NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, effective as of the 13th day of March, 2006 (the
"Grant Date"), between Manchester Inc. (the "Company"), and Xxxxxx X. Xxxxxxxx
(the "Optionee").
WHEREAS, the Board of Directors has determined that it is in the
best interest of the corporation to provide additional incentive to selected
directors, officers, employees, consultants and strategic partners of the
Company; and
WHEREAS, the Board of Directors has determined to grant a
non-qualified option to the Optionee as provided herein, and the Company and the
Optionee hereby wish to memorialize the terms and conditions applicable to the
Option;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option. Effective as of the Grant Date, the Company
hereby grants to the Optionee the right and option (the "Option") to purchase
all or any part of an aggregate of 200,000 whole shares (the "Shares") of
Company common stock (the "Common Stock"), subject to, and in accordance with,
the terms and conditions set forth in this Agreement.
2. Purchase Price.
The price at which the Optionee shall be entitled to purchase Shares
upon the exercise of the Option shall be US$4.39 per Share, being the closing
price of the Company's common stock on the OTC Bulletin Board on the trading day
immediately preceding the date of this Agreement.
3. Duration of Option.
The Option shall be exercisable to the extent vested and in the
manner provided herein until the fifth anniversary of the date hereof.
4. Exercisability of Option.
The Option shall vest in accordance with the following schedule and
become exercisable with respect to the following number of Shares covered by the
Option so long as Optionee remains employed by the Company or continues to serve
the Company in a consulting capacity:
50,000 Shares as of the date of this Agreement.
75,000 Shares on the six month anniversary thereafter.
75,000 Shares on the one year anniversary thereafter.
5. Manner of Exercise and Payment.
5.1 Subject to the terms and conditions of this Agreement
the Option may be exercised by delivery of written notice to the Company in the
form attached hereto, at its principal executive office. Such notice shall state
that the Optionee is electing to exercise the Option and the number of Shares in
respect of which the Option is being exercised and shall be signed by the person
or persons exercising the Option. If requested by the Company, such person or
persons shall (i) deliver this Agreement to an Officer of the Company who shall
endorse thereon a notation of such exercise and (ii) provide satisfactory proof
as to the right of such person or persons to exercise the Option.
5.2 The notice of exercise described in Section 5.1 shall be
accompanied by payment of the full purchase price for the Shares in respect of
which the Option is being exercised, in cash or by check.
5.3 Upon receipt of the notice of exercise and any payment
or other documentation as may be necessary pursuant to Section 5.2 relating to
the Shares in respect of which the Option is being exercised, the Company shall,
subject to this Agreement, take such action as may be necessary to effect the
transfer to the Optionee of the number of Shares as to which such exercise was
effective.
5.4 The Optionee shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect to any Shares subject to the
Option until (i) the Option shall have been exercised pursuant to the terms of
this Agreement and the Optionee shall have paid the full purchase price for the
number of Shares in respect of which the Option was exercised, (ii) the Company
shall have issued and delivered the Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company, whereupon the Optionee shall have full voting and other
ownership rights with respect to such Shares during the period of ownership
thereof.
6. Cashless Exercise.
In lieu of payment upon exercise of the Option as set forth in
Section 5, the Optionee may alternatively surrender to the Company for
cancellation a portion of this Option representing that number of unissued
shares underlying this Option which is equal to the quotient obtained by
dividing (A) the product obtained by multiplying the Purchase Price by the
number of shares of stock being purchased underlying the Option upon such
exercise, by (B) the difference obtained by subtracting the Purchase Price from
the closing price of the Company's common stock on the date immediately
preceding such date of such exercise ("Cashless Exercise"); or (iii) by a
combination of the foregoing methods of payment selected by the Holder of this
Option.
7. Nontransferability.
The Option shall not be transferable other than by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined in the U.S. Internal Revenue Code. During the lifetime of the
Optionee, the Option shall be exercisable only by the Optionee, except in the
case of an Option transferred pursuant to a qualified domestic relations order.
2
8. Securities Act Restrictions; Sales of Shares.
The Optionee acknowledges that neither the U.S. Securities and
Exchange Commission (the "SEC") nor any state securities commission has approved
the Option nor any Shares issuable upon exercise thereof, nor passed upon or
endorsed the merits of the Shares; the Optionee further understands and agrees
that the Shares have not been registered (i) under with the SEC under the
Securities Act of 1933, as amended (the "Securities Act") nor (ii) with any
state securities commission. The Optionee understands that the Shares may not be
offered, sold, transferred or otherwise disposed of in the U.S., its territories
or possessions, or to persons known to be residents of the U.S. or to a U.S.
person within the meaning of Regulation S under the Securities Act; provided
that the Shares may be so sold after the earlier to occur of the effectiveness
of a registration statement registering the Shares under the Securities Act or
the expiration of the restricted period under Rule 144 promulgated under the
Securities Act and thereafter only if the Shares are registered under the
Securities Act or an exemption from the registration requirements under the
Securities Act is available. The Optionee acknowledges that the Company has no
obligation to cause the registration of the Shares under the Securities Act.
Following exercise of some or all of the Option, Optionee agrees not to sell or
transfer more than 25% of the aggregate of all such Shares underlying the Option
during any single calendar quarter and that the certificates representing such
Shares shall bear a legend to such effect.
9. Adjustments.
In the event of a change in capitalization, the Board of Directors
may make appropriate adjustments to the number and class of Shares or other
stock or securities subject to the Option and the purchase price for such Shares
or other stock or securities, provided, however, that the number of Shares
subject to the Option set forth in Section 1.1 reflects any and all changes in
capitalization of the Company as of the date hereof.
10. Effect of a Liquidation, Merger or Consolidation.
Upon the effective date of (i) the liquidation or dissolution of the
Company or (ii) a merger or consolidation of the Company (a "Transaction"), the
Option shall continue in effect in accordance with its terms and the Optionee
shall be entitled to receive in respect of each Share subject to the Option,
upon exercise of the Option, the same number and kind of stock, securities,
cash, property or other consideration that each holder of a Share was entitled
to receive in the Transaction in respect of a Share.
3
11. Withholding of Taxes; Non-Qualified Stock Option Treatment
The Company shall have the right to deduct from any distribution of
cash to the Optionee an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld (the
"Withholding Taxes") with respect to the Option. If the Optionee is entitled to
receive Shares upon exercise of the Option, the Optionee shall pay the
Withholding Taxes to the Company in cash prior to the issuance of such Shares.
In satisfaction of the Withholding Taxes, the Optionee may make a written
election (the "Tax Election"), which may be accepted or rejected in the
discretion of the Company, to have withheld a portion of the Shares issuable to
him or her upon exercise of the Option, having an aggregate Fair Market Value,
on the date preceding the date of such issuance, equal to the Withholding Taxes.
This Option shall be construed as a non-qualified stock option for purposes of
interpretation under the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
12. No Assignment.
Except as otherwise provided herein, the rights of the Optionee
hereunder may not be assigned or otherwise transferred to any other party.
13. Modification of Agreement.
This Agreement may be modified, amended, suspended or terminated,
and any terms or conditions may be waived, but only by a written instrument
executed by the parties hereto.
14. Severability.
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any reason, the
remaining provisions of this Agreement shall not be affected by such holding and
shall continue in full force in accordance with their terms.
15. Successors in Interest.
This Agreement shall inure to the benefit of and be binding upon any
successor to the Company. This Agreement shall inure to the benefit of the
Optionee's legal representatives. All obligations imposed upon the Optionee and
all rights granted to the Company under this Agreement shall be final, binding
and conclusive upon the Optionee's heirs, executors, administrators and
successors.
[Signature Page Follows]
4
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above with the understanding that this Agreement shall
constitute a legal, valid, binding and enforceable obligation of the Company and
the Optionee, respectively.
MANCHESTER INC.
By: /s/ Xxxxxxx Xxxxxx
------------------------------
Name: Xxxxxxx Xxxxxx
Title: Corporate Secretary
OPTIONEE
/s/ Xxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxx
STOCK OPTION AGREEMENT
Notice of Exercise
(to be executed in duplicate with a copy to each party)
Optionee
-----------------------------------------------------------------------
Number of Shares purchased pursuant
to Exercise of Option
----------------------------------------------------------
Exercise Date
------------------------------------------------------------------
Exercise Price per Share
-------------------------------------------------------
Aggregate Purchase Price
-------------------------------------------------------
Form of Payment
----------------------------------------------------------------
By this exercise, the Optionee agrees to (i) promptly provide such additional
documents as the Company may reasonably require and (ii) provide for the payment
to the Company (in the manner designated by the Company) of tax withholding
obligations, if any, relating to the exercise of this Option.
Optionee:
----------------------------------------------------------------------
By:
----------------------------------------------------------
Name:
-----------------------------------------------
Title:
--------------------------------------------
Accepted:
MANCHESTER INC.
By:
----------------------------------------------------------
Name:
-----------------------------------------------
Title:
--------------------------------------------
