ABC FUNDING, INC. STOCK OPTION AGREEMENT
This Stock Option Agreement (this
"Agreement") is effective as of October 1, 2008, (the "Option Grant Date") by
and between ABC Funding, Inc., a Nevada corporation having its principal place
of business at 0000 XX 0000 Xxxx Xxxxx 000, Xxxxxxx, Xxxxx 00000 (the
"Company"), and Xxx X. Xxxxx, an individual residing in the State of Texas (the
"Optionee"). The Optionee and the Company hereby agree as
follows:
1. Grant. The
Company hereby grants to the Optionee, pursuant to the ABC Funding, Inc. 2008
Stock Incentive Plan, an option (the "Option") to purchase up to an aggregate of
333,333 shares (the "Optioned Shares") of the Company's common stock, par value
$0.001 per share (the "Common Stock"), at an exercise price (the "Exercise
Price") of $0.59 per Optioned Share.
2. Term. The
Option granted hereby shall terminate no later than at the close of business on
October 1, 2015 (the "Termination Date").
3. Exercisability;
Termination of Employment; Change of Control.
(a) Exercisability. Subject
to Sections 3(b) and 3(c) below, the Option shall vest and may be exercised in
whole or in part for up to 333,333 Optioned Shares at any time from and after
the first anniversary date of the Option Grant Date (the "Vesting Date") until
the Termination Date; provided, that on such Vesting Date, the Optionee shall
have been continuously employed by the Company through such date. To
the extent the Option has become vested and is exercisable, the Option may
thereafter be exercised by the Optionee, in whole or in part, at any time or
from time to time prior to the expiration of the Option as provided
herein. Optioned Shares that are available to be issued to the
Optionee upon exercise pursuant to this Section 3 are referred to herein as
"Exercisable Shares."
(b) Termination of
Employment.
(1) If the Optionee's
employment under his current employment agreement with the Company ("Employment
Agreement") is terminated by the Company without Cause (as defined in the
Employment Agreement) or by the Optionee pursuant to the requirements for his
voluntary resignation for Good Reason (as defined in the Employment Agreement)
prior to the Vesting Date, then Optioned Shares that had not yet vested and
become exercisable as of the employment termination date shall immediately vest
and become exercisable in a number that is equal to (x) multiplied by (y), where
(x) is the total number of Optioned Shares that would have become exercisable on
the Vesting Date, and (y) is a fraction, the numerator of which is the number of
whole thirty-day periods the Optionee was employed from the Option Grant Date
through such termination date and the denominator of which is twelve
(12).
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(2) If the Optionee's employment with the Company is terminated by
the Company for Cause or by the Optionee other than pursuant to the requirements
for voluntary resignation for Good Reason, or for any other reason (except as
provided in Section 3(b)(1) above), then the unvested portion of the Option
shall be immediately forfeited and canceled, but any portion of the Option that
had vested prior thereto shall continue to be exercisable by the Optionee
pursuant to the terms hereof.
(c) Acceleration of
Vesting Upon Change of Control. Notwithstanding the provisions of
Sections 3(a) and 3(b) above, in the event the Company undergoes a "change of
control" as defined below, and provided that Optionee is employed by the Company
on such date, then all non-vested Optioned Shares shall immediately vest and
Optionee shall have the right to exercise this Option for the full amount of
Optioned Shares, less any previously exercised shares. For purposes
of this Option, a change of control shall mean any of the following
events:
(i) a merger or
consolidation to which the Company is a party if the individuals and entities
who were stockholders of the Company immediately prior to the effective date of
such merger or consolidation have beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) of less than 50% of the total combined voting power for
election of directors of the surviving corporation following the effective date
of such merger or consolidation;
(ii) the
acquisition or holding of direct or indirect beneficial ownership (as defined
under Rule 13d-3 of the Exchange Act) of securities of the Company representing
in the aggregate 30% or more of the total combined voting power of the Company's
then issued and outstanding voting securities by any person, entity or group of
associated persons or entities acting in concert, other than any employee
benefit plan of the Company or of any subsidiary of the Company, or any entity
holding such securities for or pursuant to the terms of any such
plan;
(iii) the sale of all or
substantially all of the assets of the Company to any person or entity that is
not a wholly-owned subsidiary of the Company; or
(iv) the approval by the
stockholders of the Company of any plan or proposal for the liquidation of the
Company or its material subsidiaries, other than into the Company.
4. Procedure for
Exercise.
(a) Notice. The
Optionee may exercise the Option at any time with respect to all or any part of
the Exercisable Shares by giving the Secretary of the Company written notice of
intent to exercise. The notice of exercise shall specify the number
of Exercisable 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.
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(b) Payment
of Exercise Price. Full payment (in U.S. Dollars) by the Optionee of
the Exercise Price for the Exercisable Shares purchased shall be made on or
before the exercise date specified in the notice of exercise in cash, or, with
the prior written consent of the Board, in whole or in part through the
surrender of previously acquired shares of Common Stock (valued at their fair
market value on the exercise date). If the Optionee fails to pay for
any of the Exercisable Shares specified in such notice or fails to accept
delivery thereof, the Optionee's right to purchase such Exercisable Shares may
be terminated by the Company. The date specified in the Optionee's
notice as the date of exercise shall be deemed the date of exercise of the
Option, provided that payment in full for the Exercisable Shares to be purchased
upon such exercise shall have been received by such date.
(c) Cashless
Exercise. In addition to the method of payment set forth above,
provided that the Common Stock is either registered on a national securities
exchange or quoted on a national quotation system at the time of exercise,
Optionee shall have the right to exercise this Option in full or in part by
delivering written notice to the Company, and Optionee shall receive the number
of Exercisable Shares equal to the product of (x) the number of Exercisable
Shares as to which this Option is being exercised, multiplied by (y) a fraction,
the numerator of which is the Market Price (defined below) of the Common Stock
minus the Exercise Price of the Exercisable Shares and the denominator of which
is the Market Price of the Common Stock. As used in this Agreement,
the phrase "Market Price" for any given date shall be deemed to be the last
reported sale price on the trading day immediately preceding such date, or, in
case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days immediately preceding
such date on which reported sales did take place, in either case as officially
reported by the OTC Bulletin Board or the principal securities exchange on which
the Common Stock is listed or admitted to trading if so listed and
admitted.
(d) Other Limitations on
Exercise. The obligation of the Company to deliver shares of Common
Stock upon the exercise hereof shall be subject to the condition that if at any
time the Company's Board of Directors shall determine in its sole discretion
that the listing, registration or qualification of the Option or the Exercisable
Shares upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the grant of this Option or
the issuance or purchase of stock hereunder, then this Option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Board of Directors.
5. Adjustment of and
Changes in Stock of Company. If the Company at any time after the
Option Grant Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of shares of Common Stock obtainable upon exercise of this Option will be
proportionately increased. If the Company at any time after the
Option Grant Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination will be proportionately increased and the number of Exercisable
Shares issuable upon exercise of this Option will be proportionately
decreased. Any adjustment under this Section 5 shall become effective
at the close of business on the date the subdivision or combination becomes
effective.
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6. Non-Transferability of Option. During the Optionee's
lifetime, this Option shall be exercisable only by the Optionee or any guardian
or legal representative of the Optionee, and the Option shall not be
transferable except, in case of the death of the Optionee, by will or the laws
of descent and distribution, nor shall the Option be subject to attachment,
execution or other similar process. In the event of (a) any attempt
by the Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of
this 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 Optionee and it shall
thereupon become null and void.
7. Restrictions on
Underlying Stock. The shares of Common Stock issuable upon exercise
of this Option may not be sold, pledged, hypothecated, transferred or assigned
in the absence of an effective registration statement for the securities under
the applicable federal and state securities laws or an opinion of counsel
satisfactory to the Company to the effect that such registration is not required
thereunder.
8. Nonqualified
Option. The Option granted hereby shall be treated as a nonqualified
stock option and not as an incentive stock option under the Internal Revenue
Code.
9. No Rights as
Stockholder. Neither the Optionee nor any personal representatives
shall be, or shall have any of the rights and privileges of, a stockholder of
the Company with respect to any shares of Common Stock purchasable or issuable
upon the exercise of this Option, in whole or in part, prior to the date of
exercise of this Option in accordance with the provisions hereof, and then only
to the extent of the shares of Common Stock so purchased or issued.
10. Successors and
Assigns. This Option shall not be assignable by the Optionee without
the prior consent of the Company, which shall not be unreasonably
withheld. This Option shall be binding upon the successors and
assigns of the Company, and shall be expressly assumed by any successor to the
Company pursuant to a merger in which the Company is not the surviving
entity.
11. Miscellaneous. This
Option and any term hereof may be changed, waived, discharged or terminated only
by an instrument in writing signed by the party against which enforcement of
such change, waiver, discharge or termination is sought. This
certificate is deemed to have been delivered in the State of Texas and shall be
construed and enforced in accordance with and governed by the laws of such
State. The headings in this Stock Option Agreement are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof.
[Signature
Page Follows]
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IN WITNESS WHEREOF, the Company has
caused this Agreement to be executed by a duly authorized representative and the
Optionee has hereunto set his hand as of the Option Grant Date.
| ABC FUNDING, INC. | |||
|
|
By:
|
/s/ Xxxx X. Xxxxx | |
| Xxxx X. Xxxxx | |||
| Chief Financial Officer | |||
|
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By:
|
/s/ Xxx X. Xxxxx | |
| Xxx X. Xxxxx | |||
