect in any way the right or power of the Corporation or
its shareholders to make or authorize any adjustments, recapitalizations,
reorganization, or other changes in the Corporation's capital structure or
its business, or any merger or consolidation of the Corporation, or any
issue of bonds, debentures, preferred shares with rights greater than or
affecting the Shares, or the dissolution or liquidation of the Corporation,
or any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding, whether of a similar character or
otherwise.
Section 7. No Waiver of Corporation's Right to Terminate Employment.
Nothing in this Agreement shall be construed to confer or shall be deemed
to confer on Anderson any right to continue as an employee of the
Corporation, or to continue any other relationship with, the Corporation or
any parent or subsidiary of the Corporation, or limit in any way the right
of the Corporation or its shareholders to terminate Anderson's employment
or other relationship at any time, with or without cause. If Anderson is
terminated with or without cause, this agreement shall not be effected by
such termination.
Section 8. Compliance With Securities Laws.
8.1 No Exercise Until Compliance. If the Corporation at any time
determines that registration or qualification of the Shares or this Option
under state or federal law, or the consent or approval of any governmental
regulatory body, is necessary, then this Option may not be exercised, in
whole or in part, until such registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Corporation..
8.2 Investment Interest. If required by the Corporation at the time of
any exercise of this Option as a condition to such exercise, Anderson shall
enter into an agreement with the Corporation in form satisfactory to
counsel for the Corporation by which Anderson (I) shall represent that the
Shares are being acquired for Anderson's own account for investment and not
with a view to, or for sale in connection with, any resale or distribution
of such Shares, and (ii) shall agree that, if Anderson should decide to
sell, transfer, or otherwise, dispose of any of such Shares, Anderson
may do so only if the shares are registered under the Securities Act of
1933 and the relevant state securities laws, unless, in the opinion of
counsel for the Corporation, such registration is not required, or the
transfer in pursuant to the Securities and Exchange Commission Rule 144;
provided, however, that the Corporation agrees to use its best efforts
to cause a Registration Statement on Form S-8 with respect to the Shares
issuable upon exercise of this Option to be filed and declared effective
as soon as is practicable, and to maintain the effectiveness of such
Registration Statement until such time as the Option has been fully
exercised or terminated.
Section 9. Violation. Any provision of this Agreement to the contrary
notwithstanding, this Option shall not be exercisable at any time, in whole
or in part, if issuance and delivery of the Option Shares would violate any
law or registration.
Section 10. Representations of Anderson. Anderson represents that he has
been advised that he is not being represented in this transaction by the
corporation's attorneys and that Anderson has been advised to seek separate
legal counsel for advice in this matter.
Section 11. Notices. Any notice under this Agreement shall be in
writing and shall be effective when actually delivered in person or three
days after being deposited in the U.S. mail, registered or certified,
postage prepaid and addressed to the party at the address stated in this
Option or such other address as either party may designate by written
notice to the other.
Section 12. Law Governing. This Option shall be governed by and
construed in accordance with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
date first above written.
INNOVO GROUP INC.
By: /s/ Pat Anderson
-----------------------
Pat Anderson, President
/s/ Jay Furrow
----------------------
Jay Furrow
EXHIBIT A
INNOVO GROUP INC.
NOTICE OF EXERCISE OF SHARE OF OPTION
I hereby exercise my Non-Qualified Share Option granted by INNOVO GROUP
INC. ("Corporation") and seek to purchase _____________ shares of common
shares of the Corporation pursuant to said Option. I understand that this
exercise is subject to all the terms and provisions of my Non-Qualified
Share Option Agreement.
Enclosed is my check in the sum of $_________________ in payment for such
shares.
Dated:_____________,________
___________________________
Signature
___________________________
Address
___________________________
___________________________
___________________________
Social Security Number
Receipt is hereby acknowledged of the delivery to me by INNOVO GROUP INC.
of certificates for _______________________ common shares of the
Corporation purchased by me pursuant to the terms and conditions of
Non-Qualified Share Option Agreement referred to above.
Date:_____________,________
__________________________
Signature