Exhibit 1. Employment Agreement.
THIS OPTION AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
BLUEGATE CORPORATION No. E-06-04
STOCK OPTION AGREEMENT
Date of Grant: August 1, 2006
THIS GRANT, dated as of the date of grant first stated above (the "Date of
Grant"), is delivered by Bluegate Corporation (the "Company") to Xxxxxxx X.
Xxxxxxx (the "Grantee"), who is an employee, consultant or director of the
Company or one of its subsidiaries (the Company is sometimes referred to herein
as the "Employer").
WHEREAS, the Board of Directors of the Company (the "Board) approved the
Company's grant to Grantee the right to purchase shares of the Common Stock of
the Company, par value $0.001 per share (the "Stock"), in accordance with the
terms and provisions hereof.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree
as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the Company, with the
approval and at the direction of the Board, hereby grants to the Grantee, as of
the Date of Grant, an option to purchase up to 1,200,000 shares of Stock at a
price of $0.60 per share. Such option is hereinafter referred to as the "Option"
and the shares of stock purchasable upon exercise of the Option are hereinafter
sometimes referred to as the "Option Shares." The Option Shares to be issued
pursuant to this Stock Option Agreement shall be restricted securities.
2. Vesting.
This Option shall vest according to the schedule below:
Option Shares Vesting Date
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600,000 August 1, 2006
50,000 September 1, 2006
50,000 October 1, 2006
50,000 November 1, 2006
50,000 December 1, 2006
50,000 January 1, 2007
50,000 February 1, 2007
50,000 March 1, 2007
50,000 April 1, 2007
50,000 May 1, 2007
50,000 June 1, 2007
50,000 July 1, 2007
50,000 August 1, 2007
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto, to the extent
such Option has vested, shall terminate and become null and void after the
expiration of five (5) years from the Date of Grant (the "Option Term"). To the
extent that the Option has not vested in accordance with Section 2 above, then
the non-vested portion of the Option shall terminate and become null and void
upon the termination of the Grantee as an employee, officer or director of the
Company.
(b) In the event of the death of the Grantee, the Option may be exercised by
the Grantee's legal representative(s), but only to the extent that the Option
would otherwise have been exercisable by the Grantee.
(c) In the event the Board (or Committee, if any) finds by a majority vote
after full consideration of the facts that Grantee, before or after termination
of his employment with the Company or an Affiliate for any reason (i) committed
or engaged in fraud, embezzlement, theft, commission of a felony, or proven
dishonesty in the course of his employment by the Company or any subsidiary or
affiliate of the Company, which conduct damaged the Company or subsidiary or
affiliate, or disclosed trade secrets of the Company its subsidiary or its
affiliate, or (ii) participated, engaged in or had a material, financial or
other interest, whether as an employee, officer, director, consultant,
contractor, shareholder, owner, or otherwise, in any commercial endeavor
anywhere which is competitive with the business of the Company or a subsidiary
or Affiliate without the written consent of the Company, the Grantee shall
forfeit all outstanding Options. Clause (ii) shall not be deemed to have been
violated solely by reason of the Grantee's ownership of stock or securities of
any publicly owned corporation, if that ownership does not result in effective
control of the corporation.
The decision of the Board (or Committee, if any) as to the cause of the
Grantee's discharge, the damage done to the Company or a subsidiary or an
affiliate, and the extent of the Grantee's competitive activity shall be final.
No decision of the Board (or Committee, if any) however, shall affect the
finality of the discharge of the Grantee by the Company.
4. Exercise of Options.
(a) The Grantee may exercise the Option with respect to all or any part of
the number of Option Shares then exercisable hereunder by giving the Secretary
of the Company written notice of intent to exercise. The notice of exercise
shall specify the number of Option Shares as to which the Option is to be
exercised and the date of exercise thereof, which date shall be at least five
days after the giving of such notice unless an earlier time shall have been
mutually agreed upon. Notwithstanding the foregoing, an Option granted under
this Agreement may be exercised in increments of not less than 10% of the full
number of Shares as to which it can be exercised. A partial exercise of an
Option will not affect the Grantee's right to exercise the Option from time to
time in accordance with this Agreement as to the remaining Shares subject to the
Option.
(b) Full payment (in U.S. dollars) by the Grantee of the option price for
the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or certified or cashier's check or
money order, or, with the prior written consent of the Board, in whole or in
part through the surrender of previously acquired shares of Stock at their fair
market value on the exercise date.
On the exercise date specified in the Grantee's notice or as soon thereafter as
is practicable, but not to exceed ten (10) business days, the Company shall
cause to be delivered to the Grantee, a certificate or certificates for the
Option Shares then being purchased (out of theretofore unissued Stock or
reacquired Stock, as the Company may elect) upon full payment for such Option
Shares.
(c) If the Grantee fails to pay for any of the Option Shares specified in
such notice, the Grantee's right to purchase such Option Shares may be
terminated by the Company. The date specified in the Grantee's notice as the
date of exercise shall be deemed the date of exercise of the Option, provided
that payment in full for the Option Shares to be purchased upon such exercise
shall have been received by such date.
(d) Notwithstanding any of the other provisions hereof, Grantee agrees that
he will not exercise this Option and that the Company will not be obligated to
issue any Option Shares pursuant to this Stock Option Agreement, if the exercise
of the Option or the issuance of such Option Shares would constitute a violation
by the Grantee or by the Company of any provision of any law or regulation of
any governmental authority or national securities exchanges. Upon the
acquisition of any Option Shares pursuant to the exercise of the Option herein
granted, Grantee will enter into such written representations, warranties and
agreements as the Company may reasonably request in order to comply with
applicable securities laws with this Stock Option Agreement.
5. Piggyback Registration Rights.
If the Company at any time proposes to register any of its Common Stock under
the Securities Act (other than a registration on Form S-8 or S-4 or any
successor or similar forms) whether or not for sale for the Company's account,
the Company shall use its best efforts to include in such registration (and any
related qualifications under blue sky laws or other compliance) all the Option
Shares specified in a written request or requests, made by the Grantee and
received by the Company within 15 days after the Grantee's receipt of written
notice from the Company regarding the proposed registration, which written
request may specify the inclusion of all or a part of Grantee's Option Shares.
6. Adjustment of and Changes in Stock of the Company.
In the event of a reorganization, recapitalization, change of shares, stock
split, spin-off, stock dividend, reclassification, subdivision or combination of
shares, merger, consolidation, rights offering, or any other change in the
corporate structure or shares of capital stock of the Company, the Board shall
make such adjustment in the number and kind of shares of Stock subject to the
Option and in the option price; provided, however, that no such adjustment shall
give the Grantee any additional benefits under the Option.
7. Fair Market Value.
As used herein, the "fair market value" of a share of Stock shall be the closing
price per share of Stock on the PINK SHEETS, OTCBB, NASDAQ, the NYSE, the Amex,
the composite tape or other recognized market source, as determine by the Board,
on the applicable date of reference hereunder, or if there is no sale on such
date, then the closing price on the last previous day on which a sale is
reported.
8. No Rights of Stockholders.
Neither the Grantee nor any personal representative shall be, or shall have any
of the rights and privileges of, a stockholder of the Company with respect to
any shares of Stock purchasable or issuable upon the exercise of the Option, in
whole or in part, prior to the date of exercise of the Option.
9. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall be exercisable only by
the Grantee or any guardian or legal representative of the Grantee, and the
Option shall not be transferable except, (i) in case of the death of the
Grantee, by will or the laws of descent and distribution, and (ii) to a child,
grandchild or stepchild of the Grantee or to a trust or partnership created by
the Grantee, who, in each case, will be subject to all of the provisions hereof,
nor shall the Option be subject to attachment, execution or other similar
process. In the event of (a) any attempt by the Grantee to alienate, assign,
pledge, hypothecate or otherwise dispose of the Option, except as provided for
herein, or (b) the levy of any attachment, execution or similar process upon the
rights or interest hereby conferred, the Company may terminate the Option by
notice to the Grantee and it shall thereupon become null and void and of no
value to any such party.
10. Disputes.
As a condition of the granting of this Option, the Grantee and his heirs and
successors agree that any dispute or disagreement which may arise hereunder
shall be determined by the Board (or Committee, if any) in its sole discretion
and judgment, and that any such determination and any interpretation by the
Board (or Committee, if any) of the terms of this Option shall be final and
shall be binding and conclusive, for all purposes upon the Company, the Grantee,
his heirs and successors.
11. Notice.
Any notice to the Company provided for in this instrument shall be addressed to
it in care of its Secretary at its executive offices at Bluegate Corporation,
and any notice to the Grantee shall be addressed to the Grantee at the current
address shown on the records of the Company. Any notice shall be deemed to be
duly given if and when properly addressed and posted by registered or certified
mail, postage prepaid.
12. Governing Law.
The validity, construction, interpretation and effect of this instrument shall
exclusively be governed by and determined in accordance with the law of the
State of Texas, except to the extent preempted by federal law, which shall to
the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute and attest to this Stock Option Agreement, and to apply the corporate
seal hereto, and the Grantee has placed his or her signature hereon, effective
as of the Date of Grant.
Bluegate Corporation
By:
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Xxxxxxx Xxxxxxxxx, Chief Executive Officer
Grantee:
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Xxxxxxx X. Xxxxxxx
