Exhibit
10.31


 


AMERICAN DEFENSE SYSTEMS, INC.


NON-QUALIFIED STOCK OPTION AGREEMENT


FOR


 






 


Agreement


 


1.             Grant
of Option.  AMERICAN DEFENSE SYSTEMS, INC., a Delaware
corporation (the “Company”) hereby grants, as of                       
(“Date of Grant”), to                          
(the “Optionee”) an option (the “Option”) to purchase up to              
shares of the Company’s common stock, $.001 par value per share (the “Shares”),
at an exercise price per share equal to $2.00 (the “Exercise Price”).  The Option shall be subject to the terms and
conditions set forth herein.  The Option
was issued pursuant to the Company’s 2007 Incentive Compensation Plan (the “Plan”),
which is incorporated herein for all purposes. 
The Option is a Non-Qualified Stock Option, and not an Incentive Stock
Option.  The Optionee hereby acknowledges
receipt of a copy of the Plan and agrees to be bound by all of the terms and
conditions hereof and thereof and all applicable laws and regulations.


 


2.             Definitions.  Unless otherwise provided herein, terms used
herein that are defined in the Plan and not defined herein shall have the
meanings attributed thereto in the Plan.


 


3.             Exercise
Schedule.  Except as
otherwise provided in Sections 6 or 10 of this Agreement, or in the Plan, the Option
is exercisable in installments as provided below, which shall be cumulative. To
the extent that the Option has become exercisable with respect to a percentage
of Shares as provided below, the Option may thereafter be exercised by the
Optionee, in whole or in part, at any time or from time to time prior to the
expiration of the Option as provided herein. The following table indicates each
date (the “Vesting Date”) upon which the Optionee shall be entitled to exercise
the Option with respect to the percentage of Shares granted as indicated beside
the date, provided that the Continuous Service of the Optionee continues
through and on the applicable Vesting Date:


 


	
  Percentage of Shares

  	
   

  	
  Vesting Date

  
	
   

  	
   

  	
   

  
	
  20%

  	
   

  	
  First anniversary of the Date of Grant

  
	
  40%

  	
   

  	
  Second anniversary of the Date of Grant

  
	
  60%

  	
   

  	
  Third anniversary of the Date of Grant

  
	
  80%

  	
   

  	
  Fourth anniversary of the Date of Grant

  
	
  100%

  	
   

  	
  Fifth anniversary of the Date of Grant

  



 


Except as otherwise specifically provided herein, there shall be no
proportionate or partial vesting in the periods prior to each Vesting Date, and
all vesting shall occur only on the appropriate Vesting Date. Upon the
termination of the Optionee’s Continuous Service, any unvested portion of the
Option shall terminate and be null and void.


 


4.             Method
of Exercise.  The vested
portion of this Option shall be exercisable in whole or in part in accordance
with the exercise schedule set forth in Section 3 hereof by written notice



 


1

















 


which
shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised, and such other representations
and agreements as to the holder’s investment intent with respect to such Shares
as may be required by the Company pursuant to the provisions of the Plan.  Such written notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company.  The written notice shall
be accompanied by payment of the Exercise Price.  This Option shall be deemed to be exercised
after both (a) receipt by the Company of such written notice accompanied
by the Exercise Price and (b) arrangements that are satisfactory to the
Committee in its sole discretion have been made for Optionee’s payment to the
Company of the amount, if any, that is necessary to be withheld in accordance
with applicable Federal or state withholding requirements.  No Shares shall be issued pursuant to the
Option unless and until such issuance and such exercise shall comply with all
relevant provisions of applicable law, including the requirements of any stock
exchange upon which the Shares then may be traded.


 


5.             Method
of Payment.  Payment of
the Exercise Price shall be by any of the following, or a combination thereof,
at the election of the Optionee:  (a) cash;
(b) check; (c) to the extent permitted by the Committee, with Shares
owned by the Optionee, or the withholding of Shares that otherwise would be
delivered to the Optionee as a result of the exercise of the Option, or (d) if
approved by the Committee, pursuant to a “cashless exercise” procedure by
delivery by the Optionee of a properly executed exercise notice together with
such other documentation, and subject to such guidelines, as the Committee shall
require to effect an exercise of the Option and delivery to the Company by a
licensed broker acceptable to the Company of proceeds from the sale of Shares
or a margin loan sufficient to pay the Exercise Price and any applicable income
or employment taxes, or (e) such other consideration or in such other
manner as may be determined by the Committee in its absolute discretion.


 


6.             Termination
of Option.


 


(a)           General.  Any unexercised portion of the Option shall
automatically and without notice terminate and become null and void at the time
of the earliest to occur of the following:


 


(i)            unless the Committee
otherwise determines in writing in its sole discretion, three months after the
date on which the Optionee’s Continuous Service is terminated other than by
reason of (A) by the Company or a Related Entity for Cause, (B) a
Disability of the Optionee as determined by a medical doctor satisfactory to
the Committee, or (C) the death of the Optionee;


 


(ii)           immediately upon the
termination of the Optionee’s Continuous Service by the Company or a Related
Entity for Cause;


 


(iii)          twelve months after the date
on which the Optionee’s Continuous Service is terminated by reason of a
Disability as determined by a medical doctor satisfactory to the Committee;


 


(iv)          (A) twelve months after
the date of termination of the Optionee’s Continuous Service by reason of the
death of the Optionee, or, if later, (B) three months after the 


 


2

















 


date on which the Optionee shall die if such
death shall occur during the one year period specified in Section 6(a)(iii) hereof;
or


 


(v)           the seventh anniversary of
the date as of which the Option is granted.


 


(b)           Cancellation.  To the extent not previously exercised, (i) the
Option shall terminate immediately in the event of (A) the liquidation or
dissolution of the Company, or (B) any reorganization, merger,
consolidation or other form of corporate transaction in which the Company does
not survive or the Shares are exchanged for or converted into securities issued
by another entity, or an affiliate of such successor or acquiring entity,
unless the successor or acquiring entity, or an affiliate thereof, assumes the
Option or substitutes an equivalent option or right pursuant to Section 10(c) of
the Plan, and (ii) the Committee in its sole discretion may by written
notice (“cancellation notice”) cancel, effective upon the consummation of any
transaction that constitutes a Change in Control, the Option (or portion
thereof) that remains unexercised on such date. 
The Committee shall give written notice of any proposed transaction
referred to in this Section 6(b) a reasonable period of time prior to
the closing date for such transaction (which notice may be given either before
or after approval of such transaction), in order that the Optionee may have a
reasonable period of time prior to the closing date of such transaction within
which to exercise the Option if and to the extent that it then is exercisable
(including any portion of the Option that may become exercisable upon the
closing date of such transaction).  The
Optionee may condition his exercise of the Option upon the consummation of a
transaction referred to in this Section 6(b).


 


7.             Restrictions While Stock is Not Registered.


 


(a)           Restricted Shares.  Any Shares acquired upon exercise of the
Option specified in Section 1 and (i) all shares of the Company’s
capital stock received as a dividend or other distribution upon such shares,
and (ii) all shares of capital stock or other securities of the Company
into which such shares may be changed or for which such shares shall be
exchanged, whether through reorganization, recapitalization, stock split-ups or
the like, shall be subject to the provisions of this Section 7 at all
times, and only at those times, that Shares are not registered under the
Securities Exchange Act of 1934, as amended (such times during which the Stock
is not so registered sometimes hereinafter being referred to as the “Restricted
Period”) and are during the Restricted Period hereinafter referred to as “Restricted
Securities.”


 


(b)           No Sale or Pledge of
Restricted Securities. 
Except as otherwise provided herein, the Optionee agrees and covenants
that during the Restricted Period he or she shall not sell, pledge, encumber or
otherwise transfer or dispose of, and shall not permit to be sold, encumbered,
attached or otherwise disposed of or transferred in any manner, either
voluntarily or by operation of law (all hereinafter collectively referred to as
“transfers”), all or any portion of the Restricted Securities or any interest
therein except in accordance with and subject to the terms of this Section 7.


 


(c)           Voluntary Transfer
Repurchase Option.  If
the Optionee desires to effect a voluntary transfer of any of the Restricted
Securities during the Restricted Period, the Optionee shall first give written
notice to the Company of such intent to transfer (the “Offer Notice”)
specifying (i) the number of the Restricted Securities (the “Offered
Shares”) and the date of the 


 


3

















 


proposed transfer (which shall not be less
than fifty (50) days after the giving of the Offer Notice), (ii) the name,
address, and principal business of the proposed transferee (the “Transferee”),
and (iii) the price and other terms and conditions of the proposed
transfer of the Offered Shares to the Transferee.  The Offer Notice by the Optionee shall
constitute an offer to sell all, but not less than all, of the Offered Shares,
at the price and on the terms specified in such Offer Notice, to the Company
and/or its designated purchaser.  If the
Company desires to accept the Optionee’s offer to sell, either for itself or on
behalf of its designated purchaser, the Company shall signify such acceptance
by written notice to Optionee within fifty (50) days following the giving of
the Option Notice.  Failing such
acceptance, the Optionee’s offer shall lapse on the fifty-first day following
the giving of the Option Notice.  With
such written acceptance, the Company shall designate a day not later than ten
days following the date of giving its notice of acceptance on which the Company
or its designated purchaser shall deliver the purchase price of the Offered
Shares (in the same form as provided in the Offer Notice) and the Optionee shall
deliver to the Company or its designated Purchaser, as applicable, all
certificates evidencing the Offered Shares endorsed in blank for transfer or
with separate stock powers endorsed in blank for transfer.  The Company may in its sole and absolute
discretion, notify the Optionee within fifty-one days following the giving of
the Option Notice that it does not permit the transfer of the Offered Shares to
the Transferee pursuant to the terms and conditions set forth in the Option
Notice in which event any such transfer or attempted transfer by the Optionee
to the Transferee shall be null and void. Upon the lapse without acceptance by
the Company of the Optionee’s offer to sell the Offered Shares, and unless the
Company shall provide written notice to the Optionee within fifty-one days
following the giving of the Option Notice that it will not permit the transfer
of the Offered Shares to the Transferee pursuant to the terms and conditions
set forth in the Option Notice, the Optionee shall be free to transfer the
Offered Shares not purchased by the Company or the designated purchaser to the
Transferee (and no one else), for a price and on terms and conditions which are
no more favorable to the Transferee than those set forth in the Offer Notice,
for a period of thirty days thereafter, but after such period the restrictions
of this Section 7 shall again apply to the Restricted Securities.  The Offered Shares so transferred by the
Optionee to the Transferee shall continue to be subject to all of the terms and
conditions of this Section 7 (including without limitation Section 7(f))
and the Company shall have the right to require, as a condition of such
transfer, that the Transferee execute an agreement substantially in the form
and content of the provisions of this Section 7, as well as any voting
agreement and/or shareholders agreement required by the Company.


 


(d)           Involuntary Transfer
Repurchase Option.  Whenever, during the Restricted Period, the
Optionee has any notice or knowledge of any attempted, pending, or consummated
involuntary transfer or lien or charge upon any of the Restricted Securities,
whether by operation of law or otherwise, the Optionee shall give immediate
written notice thereof to the Company. 
Whenever the Company has any other notice or knowledge of any such
attempted, impending, or consummated involuntary transfer, lien, or charge, it
shall give written notice thereof to the Optionee.  In either case, the Optionee agrees to
disclose forthwith to the Company all pertinent information in his possession
relating thereto.  If during the
Restricted Period any of the Restricted Securities are subjected to any such
involuntary transfer, lien, or charge, the Company and its designated purchaser
shall at all times have the immediate and continuing option to purchase such of
the Restricted Securities upon notice by the Company to the Optionee or other
record holder at a price and on terms determined according to Section 7(g) below,
and any of the 


 


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Restricted Securities so purchased by the
Company or its designated purchaser shall in every case be free and clear of
such transfer, lien, or charge.


 


(e)           Excepted Transfers.  The provisions of Sections 7(a) and (b) shall
not apply to transfers by the Optionee, either during his or her lifetime or
upon his or her death, to his or her spouse and/or lineal descendants, to the
trustee of any trusts for the sole benefit of the Optionee and/or the Optionee’s
spouse and/or the Optionee’s lineal descendants; provided, however, that during
the Restricted Period the Optionee shall continue to be subject to all of the
terms and provisions of this Section 7 with respect to any remaining
present or future interest whatsoever he or she may have in the transferred
Restricted Securities, and, further provided that during the Restricted Period
any shares transferred pursuant to this subsection (e) shall continue to
be treated as Restricted Securities and the transferee of any such Restricted
Securities shall likewise be subject to all such terms and conditions of this Section 7
as though such transferee were a party hereto.


 


(f)            Repurchase Option After
Termination of Continuous Service.  Anything set forth in this Agreement to the
contrary notwithstanding, the Company shall have the right (but not the
obligation) to purchase or designate a purchaser of all, but not less than all,
of the Restricted Securities (including, without limitation, any Restricted
Securities transferred pursuant to Section 7(e)) during the Restricted
Period and after termination of the Optionee’s Continuous Service for any
reason, for the purchase price and on terms specified in Section 7(g) hereof.  The Company may exercise its right to
purchase or designate a purchaser of the Restricted Securities at any time
(without any time limitation) after the Optionee’s termination of Continuous
Service and during the Restricted Period. 
If the Company chooses to exercise its right to purchase the Restricted
Securities hereunder, the Company shall give its notice of its exercise of this
right to the Optionee or his or her legal representative specifying in such
notice a date not later than ten (10) days following the date of giving
such notice on which the Company or its designated purchaser shall deliver, or
be prepared to deliver, the check or promissory note for the purchase price and
the Optionee or his or her legal representative shall deliver all stock
certificates evidencing such Restricted Securities duly endorsed in blank for
transfer or with separate stock powers endorsed in blank for transfer.


 


(g)           Repurchase Price.  For purposes of Sections 7(d) and (f) hereof,
the per share purchase price of Restricted Securities shall be an amount equal
to the Fair Market Value of such Share, determined by the Committee as of any
date determined by the Committee that is not more than one year prior to the
date of the event giving rise to the Company’s right to purchase such
Restricted Securities.  Notwithstanding
the foregoing, if the event that gives rise to the Company’s right to
repurchase the Restricted Securities is the termination of Optionee’s
Continuous Service by the Company or a Related Entity for Cause, the per share
purchase price of the Restricted Securities shall be an amount equal to the
lesser of (i) the Fair Market Value of such Share (as determined in
accordance with the previous sentence), and (ii) the original purchase
price per share the Optionee paid for such Restricted Securities.  Any determination of Fair Market Value made
by the Committee shall be binding and conclusive on all parties.  The purchase price shall, at the option of
the Company, be payable in cash or in the form of the Company’s promissory note
payable in up to three equal annual installments commencing 12 months after the
acquisition by the Company (the “Restricted Share Acquisition Date”) of the
Restricted Securities, together with interest on the unpaid balance thereof at
the rate equal to the 


 


5

















 


prime rate of interest as quoted in the Wall
Street Journal on the Restricted Share Acquisition Date.


 


(h)           Legends.  The certificate or certificates representing
any Restricted Securities acquired pursuant to the exercise of this Option
prior to the last day of the Restricted Period shall bear the following legends
(as well as any legends required by applicable state and federal corporate and
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 IN FORM AND SUBSTANCE 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 RIGHT OF
FIRST REFUSAL AND REPURCHASE OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS
SET FORTH IN A NONQUALIFIED STOCK OPTION AGREEMENT 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, RIGHT OF FIRST REFUSAL AND REPURCHASE RIGHTS ARE BINDING
ON TRANSFEREES OF THESE SHARES.


 


8.             Transferability.  Unless otherwise determined by the Committee,
the Option granted hereby is not transferable otherwise than by will or under
the applicable laws of descent and distribution, and during the lifetime of the
Optionee the Option shall be exercisable only by the Optionee, or the Optionee’s
guardian or legal representative. In addition, the Option shall not be
assigned, negotiated, pledged or hypothecated in any way (whether by operation
of law or otherwise), and the Option shall not be subject to execution, attachment
or similar process. Upon any attempt to transfer, assign, negotiate, pledge or
hypothecate the Option, or in the event of any levy upon the Option by reason
of any execution, attachment or similar process contrary to the provisions
hereof, the Option shall immediately become null and void.  The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.


 


9.             No
Rights of Stockholders.  Neither the Optionee nor any personal
representative (or beneficiary) shall be, or shall have any of the rights and
privileges of, a stockholder of the Company with respect to any Shares
purchasable or issuable upon the exercise of the Option, in whole or in part,
prior to the date on which the Shares are issued.


 


6














 


10.           Acceleration of
Exercisability of Option.


 


(a)           Acceleration
Upon Certain Terminations or Cancellations of Option.  This Option shall become immediately fully
exercisable in the event that, prior to the termination of the Option pursuant
to Section 6 hereof, (i) the Option is terminated pursuant to Section 6(b)(i) hereof,
or (ii) the Company exercises its discretion to provide a cancellation
notice with respect to the Option pursuant to Section 6(b)(ii) hereof.


 


(b)           Acceleration
Upon Change in Control.  This Option shall become immediately fully
exercisable in the event that, prior to the termination of the Option pursuant
to Section 6 hereof, and during the Optionee’s Continuous Service, there
is a “Change in Control”, as defined in Section 9(b) of the Plan.


 


(c)           Exception
to Acceleration Upon Change in Control.  Notwithstanding the foregoing, if in the
event of a Change in Control the successor company assumes or substitutes for
the Option, the vesting of the Option shall not be accelerated as described in Section 10(b).  For the purposes of this paragraph, the
Option shall be considered assumed or substituted for if following the Change
in Control the Option or substituted option confers the right to purchase, for
each Share subject to the Option immediately prior to the Change in Control,
the consideration (whether stock, cash or other securities or property)
received in the transaction constituting a Change in Control by holders of
Shares for each Share held on the effective date of such transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the transaction constituting a
Change in Control is not solely common stock of the successor company or its
parent or subsidiary, the Committee may, with the consent of the successor
company, or its parent or subsidiary, provide that the consideration to be
received upon the exercise or vesting of the Option will be solely common stock
of the successor company or its parent or subsidiary substantially equal in
Fair Market Value to the per share consideration received by holders of Shares
in the transaction constituting a Change in Control.  The determination of such substantial
equality of value of consideration shall be made by the Committee in its sole
discretion and its determination shall be conclusive and binding.


 


11.           No Right to Continued
Employment.  Neither the
Option nor this Agreement shall confer upon the Optionee any right to continued
employment or service with the Company.


 


12.           Law Governing.  This Agreement shall be governed in
accordance with and governed by the internal laws of the State of Delaware.


 


13.           Interpretation /
Provisions of Plan Control. This Agreement is subject to all the
terms, conditions and provisions of the Plan, including, without limitation,
the amendment provisions thereof, and to such rules, regulations and
interpretations relating to the Plan adopted by the Committee as may be in
effect from time to time. If and to the extent that this Agreement conflicts or
is inconsistent with the terms, conditions and provisions of the Plan, the Plan
shall control, and this Agreement shall be deemed to be modified accordingly.
The Optionee accepts the Option subject to all of the terms and provisions of
the Plan and this Agreement.  The
undersigned Optionee hereby accepts as binding, conclusive and final all
decisions or


 


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interpretations
of the Committee upon any questions arising under the Plan and this Agreement,
unless shown to have been made in an arbitrary and capricious manner.


 


14.           Notices.  Any notice under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered personally
or when deposited in the United States mail, registered, postage prepaid, and
addressed, in the case of the Company, to the Company’s Secretary at 230 Duffy
Avenue, Unit C, Hicksville, NY 11801, or if the Company should move its
principal office, to such principal office, and, in the case of the Optionee,
to the Optionee’s last permanent address as shown on the Company’s records,
subject to the right of either party to designate some other address at any
time hereafter in a notice satisfying the requirements of this Section.


 


15.           Market Stand-Off Agreement.  In the event of an initial public offering of
the Company’s securities and upon request of the Company or the underwriters
managing any underwritten offering of the Company’s securities, the Optionee
agrees not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Shares (other than those included in
the registration) acquired pursuant to the exercise of the Option, without the
prior written consent of the Company or such underwriters, as the case may be,
for such period of time (not to exceed 180 days) from the effective date of
such registration as may be requested by the Company or such managing
underwriters.


 


16.           Optionee’s Representations.  In the event that the Company’s issuance of
the Shares purchasable pursuant to the exercise of this Option has not been
registered under the Securities Act of 1933, as amended, at the time this
Option is exercised, the Optionee 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
to this Agreement as Exhibit A or in such other form as the Company may
request.


 


IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of
the            day of
                                      ,
2007.


 


	
   

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AMERICAN
  DEFENSE SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  



 


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The
Optionee acknowledges receipt of a copy of the Plan and represents that he or
she has reviewed the provisions of the Plan and this Option Agreement in their
entirety, is familiar with and understands their terms and provisions, and hereby
accepts this Option subject to all of the terms and provisions of the Plan and
the Option Agreement.  The Optionee
further represents that he or she has had an opportunity to obtain the advice
of counsel prior to executing this Option Agreement.


 


	
  Dated:

  	
   

  	
   

  	
  OPTIONEE:

  
	
   

  	
   

  	
   

   

  
	
   

  	
   

  	
  By:

  	
   

  



 


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EXHIBIT A


 


INVESTMENT REPRESENTATION STATEMENT


 


	
  PURCHASER

  	
  :

  	
   

  
	
   

  	
   

  	
   

  
	
  COMPANY

  	
  :

  	
  AMERICAN
  DEFENSE SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
  SECURITY

  	
  :

  	
   

  
	
   

  	
   

  	
   

  
	
  AMOUNT

  	
  :

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE :

  	
   

  



 


In
connection with the purchase of the above-listed Securities, I, the Purchaser,
represent to the Company the following:


 


(a)           I am aware of the
Company’s business affairs and financial condition, and have acquired
sufficient information about the Company to reach an informed and knowledgeable
decision to acquire the Securities. I am purchasing these Securities for my own
account for investment purposes only and not with a view to, or for the resale
in connection with, any “distribution” thereof for purposes of the Securities
Act of 1933, as amended (the “Securities Act”).


 


(b)           I understand that
the Company’s issuance of the Securities has 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 my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission (the “SEC”), the statutory basis for such
exemption may be unavailable if my 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 year or
any other fixed period in the future.


 


(c)           I further understand
that the Securities must be held indefinitely unless the transfer is
subsequently registered under the Securities Act or unless an exemption from
registration is otherwise available. Moreover, I understand that the Company is
under no obligation to register any transfer of the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless registered
or such registration is not required in the opinion of counsel for the Company.


 


(d)           I am 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
issuance of the Securities, such issuance will be exempt from


 


10

















 


registration
under the Securities Act. In the event the Company later becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter the securities exempt under Rule 701
may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including among other things: (1) the sale
being made through a broker in an unsolicited “broker’s transaction” or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, and the amount of
securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), if applicable. Notwithstanding this
paragraph (d), I acknowledge and agree to the restrictions set forth in
paragraph (e) hereof.


 


In
the event that the Company does not qualify under Rule 701 at the time of
issuance of the Securities, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which
requires among other things: (1) the availability of certain public
information about the Company, (2) the resale occurring not less  than one  year after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than two years, (3) the
sale being made through a broker in an unsolicited “broker’s transaction” or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.


 


(e)           I further understand
that in the event all of the applicable requirements of Rule 144 or Rule 701
are not satisfied, registration under the Securities Act, compliance with
Regulation A, or some other registration exemption will be required; and that,
notwithstanding the fact that Rule 144 and Rule 701 are not
exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 or Rule 701 will
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.


 


	
   

  	
  Signature
  of Purchaser:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
				



 


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