NONQUALIFIED STOCK OPTION AGREEMENT
Exhibit
10.2
Exhibit
A
Form
of Stock Option Agreement
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE OR OTHER
SECURITIES LAW. SUCH SECURITIES MAY NOT BE OFFERED, REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF OR
DISTRIBUTED, DIRECTLY OR INDIRECTLY, UNLESS THEY ARE REGISTERED AND QUALIFIED
IN
ACCORDANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO ELECTRIC AQUAGENICS
UNLIMITED, INC., SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED UNDER
SUCH
LAWS.
Award
Summary
Optionee:
XXXX X. XXXXXXX
Number
of
Options: 500,000
Exercise
Price per Option Share: $1.30
THIS
NONQUALIFIED STOCK OPTION AGREEMENT (the “Agreement”),
made
this _____ day of October, 2006, evidences the award of 500,000 nonqualified
stock options (each an “Option”
or
collectively the “Options”)
that
have been granted to you, XXXX X. XXXXXXX (“Optionee”),
effective as of November 6, 2006 (the “Grant
Date”),
in
fulfillment of the obligations of Electric Aquagenics Unlimited, Inc., a
Delaware corporation (“Company”),
under
Section 3(a)(iii) of that certain employment agreement entered into between
the
Optionee and the Company on October _____, 2006 (the “Employment Agreement”)
and
subject to and conditioned upon the Optionee’s agreement to the terms described
below. Each Option entitles the Optionee to purchase one share of common
stock, par value $.0001 per share, of the Company (“Common
Stock”)
at
$1.30 per share, the closing price reported on the NASDAQ OTC Bulletin Board
Service on the date hereof. An
executed copy of this Agreement must be returned to the Company within 10 days
of the date hereof. If not, the Options will be null and
void.
WHEREAS,
pursuant to the Employment Agreement, the Optionee is employed by the Company,
and the Company desires to have the Optionee remain in such employ or capacity
and to afford the Optionee the opportunity to acquire stockownership in the
Company so that the Optionee may have a direct proprietary interest in the
Company’s success;
NOW
THEREFORE, in consideration of the premises and of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby mutually covenant
and agree as follows:
1. Terminology
Capitalized
terms used in this Agreement not otherwise defined herein shall have the
meanings set forth below:
(a) “Change
in Control”
means
(i) the acquisition (other than from the Company) in one or more
transactions by any Person, as defined below, of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50%
or
more of (A) the then outstanding shares of the securities of the Company,
or (B) the combined voting power of the then outstanding securities of the
Company entitled to vote generally in the election of directors (the
“Company
Voting Stock”);
(ii)
the closing of a sale or other conveyance of all or substantially all of the
assets of the Company; or (iii) the effective time of any merger, share
exchange, consolidation, or other business combination involving the
Company if immediately after such transaction persons who hold a majority of
the
outstanding voting securities entitled to vote generally in the election of
directors of the surviving entity (or the entity owning 100% of such surviving
entity) are not persons who, immediately prior to such transaction, held the
Company Voting Stock. For purposes of this definition, a “Person”
means
any individual, entity or group within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act, other than employee benefit plans sponsored or
maintained by the Company and other than individuals, entities or groups to
whom the Company has issued on or prior to the date of this Agreement any
registered or unregistered security in any form whatsoever, including, without
limitation, any stock options or warrants.
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(b)
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“Committee”
means the Compensation Committee of the Board of Directors of the
Company,
if any (if there is no Compensation Committee, it means the Board
of
Directors of the Company as a
whole).
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(c)
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“Exchange
Act”
means the Securities Exchange Act of 1934, as
amended.
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(d)
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“Fair
Market Value”
means, with respect to a share of the Common Stock for any purpose
on a
particular date, the value determined by the Committee in good faith.
However, if the Common Stock is registered under Section 12(b) or
12(g) of
the Exchange Act, and listed for trading on a national exchange or
market,
“Fair Market Value” means, as applicable, (i) either the closing price or
the average of the high and low sale price on the relevant date,
as
determined in the Committee’s discretion, quoted on the New York Stock
Exchange, the American Stock Exchange, the NASDAQ Global Select Market,
or
the NASDAQ Global Market; (ii) the last sale price on the relevant
date
quoted on the NASDAQ Capital Market; (iii) the last sale price on
the
relevant date quoted on the NASDAQ OTC Bulletin Board Service or
by the
National Quotation Bureau, Inc. or a comparable service as determined
in
the Committee’s discretion; or (iv) if the Common Stock is not quoted by
any of the above, the average of the closing bid and asked prices
on the
relevant date furnished by a professional market maker for the Common
Stock, or by such other source, selected by the Committee. If no
public trading of the Common Stock occurs on the relevant date but
the
shares are so listed, then Fair Market Value shall be determined
as of the
next preceding date on which trading of the Common Stock does occur.
For all purposes under this Agreement, the term “relevant date”
as used in this definition of Fair Market Value means either the
date as
of which Fair Market Value is to be determined or the next preceding
date
on which public trading of the Common Stock occurs, as determined
in the
Committee’s discretion.
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(e)
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“Securities
Act”
means the Securities Act of 1933, as
amended.
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(f)
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“Service”
means the Optionee’s employment with the Company pursuant to the
Employment Agreement.
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2. Grant
of Options
Subject
to the terms and conditions set forth herein, the Company hereby grants to
Optionee, as of the Grant Date, Options to purchase shares of the Common Stock
of the Company. The number of shares of Common Stock that may be purchased
and the Exercise Price per share at which such shares may be purchased is
specified above.
3. Exercisability
of Option
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(a)
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Subject
to the terms and conditions described in this Agreement, the Options
become vested and exercisable in installments in accordance with
the
schedule below:
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Number
of Options
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Date
Vested and Exercisable
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100,000
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February
6, 2007
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100,000
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November
6, 2007
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100,000
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November
6, 2008
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100,000
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November
6, 2009
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100,000
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November
6, 2010
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(b)
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To
the extent not exercised, installments shall be exercisable by the
Optionee, in whole or in part, at any time on or before the Expiration
Date or the earlier termination of the
Options.
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(c)
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If
Service ceases on account of the Optionee’s death, Permanent Disability
(as defined in the Employment Agreement) or termination of Optionee
by the
Company For Cause (as defined in the Employment Agreement) all unvested
Options shall immediately
terminate.
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(d)
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If
Service ceases on account of resignation by Optionee (other than
for Good
Reason (as defined in the Employment Agreement)) all vested and unvested
Options shall immediately
terminate.
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(e)
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If
Service ceases on account of the Optionee’s termination by the Company
other than For Cause, resignation by the Optionee for Good Reason
or
non-renewal of the Employment Agreement pursuant to Section 12(a)
of the
Employment Agreement because of a written notice delivered by the
Company
to Optionee pursuant to such section (other than a non-renewal For
Cause)
vesting and exercisability of all unvested Options shall be accelerated
so
that the 100% of the Optionee’s Options shall be fully vested and
exercisable.
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(f)
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The
Options may be exercised only in multiples of whole shares of Common
Stock
and may not be exercised at any one time as to fewer than one hundred
(100)
shares of Common Stock, unless the number of shares of Common Stock
purchased at such time is the total number of shares of Common Stock
in
respect of which the Options are then
exercisable.
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(g)
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Upon
the occurrence of a Change in Control, vesting and exercisability
of the
Options shall be accelerated so that the 100% of the Optionee’s Options
shall be fully vested and exercisable as of the date of, and in connection
with the, closing of the Change in Control
transaction.
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(h)
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In
no event shall the Options be exercisable for a fractional
share.
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4. Method
of Exercising Option and Payment of Exercise Price
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(a)
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The
Options, to the extent exercisable, may be exercised at any time
(the
“Exercise
Date”)
on or before the Expiration Date or the earlier termination of the
Options, unless otherwise provided under applicable law. The Options
may be exercised by delivering to the Secretary of the Company or
its
delegate, from time to time, notice, in such manner and form as the
Committee may require from time to time, specifying the number of
shares
of Common Stock to be purchased (the “Notice”),
and either (i) cash, certified or cashier’s check, money order or other
cash equivalent acceptable to the Committee, in its discretion, to
the
order of the Company for an amount in United States dollars equal
to the
Exercise Price multiplied by the number of shares of Common Stock
specified in the Notice (the “Total
Exercise Price”),
such payment to be delivered with the Notice, (ii) properly executed,
irrevocable instructions, in such manner and form as the Committee
may
require from time to time, to effectuate a broker-assisted cashless
exercise in accordance with Regulation T of the Board of Governors of
the Federal Reserve System through a brokerage firm approved by the
Committee, (iii) any other method delivering the Total Exercise Price
as
approved by the Committee, or (iv) any combination of the foregoing.
An exercise will not be effective until the Secretary of the Company
or
his or her delegate receives all of the foregoing items.
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(b)
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As
soon as practicable after the Exercise Date, the Company shall, subject
to
the receipt of the Total Exercise Price and withholding tax, if any,
issue
the number of shares of Common Stock with respect to which such Options
shall be so exercised, and shall deliver a certificate (or certificates)
therefore, or deliver shares of Common Stock electronically or in
certificate form to a designated broker, for the shares issued upon
exercise of the Options. Any share certificates delivered will,
unless the shares of Common Stock are registered or an exemption
from
registration is available under applicable federal and state law,
bear a
legend restricting transferability of such shares of Common
Stock.
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5. Expiration
Date
The
Options shall terminate and be of no force or effect after 5:00 p.m. Eastern
Time on the last business day coincident with or prior to November 6, 2016,
unless fully exercised or terminated earlier (the “Expiration
Date”).
6. Termination
of Service
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(a)
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If
the Optionee’s Service with the Company ceases for any reason, the Options
that, after giving effect to the provisions of Section 3, are then
unexercisable will terminate immediately upon such
cessation.
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(b)
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If
the Optionee’s Service with the Company ceases for any reason other than
Optionee’s resignation (other than for Good Reason), the Options that,
after giving effect to the provisions of Section 3, are then exercisable
shall terminate as of the sixtieth (60th)
calendar day following the date of termination or, if earlier, upon
the
Expiration Date. Provided however, that if all or any portion of the
60-day exercise period shall be a period during which the Optionee
is
prohibited from trading in the Common Stock, then such 60-day exercise
period shall be extended by an amount of time equal to any such prohibited
period, but in no event beyond the Expiration Date. In the event
of death,
the exercisable Options may be exercised by the Optionee’s executor,
personal representative or the person(s) to whom the Options are
transferred by will or the laws of descent and
distribution.
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(c)
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Notwithstanding
anything in this Agreement to the contrary, the Options shall terminate
in
their entirety, regardless of whether the Options are then exercisable,
immediately upon the Optionee’s resignation other than for Good
Reason.
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(d)
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If
the Company and Optionee dispute the reason that Optionee’s Service with
the Company has ceased, for purposes of this Agreement, such reason
shall
be determined by the Committee in good faith. Any determination made
by
the Committee with respect to any matter referred to in this Section
6
shall be final and conclusive on all persons affected thereby. For
example, if pursuant to the Employment Agreement, the Optionee gives
notice to the Company that he is resigning for Good Reason and the
Company
disputes that there is a Good Reason, for purposes of this Agreement,
the
Committee shall determine, in good faith, whether or not the Optionee’s
resignation is for Good Reason, which determination shall be final
and
conclusive on all persons affected
thereby.
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7.
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Intentionally
Deleted
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8.
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Coordination
With Other Agreements
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To
the
extent that the Optionee is a party to any agreement with the Company that
contains covenants the same as or similar to those set forth in this Agreement
(hereinafter referred to as the “Other
Agreement”),
the
Optionee and the Company expressly agree that any remedy available to the
Company under this Agreement is in addition to, and does not limit the
enforceability of, any remedy available to the Company under such Other
Agreement.
9. Assignability
Except
as
otherwise provided herein, these Options are not transferable otherwise than
by
will or the laws of descent and distribution or to an entity, for estate
planning purposes, which is directly controlled by the Optionee and are
exercisable during the Optionee’s lifetime only by the Optionee or, during the
period the Optionee is under a legal disability, by the Optionee’s guardian or
legal representative. No assignment or transfer of these Options, or of
the rights represented thereby, whether voluntary or involuntary, by operation
of law or otherwise, except by will, the laws of descent and distribution or
except as provided above, shall vest in the assignee or transferee any interest
or right herein whatsoever, but immediately upon any attempt to assign or
transfer these Options the same shall terminate and be of no force or
effect.
10. Non-Guarantee
of Employment or Service Relationship
Nothing
in this Agreement will alter the at-will or other employment status or other
service relationship of the Optionee with the Company, nor be construed as
a
contract of employment or service relationship between the Optionee and the
Company, or as a contractual right to continue in the employ of, or in a service
relationship with, the Company for any period of time, or as a limitation of
the
right of the Company to discharge the Optionee at any time with or without
Cause
or notice and whether or not such discharge results in the failure of any of
the
Options to become exercisable or any other adverse effect on the Optionee’s
interests under this Agreement.
11. No
Rights as a Stockholder
The
Optionee shall not be deemed for any purpose to be a stockholder of the Company
with respect to the shares represented by these Options until these Options
shall have been exercised, payment and issue have been made as herein provided
and the Optionee’s name has been entered as a stockholder of record on the books
of the Company.
12. The
Company’s Rights
The
existence of these Options shall not affect in any way the right or power of
the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company, or
any
issue of bonds, debentures, preferred or other stocks with preference ahead
of
or convertible into, or otherwise affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of the Company’s assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
13. Adjustments
If
there
shall occur any change with respect to the outstanding shares of Common Stock
by
reason of any recapitalization, reclassification, stock dividend, extraordinary
dividend, stock split, reverse stock split or other distribution with respect
to
the shares of Common Stock, or any merger, reorganization, consolidation,
combination, spin-off or other similar corporate change, or any other change
affecting the Common Stock, the Committee shall, in the manner and to the extent
that it deems appropriate and equitable to the Optionee, cause an adjustment
to
be made in (i) the number and type of securities subject to the Options, (ii)
the Exercise Price of the Options, (iii) the vesting schedule of the Options,
and (iv) any other terms of the Options that are affected by the
event.
14. Preemption
by Applicable Laws or Regulations
Anything
in this Agreement to the contrary notwithstanding, if, at any time specified
herein for the issue of shares of Common Stock, any law, regulation or
requirements of any governmental authority having appropriate jurisdiction
shall
require either the Company or the Optionee to take any action prior to or in
connection with the shares of Common Stock then to be issued, sold or
repurchased, the issue, sale or repurchase of such shares of Common Stock shall
be deferred until such action shall have been taken.
15. Resolution
of Disputes
Any
dispute or disagreement which shall arise under, or as a result of, or pursuant
to, this Agreement shall be resolved by arbitration as set forth in the
Employment Agreement.
16. Invalidity
or Unenforceability.
It
is the
intention of the Company and the Optionee that this Agreement shall be
enforceable to the fullest extent allowed by law. In the event that a
court having jurisdiction holds any provision of this Agreement to be invalid
or
unenforceable, in whole or in part, the Company and the Optionee agree that,
if
allowed by law, that provision shall be reduced to the degree necessary to
render it valid and enforceable without affecting the rest of this
Agreement.
17. Waiver.
No
delay
or omission by the Company in exercising any right under this Agreement shall
operate as a waiver of that or any other right. A waiver or consent given
by the Company on any one occasion shall be effective only in that instance
and
shall not be construed as a bar or waiver of any right on any other
occasion.
18. Amendments
This
Agreement may be amended from time to time in a written document signed by
the
Optionee and the Company. The Optionee and the Company agree that this
Agreement shall be subject to any provision necessary to assure compliance
with
federal and state securities laws.
19. Notice
Any
notice which either party hereto may be required or permitted to give to the
other shall be in writing, and may be delivered personally or by mail, postage
prepaid, addressed as follows: to the Company at
____________________________ (Attention: _____________________), or at
such other address as the Company, by notice, may designate in writing from
time
to time; to Optionee, at the address as shown on the records of the Company,
or
at such other address as Optionee, by notice to the Secretary of the Company,
may designate in writing from time to time.
20. Tax
Withholding
At
the
time the Options are exercised, in whole or in part, or at any time thereafter
as requested by the Company, Optionee hereby authorizes withholding from payroll
or any other payment of any kind due to Optionee and otherwise agrees to make
adequate provision for foreign, federal, state and local taxes required to
be
withheld, if any, which arise in connection with the Options. The Company
may require a cash payment to cover any withholding tax obligation as a
condition of exercise of the Options or issuance of share certificates
representing shares of Common Stock.
The
Committee may, in its sole discretion, permit satisfaction, in whole or in
part,
of any withholding tax obligation which may arise in connection with the Options
either by electing to have the Company withhold from the shares of Common Stock
to be issued upon exercise that number of shares, or by electing to deliver
to
the Company already-owned shares, in either case having a Fair Market Value
equal to the amount necessary to satisfy the statutory minimum withholding
amount.
21. Fractional
Shares
Any
fractional shares concerning an Option shall be eliminated at the time of
exercise by rounding down for fractions of less than one-half (1/2) and rounding
up for fractions of equal to or more than one-half (1/2). No cash
settlements shall be made with respect to fractional shares eliminated by
rounding.
22. Governing
Law and Consent to Jurisdiction
The
parties agree that the formation, validity, interpretation and performance
of
this Agreement shall be governed and interpreted by the substantive laws of
Delaware, without reference to its rules of conflicts of law.
23. Intentionally
deleted
24. Reservation
of Shares
The
Company will reserve and set apart and have at all times, free from preemptive
rights, a number of authorized but unissued shares of Common Stock deliverable
upon the exercise of the Options sufficient to enable it at any time to fulfill
all its obligations hereunder.
25. Nonqualified
Nature of Agreement
The
Options are not
intended
to qualify as incentive stock options within the meaning of section 422 of
the
Code, and this Agreement shall be so construed. Optionee acknowledges
that, upon exercise of the Options, Optionee will recognize compensation income
in an amount equal to the excess of the then Fair Market Value of the shares
of
Common Stock over the Total Exercise Price and must comply with the provisions
of Section 20 of this Agreement with respect to any tax withholding obligations
that arise as a result of such exercise.
26. Regulatory
Compliance
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(a)
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No
Common Stock shall be issued hereunder until the Company has received
all
necessary regulatory approvals and has taken all necessary steps
to assure
compliance with federal and state securities laws or has determined
to its
satisfaction and the satisfaction of its counsel that an exemption
from
the requirements of the federal and applicable state securities laws
are
available. The Company shall have no obligation to effect any
registration or qualification under federal or state laws of the
Common
Stock subject to this Agreement.
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(b)
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The
Company may require that the Optionee, as a condition to exercise
of the
Options, and as a condition to the delivery of any share certificate,
make
such written representations (including representations to the effect
that
such person will not dispose of the Common Stock so acquired in violation
of federal or state securities laws) and furnish such information
as may,
in the opinion of counsel for the Company, be appropriate to permit
the
Company to issue the Common Stock in compliance with applicable federal
and state securities laws.
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27. Investment
Representations
The
Optionee represents, warrants and covenants that:
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(a)
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Any
shares purchased upon exercise of the Options shall be acquired for
the
Optionee’s account for investment only and not with a view to, or for sale
in connection with, any distribution of the shares in violation of
the
Securities Act or any rule or regulation under the Securities Act,
and
that he will not distribute the same in violation of any state or
federal
law or regulation.
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(b)
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The
Optionee has had such opportunity as he has deemed adequate to obtain
from
representatives of the Company such information as is necessary to
permit
the Optionee to evaluate the merits and risks of her investment in
the
Company.
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(c)
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The
Optionee is able to bear the economic risk of holding shares acquired
pursuant to the exercise of the Options for an indefinite
period.
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(d)
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The
Optionee understands that (i) the shares acquired pursuant to the
exercise
of the Options will not be registered under the Securities Act or
under
the securities laws of any state and are “restricted securities” within
the meaning of Rule 144 under the Securities Act; (ii) such shares
cannot
be sold, transferred or otherwise disposed of unless they are subsequently
registered under the Securities Act, and such registration or
qualification as may be necessary under the securities laws of any
state,
or an exemption from registration is then available; and (iii) there
is as
of the date of this Agreement no registration statement on file with
the
Securities and Exchange Commission with respect to the Common Stock
subject to this Agreement and the Company has no obligation or current
intention to register any such shares acquired pursuant to the exercise
of
the Options under the Securities
Act.
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By
making
payment upon exercise of the Options, the Optionee shall be deemed to have
reaffirmed, as of the date of such payment, the representations made in this
Section 27.
28. Entire
Agreement
This
Agreement contains the entire agreement between the parties with respect to
the
Options granted hereunder and controls over any inconsistent provision in the
Employment Agreement. Any oral or written agreements, representations,
warranties, written inducements, or other communications made prior to the
execution of this Agreement with respect to the Options granted hereunder will
be void and ineffective for all purposes.
[remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and you, as the Optionee, have hereunto set your hand
and seal, on the dates set forth below.
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ELECTRIC
AQUAGENICS UNLIMITED, INC.
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By:
/s/ Xxx Xxxxxx
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Title:
Interim CEO
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Date: 10/24,
2006
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THE
OPTIONEE:
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/s/
Xxxx X. Xxxxxxx
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Name
XXXX X. XXXXXXX
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Date:
10/24, 2006
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