OPTION AGREEMENT
This
Option Agreement (the "Agreement") is entered into as of September _____, 2008,
by and between The Vinyl Fence Company, Inc, a California corporation (the
"Company"), and ____________________ (the "Grantee").
WITNESSETH:
WHEREAS,
the Grantee is a trusted employee of the Company; and
WHEREAS,
the Company desires to grant an option to purchase up to _________ shares (the
"Option Shares") of the Common Stock, no par value per share (“Common Stock”),
of the Company on the terms and conditions herein contained.
NOW,
THEREFORE, in consideration of the premises, the parties hereby agree as
follows:
Section
1. Grant
of
Option.
1.1.
Subject to and upon the terms and conditions set forth in this Agreement, the
Company hereby grants to the Grantee an exclusive irrevocable option (the
"Option") to purchase the Option Shares, at an exercise price of $0.50 per
share, an amount equal to at least 85% of the fair value of the Common Stock
(the "Exercise Price").
1.2.
The
Option shall have a term of five (5) years, measured from the date hereof and
shall accordingly expire at the close of business on September ____, 2013 (the
"Expiration Date").
Section
2. Manner
of
Exercising Options. The Grantee may exercise the Option with respect to all
or a
portion of the Option Shares at any time from time to time on or before the
Expiration Date. In order to exercise the Option, the Grantee shall execute
and
deliver to the Company a duly completed Notice of Exercise in the form attached
hereto as Exhibit A at any time prior to the Expiration Date, along with the
aggregate Exercise Price for the options exercised.
Section
3. Adjustments.
3.1.
Adjustment of Exercise Price and Option Shares. The number of Option Shares
issuable upon exercise of this Option and the Exercise Price are subject to
adjustment upon occurrence of the following events prior to the Expiration
Date:
(a)
Adjustment for Stock Splits, Stock Subdivisions or Combinations of Common Stock.
The Exercise Price shall be proportionally decreased and the number of Option
Shares issuable upon exercise of the Option shall be proportionally increased
to
reflect any stock split or subdivision of the Common Stock of Company. The
Exercise Price shall be proportionally increased and the number of Option Shares
issuable upon exercise of the Option shall be proportionally decreased to
reflect any combination of the Common Stock of Company.
(b)
Adjustment for Dividends or Distributions of Common Stock or Other Property
with
Respect to Common Stock. In case Company shall make or issue, or shall fix
a
record date for the determination of eligible holders entitled to receive,
a
dividend or other distribution with respect to the Option Shares, payable in
(i)
securities of Company or (ii) assets (excluding cash dividends paid or
payable
solely out of retained earnings), then, in each such case, the Grantee on
exercise hereof at any time after the consummation, effective date or record
date of such dividend or other distribution, shall receive, in addition to
the
Common Stock issuable on such exercise prior to such date, and without the
payment of additional consideration therefor, the securities or such other
assets of Company to which such Grantee would have been entitled upon such
date
if such Option Holder had exercised the Option on the date hereof and had
thereafter, during the period from the date hereof to and including the date
of
such exercise, retained such shares and/or all other additional stock available
by it as aforesaid during such period giving effect to all adjustments called
for by this Section 3.
(c)
Reclassification of Common Stock. If Company, by reclassification of securities
or otherwise, shall change the Common Stock into the same or a different number
of securities of any other class or classes, the Option shall thereafter
represent the right to acquire such number and kind of securities as would
have
been issuable as the result of such change with respect to the Common Stock
exercisable under the Option immediately prior to such reclassification or
other
change and the Exercise Price therefore shall be appropriately adjusted, all
subject to further adjustment as provided in this Section 3.
(d)
Adjustment for Capital Reorganization, Merger or Consolidation of Company.
In
case of any capital reorganization of the common stock of Company (other than
a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), or any merger or consolidation of Company with or into
another corporation, or the sale of all or substantially all of the assets
of
Company then, and in each such case, the Grantee shall thereafter be entitled
to
receive upon exercise of the Option, during the period specified herein and
upon
payment of the Exercise Price then in effect, the number of shares of stock
or
other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares of Common Stock deliverable upon exercise of the Option would have been
entitled to receive in such reorganization, consolidation, merger, sale or
transfer if the Option had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all subject to further
adjustment as provided in this Section.
2
The
foregoing provisions of this Section 3.1(d) shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon
the
exercise of the Option. If the per-share consideration payable to the Grantee
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the President of the Company. In all events,
appropriate adjustment (as determined in good faith by the Company's President)
shall be made in the application of the provisions of the Option with respect
to
the rights and interests of the Option Holder after the transaction, to the
end
that the provisions of this Option Agreement shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after the event upon exercise of the Option.
Section
4. Issuance
and Nature of Option Shares.
4.1.
Issuance of Option Shares. Upon the delivery by the Grantee of a Notice of
Exercise as provided in Section 2.1 hereof, the Company will, as promptly as
possible, cause the issuance and delivery of a certificate evidencing the number
of shares of Common Stock of Company issuable upon such exercise against payment
of an amount equal to the product obtained by multiplying the number of Option
Shares being purchased upon such exercise by the then effective Exercise Price
("the "Exercise Amount") in immediately available funds. In case of any partial
exercise of the Option, the Company and the Grantee shall cancel this Agreement
and shall execute a new Option Agreement of like tenor and date for the balance
of the Option Shares purchasable hereunder.
4.2.
Restricted Nature of Option Shares. Grantee acknowledges and understands
that:
(a)
upon
issuance, the Option Shares will not have been registered under the Securities
Act of 1933, as amended (the “Securities Act”), or registered or qualified under
any state securities laws on the grounds that they will have been issued in
a
transaction exempt from the registration requirements of the Securities Act
and
the registration or qualification requirements of applicable state securities
laws;
(b)
the
Option Shares constitute “restricted securities” as defined in Rule 144 of the
Rules and Regulations promulgated under the Securities Act;
(c)
each
certificate evidencing the Option Shares will be imprinted with a legend which
prohibits the transfer of the Option Shares unless they are registered or such
registration is not required substantially in the following form:
[NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL ADDRESSED TO THE
COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
TO
THE COMPANY.
3
(e)
the
Company will require an opinion of counsel to the undersigned reasonably
acceptable to the Company indicating that any transfer, pledge or hypothecation
of the Option Shares is exempt from the registration requirements of the
Securities Act and applicable state securities laws prior to authorizing the
registration of any transfer of any of the Option Shares; and
(f)
Company is under no obligation to register the Option Shares for public resale
under the Securities Act or any state securities laws.
Section
5. Transferability
and Termination of Option
5.1.
Transferability. (a) This Option shall not be transferable otherwise than by
will or by the laws of descent and distribution, and each Option is exercisable
during the lifetime of an Optionee only by him or, in the case of the Optionee's
certified incompetency, by his duly authorized legal representative(s). Anything
in the foregoing to the contrary notwithstanding, an Optionee may request that
the shares of the Option Shares to be issued upon the exercise of an Option
be
issued in his and his spouse's name as joint tenants, with right of
ownership.
(b)
No
Options nor any rights of the Optionee pursuant to his Option shall be subject
to pledge, hypothecation, execution, attachment or similar process.
5.2.
Termination of Option Under Certain Circumstances.
(a)
Termination of Employment for Cause. All Options granted hereby shall terminate
immediately and all rights thereunder shall cease upon termination of the
Grantee's employment for due cause.
(b)
Termination Upon Death. If an Grantee shall die while in the employ of the
Company, or within three (3) months after leaving the employ of the Company
(because of his retirement or disability) his Option may be exercised, whether
or not such Option was exercisable by him at the date of his death, by the
person or persons to whom his rights under the Option are transferred by will
or
by the laws of descent and distribution, or by his legal representative(s),
whichever shall be applicable, at any time or from time to time for one (1)
year
after the earlier of his death or his cessation of service as an employee,
director, consultant or advisor.
(c)
Rights Upon Retirement or Disability. If the Grantee shall retire or become
disabled and leave the employee of the Company, this Option may be exercised
at
any time or from time to time for three (3) months after the date of his
retirement or his ceasing to be an employee because of
disability.
4
Section
6. Miscellaneous
Provisions.
6.1.
Amendment and Modification. Subject to applicable law, this Agreement may be
amended, modified or supplemented only by a written agreement signed by the
Grantee and the Company.
6.2.
Notices. Any notice provided for in this Agreement shall be in writing and
shall
be either personally delivered, mailed by certified mail (postage prepaid and
return receipt requested), sent by reputable overnight courier service (charges
prepaid) or transmitted by facsimile to each party at the address set forth
below. Notices shall be deemed to have been given hereunder when delivered
personally or by facsimile, three (3) calendar days after deposit in the U.S.
mail and one (1) calendar day after deposit with a reputable overnight courier
service or, if by facsimile transmission, as of the business day upon which
the
notice is sent.
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If to the Company to:
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The
Vinyl Fence Company, Inc
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0000
Xxxxx Xxxxxx Xxxxxx
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Xxxxx
Xxx Xxxxxxxxxx 00000
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If
to the
Grantee to the address or facsimile number as the Grantee furnishes to the
Company pursuant to the above.
6.3.
Entire Agreement. This Agreement contains the entire understanding between
and
among the parties and supersedes any prior understandings and agreements among
them respecting the subject matter of this Agreement.
6.4.
Agreement Binding. This Agreement shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto.
6.5.
Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California without regard to the conflict of
laws
provisions thereof.
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOLLOWS
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IN
WITNESS WHEREOF, the parties hereto have caused this Option Agreement to be
duly
executed and delivered as of the date first above written.
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THE
VINYL FENCE COMPANY, INC
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By:
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Xxxxxx
Xxxxx, President
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GRANTEE:
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Address
to which certificate is to
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be
sent, if different from address
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above:
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Social
Security Number:
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6
NOTICE
OF EXERCISE
The
Vinyl
Fence Company, Inc
0000
Xxxxx Xxxxxx Xxxxxx
Xxxxx
Xxx
Xxxxxxxxxx 00000
Ladies
and Gentlemen:
I
hereby
notify The Vinyl Fence Company, Inc (the “Company") that I elect to purchase
______________ shares (the "Option Shares") of the Company's common stock,
no
par value per share, at the option exercise price of $0.50 per share, as may
be
adjusted from time to time as provided in that certain Option Agreement dated
September ____, 2008 (the "Exercise Price"), and enclose herewith $________
in
cash or certified or official bank check or checks, which sum represents the
aggregate Exercise Price (calculated by multiplying the Exercise Price by the
number of Option Shares purchased).
____________________,
_________
Date
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Grantee
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Address:
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Print
name in exact manner it is to
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appear
on the stock certificate:
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Address
to which certificate is to
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be
sent, if different from address
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above:
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Social
Security Number:
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