XXXXXXXXX COMMUNICATIONS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
This Stock Option Agreement is made this 31st day of December, 1999,
between Xxxxxxxxx Communications, Inc. (the "Company"), and Xxxx X. XxXxx (the
"Option Holder").
R E C I T A L S
A. The Board of Directors has determined that it is to the advantage
and best interest of the Company and its shareholders to grant an option to the
Option Holder covering shares of the Company's Common Stock as an inducement to
remain in the service of the Company and as an incentive for increased effort
during such service, and on December 31, 1999 (the "Effective Date") approved
the execution of this Stock Option Agreement between the Company and the Option
Holder.
B. The option granted hereby is not intended to qualify as an
"incentive stock option," pursuant to Section 422A of the Internal Revenue Code
of 1954, as amended.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Company grants to the Option Holder the right and option to
purchase on the terms and conditions hereinafter set forth, all or any part of
an aggregate of 345,000 shares of the Common Stock of the Company at the
purchase price of $.52 per share, and exercisable from time to time in
accordance with the provisions of this Agreement during a period expiring on the
tenth anniversary from the Effective Date of this Agreement (the "Expiration
Date"). The Fair Market Value of the Company's common stock on December 31, 1999
was approximately $.52 per share.
2. The Option Holder may purchase any or all shares by exercise of this
Option between the Effective Date of this Agreement and the Expiration Date. The
number of shares which may be purchased shall be calculated to the nearest full
share and shall not be for fewer than 100 shares. The foregoing limitations
shall similarly apply to the transferees of the Option Holder by will or by the
laws of descent or distribution, so that said transferees shall be entitled
(provided they act within twelve (12) months after the death of the Option
Holder but in no event later than the Expiration Date) to purchase by exercise
of this Option all or any portion of the shares subject to this Option which the
Option Holder could have purchased by the exercise of the option at the time of
the Option Holder's death but with respect to which this Option was not
previously exercised, and no more. This Option may be exercised during the
lifetime of the Option Holder only by the Option Holder, or within twelve (12)
months after his death by his transferees by will or the laws of the descent or
distribution, and not otherwise, regardless of any community property interest
therein of the spouse of the Option Holder, or such spouse's successors in
interest. If the spouse of the Option Holder shall have acquired a community
property interest in this Option, the Option Holder, or Option Holder's
permitted successors in interest, may exercise the option on behalf of the
spouse of the Option Holder or such spouse's successors in interest.
3. Each exercise of this Option shall be by means of a written notice
of exercise delivered to the Secretary of the Company, specifying the number of
shares to be purchased and accompanied by payment to the Company of the full
purchase price of the shares to be purchased. The purchase price of the shares
upon exercise of an option shall be paid (i) in cash or by certified or
cashier's check payable to the order of the Company, (ii) by delivery of shares
of Common Stock of the Company already owned by and in the possession of the
option holder, or (iii) by a promissory note made by option holder in favor of
the Company, upon the terms and conditions determined by the Board of Directors
and secured by the shares issuable upon exercise complying with applicable law
(including, without limitation, state, corporate and federal margin
requirements), or any combination thereof. Shares of Common Stock used to
satisfy the exercise price of this Option shall be valued at their fair market
value determined as of the close of the business day immediately preceding the
date of exercise.
4. The fair market value of a share of Common Stock shall be determined
for purposes of this Agreement by reference to the most recent sale price of the
Company's Common Stock and such other factors as the Board of Directors may deem
appropriate to reflect the then fair market thereof, unless such shares are
publicly traded on a stock exchange or otherwise, in which case such value shall
be determined by reference to the closing price of such share on the principal
stock exchange on which such shares are traded, or, if such shares are not then
traded on a principal stock exchange, the mean between the bid and asked price
of a share as supplied by the National Association of Securities Dealers through
NASDAQ (or its successor in function), in each case as reported by The Wall
Street Journal, for the business day immediately preceding the date on which the
option is exercised.
5. No shares issuable upon the exercise of this Option shall be issued
and delivered unless and until there shall have been full compliance with all
applicable registration requirements of the Securities Act of 1933, as amended,
all applicable listing requirements of any national securities exchange on which
shares of the same class are then listed and any other requirements of law or of
any regulatory bodies having jurisdiction over such issuance and delivery.
Without limiting the foregoing, the undersigned hereby agrees that
unless and until the shares of stock covered by this Option have been registered
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, he will purchase all shares of stock to be issued upon exercise of this
Option for investment and not for resale or for distribution and that upon each
exercise of any portion of this Option the person entitled to exercise the same
shall, upon the request of the Company, furnish evidence satisfactory to the
Company (including a written and signed representation) to that effect in form
and substance satisfactory to the Company, including an indemnification of the
Company in the event of any violation of the Securities Act of 1933 by such
person. Furthermore, the Company may, if it deems appropriate, affix a legend to
certificates representing shares of stock upon exercise of options indicating
that such shares have not been registered with the Securities and Exchange
Commission and may so notify its Transfer Agent, and may take such other action
as it deems necessary or advisable to comply with any other regulatory or
governmental requirements.
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6. If Option Holder or Option Holder's permitted successors in interest
dispose of shares of Common Stock acquired pursuant to the exercise of this
Option, the Company shall have the right to require Option Holder or Option
Holder's permitted successor in interest to pay the Company the amount of any
taxes, which the Company may be required to withhold with respect to such
shares.
7. This Option and the rights and privileges granted hereby shall not
be transferred, assigned, pledged or hypothecated in any way, whether by
operation of the law or otherwise, except by will or the laws of descent and
distribution. Upon any attempt so to transfer, assign, pledge, hypothecate or
otherwise dispose of this option or any right or privileges granted hereby
contrary to the provisions hereof, this Option and all rights and privileges
contained herein shall immediately become null and void and of no further force
or effect.
8. If the outstanding shares of the Common Stock of the Company are
increased, decreased, changed into, or exchanged for a different number or kind
of shares or securities of the Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment (to be conclusively determined by the
Board of Directors of the Company) shall be made in the number and kind of
securities receivable upon the exercise of this Option, without change in the
total price applicable to the unexercised portion of this Option but with a
corresponding adjustment in the price for each unit of any security covered by
this Option.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon the sale of substantially all the property or more than 80% of the then
outstanding stock of the Company to another corporation, this Option shall be
terminated, unless express written provision be made in connection with such
transaction for (i) the immediate exercisability of this Option, (ii) the
assumption of this Option or the substitution therefore of a new option covering
the stock of a successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to number and kind of shares and prices, such
adjustments to be conclusively determined by the Board of Directors of the
Company. Adjustments under this paragraph 8 shall be made by the Board of
Directors, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive. No fractional shares
shall be issued under any such adjustment.
9. Neither the Option Holder nor any other person legally entitled to
exercise this option shall be entitled to any of the rights or privileges of a
shareholder of the Company in respect of any shares issuable upon any exercise
of this Option unless and until a certificate or certificates representing such
shares shall have been actually issued and delivered to him.
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10. This Option has been executed and delivered the day and year first
above-written at Costa Mesa, California, and the interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California.
XXXXXXXXX COMMUNICATIONS, INC.
By: /S/ Xxxx Xxxxxxxxx
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Xxxx Xxxxxxxxx
President
By: /S/ Xxxx X. XxXxx
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Xxxx X. XxXxx
Option Holder
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