DETTO TECHNOLOGIES, INC.
REPURCHASE OPTION AGREEMENT
This Stock
Issuance Agreement (the "Agreement") is made as of November 18,
2005, by and among Detto Technologies, Inc., a Delaware corporation (the
"Corporation") and Stephen Elderkin (the
"Stockholder").
R E C I T A L S :
WHEREAS
the Stockholder
and the Corporation entered into that certain
Purchase Agreement dated of even date herewith (the "Purchase Agreement")
pursuant to which the Corporation agreed to issue 1,400,000 shares of the
Corporation's Common Stock;
WHEREAS as
a condition
to the issuance of the shares pursuant to the
Purchase Agreement, the Stockholder agreed
to enter into this Agreement; and
WHEREAS
all capitalized
terms in this
Agreement shall have the meaning
assigned to them in this Agreement or in
the attached Appendix, unless otherwise
indicated.
NOW,
THEREFORE, it is hereby agreed as follows:
1. Issuance of Shares.
(a)
Issuance. The Company
shall issue to the Stockholder 1,400,000 shares
of the Corporation's Common Stock pursuant to the Purchase Agreement (the
"Acquired Shares").
(b)
Shareholder Rights.
Until such time as the Corporation exercises the
Repurchase Right (as defined in Section 4(a)
hereof), the
Stockholder (or
any
successor in interest) shall have all the rights of a
shareholder
(including
voting, dividend and liquidation
rights) with respect
to the Acquired
Shares,
subject, however, to the transfer
restrictions of this Agreement.
(c)
Escrow. The Corporation shall have the right to hold the
Acquired
Shares in escrow until those shares have
vested in accordance
with the Vesting
Schedule and the Stockholder shall execute (in blank) the
Assignment
Separate
from Certificate in the form attached
hereto as Exhibit 2.
(d)
Compliance
With Law. Under no
circumstances
shall shares of
Common
Stock or other assets be issued or
delivered to the Stockholder pursuant to the
provisions of this Agreement unless, in the opinion of counsel for the
Corporation or its successors, there shall have been compliance with all
applicable requirements of Federal and state securities laws, all applicable
listing requirements of any stock exchange
(or the NASDAQ National Market, if
applicable) on which the Common Stock is at
the time listed for trading and all
other requirements of law or of any
regulatory bodies having jurisdiction over
such issuance and delivery.
2. Securities Law Compliance.
(a)
Exemption From
Registration. The
Stockholder
acknowledges that
the
Acquired Shares have not been registered
under the 1933 Act and
are accordingly
being issued to the Stockholder in reliance upon the exemption from such
registration in accordance to the Purchase
Agreement.
<PAGE>
(b)
Disposition
of Shares. The Stockholder hereby agrees that the
Stockholder shall make no disposition
of the Acquired
Shares unless and
until
there is compliance with all of the
following requirement: the Stockholder shall
have provided the Corporation with written assurances, in form and substance
satisfactory to the Corporation, that: (A) the proposed
disposition
does not
require registration of the Acquired Shares under the 1933 Act; or (B) all
appropriate action necessary for compliance
with the registration
requirements
of the 1933 Act or of any exemption from
registration
available under the
1933
Act (including Rule 144) has been
taken.
The Corporation shall not be required: (i) to transfer on its books
any
Acquired Shares which have been sold or transferred in violation of the
provisions of this Agreement; or (ii) to treat as the
owner of the
Acquired
Shares, or otherwise to accord voting,
dividend or
liquidation rights to,
any
transferee to whom the Acquired Shares have been transferred in violation of
this Agreement.
(c)
Restrictive Legends.
In order to reflect the restrictions imposed by
this Agreement upon the disposition of the Acquired Shares, the stock
certificates for the Acquired Shares shall
be endorsed with restrictive legends,
including one or more of the following
legends:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF: (A) AN
EFFECTIVE REGISTRATION
STATEMENT FOR
THE SHARES UNDER SUCH ACT; (B) A `NO ACTION' LETTER OF THE SECURITIES AND
EXCHANGE COMMISSION WITH RESPECT TO SUCH SALE OR OFFER;
OR (C) SATISFACTORY
ASSURANCES TO THE CORPORATION THAT
REGISTRATION
UNDER SUCH ACT IS NOT
REQUIRED
WITH RESPECT TO SUCH SALE OR OFFER."
(ii) "THE SHARES
REPRESENTED BY THIS
CERTIFICATE MAY NOT BE
SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN
CONFORMITY WITH THE TERMS OF A STOCK
ISSUANCE AGREEMENT
BETWEEN THE CORPORATION
AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN
INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS CERTAIN
REPURCHASE RIGHTS TO THE CORPORATION (OR
ITS ASSIGNEES) UPON THE SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER
DISPOSITION OF THE SHARES. A COPY OF SUCH AGREEMENT IS MAINTAINED AT THE
CORPORATION'S PRINCIPAL CORPORATE OFFICES. ANY TRANSFER IN VIOLATION OF
SAID
AGREEMENT IS NULL AND VOID."
3. Transfer Restrictions. The Stockholder shall not
transfer, assign,
encumber
or otherwise dispose of any of the Acquired Shares which are subject to the
Repurchase Right.
4. Repurchase Right.
(a) Grant.
The Corporation is hereby granted the
right (the
"Repurchase
Right"), exercisable at any time during the
ninety (90) day period following the
date the Stockholder ceases for any reason to remain in
Service, to
repurchase
at a price of $0.01 per share all or any
portion of the Acquired Shares in which
the Stockholder is not, at the time of
his or her cessation of Service, vested
in accordance with the Vesting Schedule or the special
vesting acceleration
provisions of Section 4(e) hereof (such
shares to be hereinafter referred to as
the "Unvested Shares").
<PAGE>
(b)
Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to the Stockholder prior to the
expiration of the ninety (90) day exercise
period. The notice shall indicate the
number of Unvested Shares to be repurchased
and the date on which the repurchase
is to be effected, such date to be not more
than thirty (30) days after the date
of such notice. The certificates representing the Unvested Shares to be
repurchased shall be delivered to the Corporation on or before the close of
business on the date specified for the
repurchase. Concurrently with the receipt
of such stock certificates, the Corporation shall pay to the
Stockholder $0.01
per share.
(c)
Termination
of the Repurchase Right. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under Section 4(b) hereof.
In addition,
the Repurchase
Right shall
terminate and cease to be exercisable with respect to any and all Acquired
Shares in which the Stockholder
vests in accordance
with the following
Vesting
Schedule:
(i) the Stockholder
shall acquire a vested interest in, and the
Repurchase Right shall lapse with respect
to, the Acquired Shares in a series of
twenty-four successive equal monthly installments upon the Stockholder's
completion of each additional month of
Service over the twenty-four month period
measured from the date of this
Agreement.
(d)
Recapitalization.
Any new, substituted or additional
securities or
other property (including cash paid other
than as a regular cash dividend) which
is by reason of any stock split, stock
dividend,
recapitalization,
combination
of shares, exchange of shares or other
transaction
affecting the
outstanding
Common Stock as a class effective without the Corporation's receipt of
consideration ("Recapitalization"), distributed with respect to the Acquired
Shares shall be immediately subject to the Repurchase Right and any escrow
requirements hereunder, but only to the extent the
Acquired Shares are at
the
time covered by such right or escrow
requirements.
Appropriate
adjustments to
reflect such distribution shall be made to
the number and/or c
