Exhibit (10)(a)
STOCK OPTION AGREEMENT
XXXXXX UNITED DEVELOPMENT CORP. (the "Company"), desiring to afford an
opportunity to the Grantee named below to purchase certain shares of the
Company's Common Stock, $.0001 par value per share, to provide the Grantee with
an added incentive as an employee of the Company, hereby grants to Grantee, and
the Grantee hereby accepts, an option to purchase the number of such shares
optioned as specified below, during the term ending at midnight Eastern Time on
the expiration date of this Option specified below, at the option exercise price
specified below, subject to and upon the following terms and conditions:
1. Identifying Provisions: As used in this Option, the following terms
shall have the following respective meanings:
(a) Grantee: Xxxxxx Xxxxxx
(b) Date of grant: April 11, 2002
(c) Number of shares optioned: Six Million (6,000,000)
(d) Option exercise price per share: Two Cents ($.02)
(e) Expiration date: April 10, 2012
This Option is not intended to be and shall not be treated as an
incentive stock option under Section 422 of the Internal Revenue Code.
2. Timing of Purchases: This Option is shall be exercisable as follows:
Number of Shares Eligible for Exercise
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1,000,000 October 11, 2002
1,000,000 April 11, 2003
1,000,000 October 11, 2003
1,000,000 April 11, 2004
1,000,000 October 11, 2004
1.000,000 April 11, 2005
From April 11, 2005, this Option may be exercised as to all optioned shares for
which it had not previously been exercised, until and including the expiration
date of this Option whereupon the Option shall expire and may thereafter no
longer be exercised.
3. Restrictions on Exercise: The following additional provisions shall apply to
the exercise of this Option:
(i) Termination of Employment. If the Grantee's employment by the Company is
terminated for any reason other than death, only that portion of this Option
exercisable at the time of such termination of employment may thereafter be
exercised, and it may not be exercised more than three (3) months after such
termination nor after the expiration date of this Option, whichever date is
sooner, unless such termination is by reason of the Grantee's permanent and
total disability, in which case such period of three (3) months shall be
extended to one (1) year. In all other respects, this Option shall terminate
upon such termination of employment.
(ii) Death of Grantee. If the Grantee shall die during the term of this Option,
the Grantee's legal representative or representatives, or the person or persons
entitled to do so under the Grantee's last will and testament or under
applicable intestate laws, shall have the right to exercise this Option, but
only for the number of shares as to which the Grantee was entitled to exercise
this Option in accordance with Section 2 hereof on the date of his death, and
such right shall expire and this Option shall terminate one (1) year after the
date of the Grantee's death or on the expiration date of this Option, whichever
date is sooner. In all other respects, this Option shall terminate upon such
death.
(iii) Continuity of Employment. This Option shall not be exercisable by the
Grantee in any part unless at all times beginning with the date of grant and
ending no more than three (3) months prior to the date of exercise, the Grantee
has, except for military service leave, sick leave or other bona fide leave of
absence (such as temporary employment by the United States Government) been in
the continuous employ of the Company, except that such period of three (3)
months shall be one (1) year following any termination of the Grantee's
employment by reason of his permanent and total disability.
4. Non-Transferable: The Grantee may not transfer this Option except by will or
the laws of descent and distribution. This Option shall not be otherwise
transferred, assigned, pledged, hypothecated or disposed of in any way, whether
by operation of law or otherwise, and shall be exercisable during the Grantee's
lifetime only by the Grantee or his guardian or legal representative.
5. Adjustments and Corporate Reorganizations: If the outstanding shares of the
class then subject to this Option are increased or decreased, or are changed
into or exchanged for a different number or kind of shares or securities, as a
result of one or more reorganizations, recapitalizations, stock splits, reverse
stock splits, stock dividends or the like, appropriate adjustments shall be made
in the number and/or kind of shares or securities for which the unexercised
portions of this Option may thereafter be exercised, all without any change in
the aggregate exercise price applicable to the unexercised portions of this
Option, but with a corresponding adjustment in the exercise price per share or
other unit. No fractional share of stock shall be issued under this Option or in
connection with any such adjustment. Such adjustments shall be made by or under
authority of the Company's board of directors whose determinations as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.
Upon the dissolution or liquidation of the Company, or upon a reorganization,
merger or consolidation of the Company as a result of which the outstanding
securities of the class then subject to this Option are changed into or
exchanged for cash or property or securities not of the Company's issue, or any
combination thereof, or upon a sale of substantially all the property of the
Company to, or the acquisition of stock representing more than eighty percent
(80%) of the voting power of the stock of the Company then outstanding by,
another corporation or person, this Option shall terminate, unless provision be
made in writing in connection with such transaction for the assumption of this
Option, or the substitution for such option of any options covering the stock of
a successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices, in which
event this Option shall continue in the manner and under the terms so provided.
If this Option shall terminate pursuant to the foregoing sentence, the Grantee
shall have the right, at such time prior to the consummation of the transaction
causing such termination as the Company shall designate, to exercise the
unexercised portions of this Option, including the portions thereof which would,
but for this Section entitled "Adjustments and Corporate Reorganizations," not
yet be exercisable.
6. Exercise, Payment For and Delivery of Stock: This Option may be exercised by
the Grantee or other person then entitled to exercise it by giving four (4)
business days' written notice of exercise to the Company specifying the number
of shares to be purchased and the total purchase price, accompanied by a check
to the order of the Company in payment of such price. If the Company is required
to withhold on account of any present or future tax imposed as a result of such
exercise, the notice of exercise shall be accompanied by a check to the order of
the Company in payment of the amount of such withholding.
7. Alternative Payment with Stock: Notwithstanding the foregoing provisions
requiring payment by check, payment of such purchase price or any portion
thereof may be made with shares of stock of the same class as the shares then
subject to this Option, if shares of that class are then Publicly Traded (as
defined herein), such shares to be credited toward such purchase price on the
valuation basis set forth below, in which event the stock certificates
evidencing the shares so to be used shall accompany the notice of exercise and
shall be duly endorsed or accompanied by duly executed stock powers to transfer
the same to the Company; provided, however, that such payment in stock instead
of cash shall not be effective and shall be rejected by the Company if (i) the
Company is then prohibited from purchasing or acquiring shares of the class of
its stock thus tendered to it, or (ii) the right or power of the person
exercising the Option to deliver such shares in payment of said purchase price
is subject to the prior interests of any other person (excepting the Company),
as indicated by legends upon the certificate(s) or as known to the Company. For
credit toward the purchase price, shares so surrendered shall be valued at their
Fair Market Value (as defined herein) as of the day immediately preceding the
delivery to the Company of the certificate(s) evidencing such shares. If the
Company rejects the payment in stock, the tendered notice of exercise shall not
be effective hereunder unless promptly after being notified of such rejection
the person exercising the Option pays the purchase price in acceptable form. If
and while payment of the purchase price with stock is permitted in accordance
with the foregoing provisions, the person then entitled to exercise this Option
may, in lieu of using previously outstanding shares therefor, use some of the
shares as to which this Option is then being exercised, in which case the notice
of exercise need not be accompanied by any stock certificates but shall include
a statement directing the Company to withhold so many of the shares that would
otherwise have been delivered upon that exercise of this Option as equals the
number of shares that would have been transferred to the Company if the purchase
price had been paid with previously issued stock.
8. Rights in Shares Before Issuance and Delivery: No person shall be entitled to
the privileges of stock ownership in respect of any shares issuable upon
exercise of this Option, unless and until such shares have been issued to such
person as fully paid shares.
9. Requirements of Law: By accepting this Option, the Grantee represents and
agrees for himself and his transferees by will or the laws of descent and
distribution that, unless a registration statement under the Securities Act of
1933 is in effect as to shares purchased upon any exercise of this Option, (i)
any and all shares so purchased shall be acquired for his personal account and
not with a view to or for sale in connection with any distribution, and (ii)
each notice of the exercise of any portion of this Option shall be accompanied
by a representation and warranty in writing, signed by the person entitled to
exercise the same, that the shares are being so acquired in good faith for his
personal account and not with view to or for sale in connection with any
distribution.
No certificate or certificates for shares of stock purchased upon exercise of
this Option shall be issued and delivered prior to the admission of such shares
to listing on notice of issuance on any stock exchange or other securities
market on which shares of that class are then listed, nor unless and until, in
the opinion of counsel for the Company, such securities may be issued and
delivered without causing the Company to be in violation of or incur any
liability under any federal, state or other securities law, any requirement of
any securities exchange listing agreement to which the Company may be a party,
or any other requirement of law or of any regulatory body having jurisdiction
over the Company.
10. Replacement Options. If and when this Option is exercised and the exercise
price is paid with previously outstanding shares or with shares as to which this
Option is being exercised, as permitted in paragraph 7 hereof, upon such
exercise of this Option the Grantee or other person who duly exercised this
Option will automatically and simultaneously receive a supplemental option
(herein sometimes referred to as a "replacement option") for a number of shares
equal to the number of shares delivered by the Grantee or by the other person
exercising this Option or retained by the Company in such exercise of this
Option, subject to adjustments of the sort provided in paragraph 5 hereof, at an
exercise price per share equal to the Fair Market Value (as defined herein) of
the shares subject to the replacement option on the date this Option is thus
exercised. The replacement option shall expire on the expiration date of this
Option and shall in other respects contain the same terms and provisions as this
Option, except that: (a) the replacement option shall not itself provide for any
further replacement options upon its exercise, whether or not the exercise price
of the replacement option is paid with previously outstanding shares or with
shares as to which it is being exercised; and (b) the replacement option may not
be exercised before the earlier of (i) the expiration of one year after the date
it is granted or (ii) the first day of the calendar month in which its
expiration date occurs, subject to any acceleration of its exercisability under
provisions such as those in paragraph 5 hereof.
11. Certain Definitions: As used in this Option "Fair Market Value" of corporate
stock shall mean: (a) If the stock is then Publicly Traded: The closing price of
stock of that class as of the day in question (or, if such day is not a trading
day in the principal securities market or markets for such stock, on the nearest
preceding trading day), as reported with respect to the market (or the composite
of markets, if more than one) in which shares of such stock are then traded, or,
if no such closing prices are reported, on the basis of the mean between the
high bid and low asked prices that day on the principal market or quotation
system on which shares of such stock are then quoted, or, if not so quoted, as
furnished by a professional securities dealer making a market in such stock
selected by or under authority of the board of directors of the Company.
(b) If the stock is then not Publicly Traded: The price at which one could
reasonably expect such stock to be sold in an arm's length transaction, for
cash, other than on an installment basis, to a person not employed by,
controlled by, in control of or under common control with the issuer of such
shares. Such Fair Market Value shall be that which has currently or most
recently been determined for this purpose by the Company's board of directors,
or at the discretion of that board by an independent appraiser or appraisers
selected by the board, in either case giving due consideration to recent
transactions involving shares of such stock, if any, the issuer's net worth,
prospective earning power and dividend-paying capacity, the goodwill of the
issuer's business, the issuer's industry position and its management, that
industry's economic outlook, the values of securities of issuers whose stock is
Publicly Traded and which are engaged in similar businesses, the effect of
transfer restrictions to which such stock may be subject under law and under the
applicable terms of any contract governing such stock, the absence of a public
market for such stock and such other matters as the board or its appraiser or
appraisers deem pertinent. The determination by the Company's board of directors
or its appraiser or appraisers of the Fair Market Value shall, if not
unreasonable, be conclusive and binding notwithstanding the possibility that
other persons might make a different, and also reasonable, determination. If the
Fair Market Value to be used was thus fixed more than sixteen months prior to
the day as of which Fair Market Value is being determined, it shall in any event
be no less than the book value of the stock being valued at the end of the most
recent period for which financial statements of the issuer are available.
Corporate stock is "Publicly Traded" if stock of that class is listed or
admitted to unlisted trading privileges on a national securities exchange or on
the NASDAQ National Market or if sales or bid and offer quotations are reported
for that class of stock in the automated quotation system ("NASDAQ") operated by
the National Association of Securities Dealers, Inc. ("NASD").
12. Notices: Any notice to be given to the Company shall be addressed to the
Company in care of its Secretary at its principal office, and any notice to be
given to the Grantee shall be addressed to him at the address given beneath his
signature hereto or at such other address as the Grantee may hereafter designate
in writing to the Company. Any such notice shall be deemed duly given when
enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
registered or certified, and deposited, postage and registry or certification
fee prepaid, in a post office or branch post office regularly maintained by the
United States Postal Service.
13. Laws Applicable to Construction: This Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has granted this Option on the date of grant
specified above.
XXXXXX UNITED DEVELOPMENT CORP.
/s/ XXXXXX XXXXXX By: /s/ XXXXXXX XXXXX
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Xxxxxx Xxxxxx Xxxxxxx Xxxxx, Executive Vice President
