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PATRIOT SCIENTIFIC CORPORATION
EXHIBIT 10.12
Employment Agreement dated as of May 8, 1996
with Michael A. Carenzo
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EMPLOYMENT AGREEMENT dated as of May 8, 1996, between PATRIOT
SCIENTIFIC CORPORATION, a Delaware corporation (the "Company"), and
MICHAEL A. CARENZO (the "Executive").
WITNESSETH:
1. TERM OF EMPLOYMENT.
(a) The Company hereby agrees to employ the Executive and the Executive hereby
agrees to accept employment as President and Chief Executive Officer of the
Company for a three-year period commencing June 1, 1996, or for such shorter
period as may be mutually agreed by the Company and the Executive ( the
"Employment Period"), subject to the terms and conditions of this Agreement. In
his capacity as President and Chief Executive Officer of the Company, Executive
will be responsible for supervising the operations and managing all functions of
the Company and/or such other management duties on behalf of the Company and its
subsidiaries and affiliates, as may be assigned to him from time to time by the
Board of Directors in substitution for the aforementioned duties and which are
the same as or similar to his duties as President and Chief Executive Officer.
(b) The Executive agrees that, during the Employment Period, he will serve the
Company faithfully and to the best of his abilities, devoting substantially all
his time, energy and skill to the activities of the Company and the promotion of
its interests with the exception of no more than five (5) business days per
month for the purpose of winding down outside consulting agreements for the
first seven months of the Employment Period. It is expressly understood that the
Executive may devote a reasonable amount of time to such charitable, civic and
personal affairs as shall not interfere with the obligation set forth in the
preceding sentence.
2. COMPENSATION AND BENEFIT PLANS.
(a) The Executive shall receive a base salary during the Employment Period which
shall be payable in installments at such times as other employees are paid but
in any case at least monthly as follows: (1) During the first year of the
Employment Period ("Year One"), the Executive shall receive a base salary of not
less than seven thousand five hundred dollars ($7,500.00) per month; (2) During
the second year of the Employment Period ("Year Two"), the Executive shall
receive a base salary of not less than nine thousand dollars ($9,000.00) per
month; (3) During the third year of the Employment Period ("Year Three"), the
Executive shall receive not less than the base salary received in Year Two. The
base salary received in any year shall be subject to other upward adjustment by
and under the direction of the Board of Directors in its sole discretion.
(b) The Executive is entitled to an Annual Incentive Bonus of at least 50
percent of the total yearly base compensation for the applicable year (the
"Annual Incentive Bonus"). The Annual Incentive Bonus payment will be based upon
mutually agreed upon objectives and levels of performance payable within sixty
(60) days of fiscal year end (May 31). The Executive is also entitled to a
guaranteed incentive bonus for Year One of at least 50 percent of the total
yearly base compensation for Year One (the "Guaranteed Bonus"). Said Guaranteed
Bonus is payable within sixty (60) days of May 31, 1997.
(c) The Executive shall be paid a one time additional special incentive bonus
(the "Special Incentive Bonus") equal to 100 percent of the annual base salary
payable over a six (6) month period in equal monthly installments beginning on
the date that the Executive successfully completes the following task. The
Executive must successfully enter into any significant (as determined by the
Board of Directors) licensing agreement, supply agreement, a joint venture or
similar agreement regarding any of the Company's Key Technologies on or before
December, 31 1997, with any Company or Agency resulting from the Executive's
introduction or efforts. In addition, as long as the agreement is of significant
value to the Company as defined by the Board of Directors, any unvested options
of the Executive as defined in this Employment Agreement and the accompanying
Stock Option Agreement will become vested options immediately upon the
completion of the above referred task.
(d) The Executive shall be eligible to participate in all employee benefit
programs, if any, maintained by the Company, including, but not limited to,
group life insurance, medical, long-term disability, short-term disability,
retirement and pension plans, any deferred compensation or profit sharing plan,
401 (k) savings plan, and such other fringe benefits as are or may be made
available from time to time to senior executives of the Company. During the
Employment Period, the Executive is entitled to three weeks vacation per annum
in Year One and four weeks vacation per annum in Year Two and Year Three.
(e) The Company will pay or reimburse the Executive during the employment period
for all expenses normally reimbursed by the Company and reasonably incurred by
the Executive in furtherance of his duties hereunder and authorized by the
Company, including but not limited to, expenses for entertainment, travel,
meals, hotel accommodations and the like upon the submission by the Executive of
vouchers or an itemized list thereof as the Board of Directors may from time to
time
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adopt and authorize and as may be required in order to permit such payments as
proper deductions to the Company under the Internal Revenue Code of 1986 and the
rules and regulations adopted pursuant thereto now or hereafter in effect.
Further, the Executive's place of employment shall be considered San Diego
County, California (or other mutually agreed upon location) and it is
contemplated that the Executive will relocate to San Diego County or vicinity
within a reasonable period during the Employment Period. Until the Executive is
relocated, the Company shall pay the lessor of actual costs of travel and
lodging for business travel or the costs if the business travel had originated
in San Diego County should the Executive travel from another location or
residence(s). Executive shall be responsible for all travel expenses to and from
other consulting locations (during the first seven months of the Employment
Period pursuant to the terms and conditions outlined in paragraph (b) of Section
1 hereof) or from residence(s). Executive shall also be responsible for all
moving, relocation and related expenses of relocating to San Diego County or
vicinity.
3. STOCK OPTIONS.
(a) The Executive has been granted stock options of nine hundred thousand
(900,000) shares at the price of the Company's common stock on April 23, 1996
from the Company's 1996 Stock Option Plan. The Company and the Executive have
signed a Stock Option Agreement memorializing the grant on April 23, 1996 in the
form of the attached Exhibit A. Should there be a significant decrease in the
price of the stock prior to June 1, 1996, the Board may, at its discretion,
adjust downward the exercise price of this option.
(b) The Company agrees to register the 1996 Stock Option Plan to which the
Executive's nine hundred thousand (900,000) option shares are a part no later
than June 30, 1997, subject to the requirement that the options' value is at
least one dollar ($1) on or before June 30, 1997. If the 1996 Stock Option Plan
is not registered by June 30, 1997, the Company agrees to have all of the
Executive's nine hundred thousand (900,000) option shares registered no later
than January 1, 1998, unless otherwise agreed to by the parties. In addition,
the Company agrees that if it should cause the registration of any stock options
of any senior officers (other than by registration of the 1992 Stock Option
Plans pursuant to an S-8 registration) that it will include the shares of the
Executive, not previously the subject of a current registration statement, with
any such registration on a prorata basis at no cost to the Executive.
4. TERMINATION OF EMPLOYMENT
(a) The employment of the Executive hereunder shall automatically terminate if
the Executive shall die during the Term of Employment. The Employment of the
Executive can be terminated by the Company at its option only for the following:
(i) if the Company chooses to give Executive ninety (90) days written
notice of the termination of employment; or
(ii) for cause as defined hereafter, or
(iii) the inability of the Executive to render, for a period of 180
consecutive days, full and effective services hereunder by reason of
permanent disability, whether resulting from illness, accident or
otherwise, in any case by thirty (30) days' prior written notice to
Executive; provided, however, that if prior to the date of termination
specified in any notice of termination given pursuant to this
paragraph, Executive's incapacity shall have terminated and he shall
have resumed his duties hereunder, Executive shall be entitled to
resume his employment hereunder as though such notice had not been
given.
The term "cause" as used herein shall mean any of the following events:
(1) the conviction of the Executive under state or federal law of a
felony or other crime, or the equivalent under foreign law; unless in
any such case Executive performed such act in good faith and in a
manner reasonably believed to be in or not opposed to the best interest
of the Company;
(2) the material breach by Executive of any provision of this
Agreement, after compliance by the Company with the provision of
Section 5 hereof; or
(3) a determination or request by an appropriate regulatory authority
that the Executive be removed or disqualified from acting as an officer
of the Company.
(b) If this agreement is terminated by the Company and the Executive's
employment is terminated for other than cause by the Company, then the Executive
shall be entitled to the following:
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(i) severance payments equal to a minimum of six (6) months of his then
monthly Base Salary and one additional month for each additional month
worked during the employment period up to a maximum of twelve (12)
months payable in a lump-sum payment on the last day of the ninety (90)
day notice period;
(ii) payment of the Guaranteed Bonus in Year One (prorated over the
full period of time the Executive worked during Year One), the Annual
Incentive Bonus and Special Incentive Bonus if earned, payable on the
last day of the ninety (90) day notice period;
(iii) all vested options can be exercised by the Executive for up to
six months following termination or the registration of said options by
the Company whichever is later.
(c) Should the Executive die after this agreement is terminated by the Company
and the Executive's employment is terminated by the Company for other than
cause, the Executive's beneficiaries, estate, conservator or other legal
representative shall be entitled to all of the benefits described in paragraph
(b) of this Section 4.
(d) If the Agreement is terminated by the Company and the Executive's
termination is terminated pursuant to subpart (iii) of paragraph (a) of this
Section 4 or if this Agreement is terminated because of the Executive's death,
then the Executive or his Estate shall be entitled to receive his then monthly
Base Salary he would otherwise be entitled to hereunder during the Term of
Employment pursuant to Section 2 hereof for a period of not longer than six (6)
months.
(e) The Executive shall have the right at his sole option to terminate his
employment hereunder under the following conditions:
(1) at any time upon thirty (30) days written notice;
(2) upon written notice by the Executive to the Company within thirty
(30) days of and indicating that a change in control of the Company has
occurred and therefore the Executive elects to terminate his employment
as provided herein. A change in control of the Company shall mean a
change in control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A promulgated under the Securities
and Exchange Act of 1924, as amended (the "Exchange Act"); provided
that, without limitation, such change in control shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13(d) under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's then outstanding securities;
or (ii) during any period of two (2) consecutive years form the date of
this Agreement, individuals who at the beginning of such period
constitute the Board of Directors of the Company cease for any reason
to constitute at least a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new
director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.
(3) If termination of the Executive is pursuant to subpart (1) of
paragraph (e) of this Section 4, then no severance payments shall be
payable. If termination is noticed pursuant to subpart (2) of paragraph
(e) of this Section 4 hereof, then Executive shall be entitled to the
same payments as if he had been terminated other than for cause
(Section 4(b)(i)). In addition, the Executive shall be entitled to
recover legal fees and costs incurred by the Executive should the
Company not make timely payment prescribed by this section and should
the Executive prevail in any action filed thereabout.
5. NOTICE OF BREACH. The Company and the Executive agree that, prior to the
termination of the Employment Period by reason of any breach of any provision of
this Agreement, the injured party will give the party in breach written notice
specifying such breach and permitting the party in breach to cure such breach
within a period of thirty (30) days after receipt of such notice.
6. INDEMNIFICATION.
(a) If, after the date of the commencement of the Employment Period, the
Executive is made a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director or officer of
the Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation or partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is an alleged act or
failure to act in an official capacity as a director, officer, member, employee
or agent, he shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines and amounts
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paid or to be paid in settlement) reasonably incurred or suffered by the
Executive in connection therewith, including, without limitation, payment of
expenses incurred in defending a Proceeding prior to the final disposition of
such Proceeding (subject to receipt of an undertaking by the Executive to repay
such amount if it shall ultimately be determined that the Executive is not
entitled to be indemnified by the Company under Delaware law), and such
indemnification shall continue as to the Executive even if he has ceased to be a
director, officer, member, employee or agent of the Company or other enterprise
and shall inure to the benefit of his heirs, executors and administrators.
(b) The right of indemnification and the payment of expenses incurred in
defending a Proceeding in advance of its final disposition conferred in this
Section 6 shall not be exclusive of any other right that the Executive may have
or hereafter may acquire under any statute, provision of the Certificate of
Incorporation or Bylaws of the Company, agreement, vote of shareholders or
disinterested directors or otherwise.
7. TRADE SECRETS OF THE COMPANY, PATENTS AND INVENTIONS.
(a) The Executive prior to and during the Term of Employment under this
Agreement has had and will have access to and become acquainted with various
trade secrets, consisting of devices, secret inventions, processes, and
compilations of information, records, and specifications which are owned by the
Company, and which are regularly used or to be used in the operation of the
business of the Company. The Executive shall not disclose any of the aforesaid
trade secrets, directly or indirectly, or use them in any way, either during the
term of this Agreement or at any time thereafter, except as required in the
course of his employment. All files, records, documents, drawings,
specifications, equipment, and similar items relating to the business of the
Company, whether prepared by the Executive or otherwise coming into his
possession, shall remain the exclusive property of the Company and shall not be
removed under any circumstances from the premises of the Company where the work
is being carried on without prior written consent of the Company or consistent
with the Company's normal business practices.
(b) The Executive agrees that as to any inventions made by him during the term
of his employment, solely or jointly with others, which are made with the
equipment, supplies, facilities or trade secret information of the Company, or
which relate at the time of the conception or reduction to purchase of the
invention to the business of the Company or the Company's actual or demonstrably
anticipated research and development, or which result from any work performed by
the Executive for the Company, shall belong to the Company and the Executive
promises to assign such inventions to the Company. The Executive also agrees
that the Company shall have the right to keep such inventions as trade secrets,
if the company chooses. The Executive agrees to assign to the Company the
Executive's rights in any other inventions where the Company is required to
grant those rights to the United States government or any agency thereof. In
order to permit the Company to claim rights to which it may be entitled, the
Executive agrees to disclose to the Company in confidence all inventions which
the Executive makes arising out of the Executive's employment and all patent
application filed by the Executive within one year after the termination of his
employment.
(c) The Executive shall assist the Company in obtaining patents on all
inventions, designs, improvements, and discoveries patentable by the Company in
the United States and in all foreign countries, and shall execute all documents
and do all things necessary to obtain letters patent, to vest the Company with
full and extensive title thereto, and to protect the same against infringement
by others.
8. SEVERABILITY. In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
9. ASSIGNMENT. The rights of the Company (but not its obligations) under this
Agreement may, without the consent of the Executive, be assigned by the Company
to any parent, subsidiary, or a successor of the Company; provided that such
parent, subsidiary or successor acknowledges in writing that it is also bound by
the terms and obligations of this Agreement. Except as provided in the preceding
sentence, the Company may not assign all or any of its rights, duties or
obligations hereunder without the prior written consent of the Executive. Except
as provided for in Section 11 hereunder, the Executive may not assign all or any
of his rights, duties or obligations hereunder without the prior written consent
of the Company.
10. SURVIVORSHIP. The respective rights and obligations of the Parties hereunder
shall survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations, including, but not limited
to, the rights of the Executive under Sections 2, 3, 4, and 6.
11. BENEFICIARIES; REFERENCES. The Executive shall be entitled to select (and
change) a beneficiary or beneficiaries to receive any compensation or benefit
payable following the Executive's death, and may change such election, in either
case, by giving the Company written notice thereof. In the event of the
Executive's death or a judicial determination of his
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incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate, committee, conservator
or other legal representative.
12. NOTICES. All notices, requests, demands and other communications shall be in
writing and shall be defined to have been duly given if delivered or if mailed
by registered mail, postage prepaid:
(a) If to the Executive, addressed to him at the following address as
may be changed in writing from time to time:
Michael A. Carenzo
144 Azalea Drive
Hershey, Pennsylvania 17033
(b) If to the Company, addressed to:
Patriot Scientific Corporation
12875 Brookprinter Place, #300
Poway, California 92064
or to such other address as any party hereto may request by notice
given as aforesaid to the other parties hereto.
13. TITLES AND HEADINGS. Titles and headings to paragraphs hereof are for the
purposes of references only and shall in no way limit, define or otherwise
affect the provisions hereof.
14. GOVERNING LAW. This Agreement is being executed and delivered and is
intended to be performed in the State of California, and shall be governed by
and construed in accordance with the laws of the State of California.
15. COUNTERPARTS. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be necessary
in making proof of this Agreement to produce or account for more than one
original counterpart.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto and may be modified or amended only by a written instrument
executed by the parties hereto. Effective on the first day of the Employment
Period, any prior employment agreements between the Company and the Executive
shall terminate.
17. GOOD FAITH. Each of the parties hereto agrees that he or it shall act in
good faith in all actions taken under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the day
and year first above written.
PATRIOT SCIENTIFIC CORPORATION
BY /s/ ELWOOD G. NORRIS
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Elwood G. Norris
President and CEO
/s/ MICHAEL A. CARENZO
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Michael A. Carenzo
Executive
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SCHEDULE A
PATRIOT SCIENTIFIC CORPORATION
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered into as of the
Date of Grant indicated below by and between Patriot Scientific Corporation, a
Delaware corporation (the "Company"), and the person named below as Participant.
WHEREAS, Participant is an employee, director or consultant of the Company
and/or one or more of its subsidiaries; and
WHEREAS, pursuant to the Company's 1996 Stock Option Plan (the "Plan"), the
committee of the Board of Directors of the Company administering the Plan (the
"Committee") has approved the grant to Participant of an option to purchase
shares of the common stock, $.00001 par value, of the Company (the "Common
Stock" or "Shares"), on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the covenants set
forth herein, the parties hereto hereby agree as follows:
1. GRANT OF OPTION: CERTAIN TERMS AND CONDITIONS. The Company hereby grants to
Participant, and Participant hereby accepts, as of the Date of Grant, an option
to purchase the number of shares of Common Stock indicated below (the "Option
Shares") at the Exercise Price per share indicated below, which option shall
expire at 5:00 o'clock p.m., California time, on the Expiration Date indicated
below and shall be subject to all of the terms and conditions set forth in this
Agreement (the "Option"). The Option shall become exercisable to purchase, and
shall vest with respect to, that number of Option Shares as provided in the
Vesting Schedule provided below.
PARTICIPANT: MICHAEL A. CARENZO
DATE OF GRANT: April 23, 1996
NUMBER OF SHARES PURCHASABLE: 900,000
EXERCISE PRICE PER SHARE: $2.30
EXPIRATION DATE: April 22, 2001
VESTING SCHEDULE: A total of 50,000 Option Shares shall vest and become
exercisable on the date Participant is appointed or elected a Director of the
Company, an additional 40,000 Options Shares shall vest and become exercisable
on the date of commencement of Participant's employment as President and CEO of
the Company. The balance of the Options Shares shall vest monthly, at month end,
commencing July 31, 1996 at the rate of 22,500 Option Shares per month,
conditioned on Participant's continued Employment. In the event the closing
price of the Common Stock exceeds five dollars ($5.00) per share for ten
consecutive trading days at any time prior to December 31, 1997, then 50% of any
unvested options shall vest with the balance vesting in equal installments
monthly over the balance of the 36 month vesting term. Should the current
consultancy relationship not change to employment as President and CEO on or
before June 1, 1996, then all 900,000 options shall expire and terminate on June
1, 1996 or such earlier date as it is determined that Participant will not be
appointed President and CEO. The Board of Directors or the Committee may
accelerate the vesting of options at its discretion.
IRRESPECTIVE OF THE VESTING SCHEDULE ABOVE OR THE TERMS HEREIN, THE OPTION MAY
NOT BE EXERCISED BEFORE THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF THE
COMPANY ON OR BEFORE THE EXPIRATION OF TWELVE MONTHS FROM THE DATE OF ADOPTION
OF THE PLAN BY THE BOARD OF DIRECTORS AND IF SUCH APPROVAL IS NOT OBTAINED THEN
THIS OPTION SHALL BE VOID.
The first 43,000 Option Shares which become vested are intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code (an
"Incentive Stock Option") and consequently:
(a) the Expiration Date shall not be more than 10 years after the Date
of Grant and the Exercise Price per share shall not be less than the
Fair Market Value (as defined in the Plan) per share on the Date of
Grant; provided.
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however, that if, on the Date of Grant, Employee owns (after
application of the family and other attribution rules of Section 425(d)
of the Internal Revenue Code) more than 10% of the total combined
voting power of all classes of stock of the Company or of its parent or
subsidiary corporations, then the Expiration Date shall not be more
than five years after the Date of Grant and the Exercise Price per
share shall not be less than 110% of the Fair Market Value per share on
the Date of Grant; and
(b) the aggregate Fair Market Value (determined as of the date such
options are granted) of the shares of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by
Employee during any calendar year (under the Plan and all other stock
option plans of the Company and its parent and subsidiary corporations)
shall not exceed $100,000.
The balance of this Option and any Option Shares determined not to qualify are
not intended to be treated as an incentive stock option under Section 422 of the
Internal Revenue Code (an "Incentive Stock Option") and shall be non-qualified
("Nonqualified Stock Option").
2. ACCELERATION AND TERMINATION OF OPTION.
(a) TERMINATION OF EMPLOYMENT OR RELATIONSHIP.
(i) TERMINATION WITHIN ONE YEAR AFTER CHANGE OF CONTROL. In the event that
Participant shall cease to be an employee, director or consultant of the Company
or any of its subsidiaries (such cessation of employment or other affiliation or
relationship shall be referred to herein as the "Termination" of Participant's
"Employment") for any reason, or for no reason, within one year after a Change
of Control (as hereinafter defined), then (A) the portion of the Option that has
not vested on or prior to the date of such Termination of Employment shall fully
vest on such date and (B) the Option shall terminate upon the earlier of the
Expiration Date or the first anniversary of the date of such Termination of
Employment. "Change of Control" shall mean the first to occur of the following
events:
(X) any date upon which the directors of the Company who were last nominated by
the Board of Directors (the "Board") for election as directors cease to
constitute a majority of the directors of the Company;
(Y) the date of the first public announcement that any person or entity,
together with all Affiliates and Associates (as such capitalized terms are
defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of such person or entity, shall have become the
Beneficial Owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of voting securities of the Company representing 25% or more of the voting power
of the Company (a "25% Shareholder"), provided, however, that the terms "person"
and "entity" as used in this clause (Y), shall not include (1) the Company or
any of its subsidiaries, (2) any employee benefit plan of the Company or any of
its subsidiaries, (3) any entity holding voting securities of the Company for or
pursuant to the terms of any such plan, (4) any person or entity if the
transaction that resulted in such person or entity becoming a 25% Shareholder
was approved in advance by the Board or (5) any person or entity who was a 25%
Shareholder on the date of adoption of the Plan by the Board; or
(Z) a reorganization, merger or consolidation of the Company (other than a
reorganization, merger or consolidation the sole purpose of which is to change
the Company's domicile solely within the United States) the consummation of
which results in the outstanding securities of any class then subject to the
Option being exchanged for or converted into cash and/or a different kind of
securities.
(ii) PERMANENT DISABILITY. If Participant's Employment is Terminated by reason
of Permanent Disability (within the meaning of Section 422(c)(6) of the Code) of
Participant, and a Change of Control shall not have occurred within one year
prior thereto, then (A) the portion of the Option that has not vested on or
prior to the date of such Termination of Employment shall terminate on such date
and (B) the remaining vested portion of the Option shall terminate upon the
earlier of the Expiration Date or the first anniversary of the date of such
Termination of Employment. Any determination by the Board that Participant does
or does not have a Permanent Disability shall be final and binding upon the
Company and Participant.
(iii) DEATH DURING EMPLOYMENT. If Participant's Employment is Terminated by
reason of death of Participant, and a Change of Control shall not have occurred
within one year prior thereto, then (A) the portion of the Option that has not
vested on or prior to the date of such Termination of Employment shall terminate
on such date and (B) the remaining vested portion of the Option shall terminate
upon the earlier of the Expiration Date or fifteen (15) months after the date of
such Termination of Employment.
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(iv) OTHER TERMINATION. If Participant's Employment is Terminated for no reason,
or for any reason other than Retirement, death or Permanent Disability, and a
Change of Control shall not have occurred within one year prior thereto, then
the Option shall terminate six months following such Termination of Employment
or the registration of said options by the Company, whichever is later.
(b) DEATH FOLLOWING TERMINATION OF EMPLOYMENT. Notwithstanding anything to the
contrary in this Agreement, if Participant shall die within not more than six
months after the Termination of his or her Employment and prior to the
Expiration Date, then (i) the portion of the Option that has not vested on or
prior to the date of such death shall terminate on such date and (ii) the
remaining vested portion of the Option shall terminate on the earlier of the
Expiration Date or fifteen (15) months after the date of such death.
(c) OTHER EVENTS CAUSING ACCELERATION OF OPTION. The Committee, in its sole
discretion, may accelerate the exercisability of the Option at any time and for
any reason.
(d) OTHER EVENTS CAUSING TERMINATION OF OPTION. Notwithstanding anything to the
contrary in this Agreement, the Option shall terminate upon the consummation of
any of the following events, or, if later, the thirtieth day following the first
date upon which such event shall have been approved by both the Board and the
shareholders of the Company:
(i) the dissolution or liquidation of the Company; or
(ii) a sale or lease of all or substantially all of the property and assets of
the Company, unless the term of such sale or lease shall provide otherwise.
3. ADJUSTMENTS. In the event that the outstanding securities of the class then
subject to the Option are increased, decreased or exchanged for or converted
into cash, property and/or a different number or kind of securities, or cash,
property and/or securities are distributed in respect of such outstanding
securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split or the like, or in the event that substantially all of the property
and assets of the Company are sold, then, unless such event shall cause the
Option to terminate pursuant to Section 2(d) hereof, the Committee shall make
appropriate and proportionate adjustments in the number and type of shares or
other securities or cash or other property that may thereafter be acquired upon
the exercise of the Option; provided, however, that any such adjustments in the
Option shall be made without changing the aggregate Exercise Price of the then
unexercised portion of the Option.
4. EXERCISE.
(a) The Option shall be exercisable during a Participant's lifetime only by
Participant or by his or her guardian or legal representative, and after
Participant's death only by the person or entity entitled to do so under
Participant's last will and testament or applicable intestate law. The Option
may only be exercised by the delivery to the Company of a written notice of such
exercise, which notice shall specify the number of Option Shares to be purchased
(the "Purchased Shares") and the aggregate Exercise Price for such shares (the
"Exercise Notice"), together with payment in full of such aggregate Exercise
Price in cash or by cashier's or personal check or money order payable to the
Company; provided, however, that at the option of the Committee payment of such
aggregate Exercise Price may instead be made, in whole or in part, by the
delivery to the Company of a certificate or certificates representing shares of
Common Stock, duly endorsed or accompanied by a duly executed stock powers,
which delivery effectively transfers to the Company good and valid title to such
shares, free and clear of any pledge, commitment, lien, claim or other
encumbrance (such shares to be valued on the basis of the aggregate Fair Market
Value (as defined in the Plan) thereof on the date of such exercise), provided
that the Company is not then prohibited from purchasing or acquiring such shares
of Common Stock.
5. REGISTRATION OF THE PLAN. The Company has agreed with Participant, under
certain circumstances, to register the 1996 Stock Option Plan to which the
Participant's Option Shares are a part no later than June 30, 1997, provided
that the value of each Option Share is at least $1.00 (market price of common
stock less exercise price of an Option Share) for a consecutive period of ten
days during the period from June 1, 1996 to June 30, 1997. Should the 1996 Stock
Option Plan not be registered by June 30, 1997, the Company agrees to register
the Participant's Option Shares, either separately or by registering the Stock
Option Plan, no later than January 1, 1998, unless otherwise agreed to by the
parties. In addition, the Company has agreed that should it cause the
registration of any stock options of any senior officers (other than by
registration of the 1992 Stock Option Plans pursuant to an S-8 registration)
that it will include the shares of the Participant, not previously subject of a
current registration statement, with any such registration on a pro rata basis
at no cost to the Participant.
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6. PAYMENT OF WITHHOLDING TAXES. The exercise of any Option is subject to the
condition that if at any time the Company shall determine, in its discretion,
that the satisfaction of withholding tax or other withholding liabilities under
any federal, state or local law is necessary or desirable as a condition of, or
in connection with, such exercise or a later lapsing of time or restrictions on
or disposition of the shares of Common Stock received upon such exercise, then
in such event, the exercise of the Option shall not be effective unless such
withholding shall have been effected or obtained in a manner acceptable to the
Company.
7. NOTICES. All notices and other communications required or permitted to be
given pursuant to this Agreement shall be in writing and shall be deemed given
if delivered personally or five days after mailing by certified or registered
mail, postage prepaid, return receipt requested, to the Company at 12875
Brookprinter Place, Suite #300, Poway, California 92064, Attention: Robert
Putnam, or to Participant at the address set forth beneath his or her signature
on the signature page hereto, or at such other addresses as they may designate
by written notice in the manner aforesaid.
8. APPLICABLE LAWS. Notwithstanding anything to the contrary in this Agreement,
no shares of stock purchased upon exercise of the Option, and no certificate
representing all or any part of such shares, shall be issued or delivered if in
the opinion of counsel to the Company, such issuance or delivery would cause the
Company to be in violation of or to incur liability under any federal, state or
other securities law, or any requirement of any stock exchange listing agreement
to which the Company is a party, or any other requirement of law or of any
administrative or regulatory body having jurisdiction over the Company. The
issuance of any unregistered Shares upon the exercise of an Option shall be
conditioned upon the Participant providing to the Committee a written
representation that, at the time of exercise, it is the intent of the
Participant to acquire the Shares for investment only and not with a view toward
distribution. Any unregistered Shares shall be restricted as to transfer by the
Company unless the Company receives an opinion of counsel satisfactory to the
Company to the effect that such restriction is not necessary.
9. NONTRANSFERABILITY. Neither the Option nor any interest therein may be sold,
assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in
any manner other than by will or the laws of descent and distribution.
10. PLAN. The Option is granted pursuant to the Plan, as in effect on the Date
of Grant, and is subject to all the terms and conditions of the Plan, as the
same may be amended from time to time; provided, however, that no such amendment
shall deprive Participant, without his or her consent, of the Option or of any
of Participant's rights under this Agreement. The interpretation and
construction by the Committee of the Plan, this Agreement, the Option and such
rules and regulations as may be adopted by the Committee for the purpose of
administering the Plan shall be final and binding upon Participant. Until the
Option shall expire, terminate or be exercised in full, the Company shall, upon
written request therefor, send a copy of the Plan, in its then-current form, to
Participant or any other person or entity then entitled to exercise the Option.
11. SHAREHOLDER RIGHTS. No person or entity shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of any Option Shares until the
Option shall have been duly exercised to purchase such Option Shares in
accordance with the provisions of this Agreement.
12. UNEMPLOYMENT OR CONTRACT RIGHTS. No provision of this Agreement or of the
Option granted hereunder shall (a) confer upon Participant any right to continue
in the employ of or contract with the Company or any of its subsidiaries, (b)
affect the right of the Company and each of its subsidiaries to terminate the
employment or contract of Participant, with or without cause, or (c) confer upon
Participant any right to participate in any employee welfare or benefit plan or
other program of the Company or any of its subsidiaries other than the Plan.
PARTICIPANT HEREBY ACKNOWLEDGES AND AGREES THAT THE COMPANY AND EACH OF ITS
SUBSIDIARIES MAY TERMINATE THE EMPLOYMENT OR CONTRACT OF PARTICIPANT AT ANY TIME
AND FOR ANY REASON, OR FOR NO REASON, UNLESS PARTICIPANT AND THE COMPANY OR SUCH
SUBSIDIARY ARE PARTY TO A WRITTEN EMPLOYMENT, CONSULTING OR OTHER AGREEMENT THAT
EXPRESSLY PROVIDES OTHERWISE.
13. SURVIVORSHIP. The respective rights and obligations of the Parties hereunder
shall survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
14. CONFLICTS. If there are any conflicts between the terms and conditions of
this Agreement and the terms and conditions of any Employment Agreement with the
Participant, then the terms and conditions of the Employment Agreement shall
govern.
15. SEVERABILITY. In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
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16. GOVERNING LAW. This Agreement and the Option granted hereunder shall be
governed by and construed and enforced in accordance with the laws of the State
of California without reference to choice or conflict of law principles.
IN WITNESS WHEREOF, the Company and Participant have duly executed this
Agreement as of the Date of Grant.
PATRIOT SCIENTIFIC CORPORATION
/s/ ROBERT PUTNAM
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By: Robert Putnam
Secretary/Treasurer
PARTICIPANT
/s/ MICHAEL A. CARENZO
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Signature
144 Azalea Drive
Hershey, Pennsylvania 17033
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