OPTION AGREEMENT dated as of October 26, 2007 between ABC Funding, Inc., a
Nevada corporation (the "Company"), and Xxxxx Xxxxx ("Xxxxx") and his assignees
or designees (each hereinafter sometimes referred to as a "Holder").
RECTIALS
A. The Company has agreed to issue Options to Xxxxx (the "Options") to
purchase five hundred thousand (500,000) shares of the Company's common stock
(the "Shares") on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the agreements herein
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant. The Company hereby grants to Xxxxx Options to purchase the
Shares at an initial exercise price of $0.35 per share (the "Exercise Price").
The Options shall be exercisable at any time from the date hereof until 5:30
p.m., New York time, October 15, 2012. The number of shares subject to the
Options granted hereunder and the Exercise Price shall be subject to adjustment
as provided in Section 8 hereof.
2. Exercise of Options.
2.1 Method of Exercise. The Options initially are exercisable at the
Exercise Price (subject to adjustment as provided below). Upon surrender of the
original copy of this Agreement with the annexed Form of Election to Purchase
duly executed, together with payment of the Exercise Price for the number of the
Shares to be purchased, to the Company c/o Eaton & Xxx Xxxxxx, acting as Option
Agent, 0 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, the Holder shall be entitled to
receive a certificate or certificates for the Shares so purchased. The purchase
rights granted hereby are exercisable at the option of the Holder, in whole or
in part (but not as to fractional shares of common stock underlying the Options
and not as to less then 25,000 shares at any one time or, if less, the number of
Options represented hereby). In the case of the purchase of less than all of the
Shares purchasable hereunder, the Company shall execute and deliver a new Option
Agreement of like tenor for the balance of the shares purchasable hereunder.
2.2 Exercise by Surrender of Options. In addition to the method of payment
set forth in Section 2.1 and in lieu of any cash payment required thereunder,
the Holder(s) of the Options shall have the right at any time and from time to
time to exercise the Options in full or in part by surrendering this Agreement
in the manner specified in Section 2.1 in exchange for the number of the Shares
equal to the product of (x) the number of the Shares as to which the Options are
being exercised, multiplied by (y) a fraction, the numerator of which is the
Market Price (as hereinafter defined) of the Shares minus the Exercise Price of
the Shares and the denominator of which is the Market Price per Share. As used
in this Agreement, the phrase "Market Price" at any date shall be deemed to be
the last reported sale price, 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, in either case as officially reported by the principal securities
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exchange on which the Shares are listed or admitted to trading, or, if the
Shares are not listed or admitted to trading on any exchange, the average
closing sale price as furnished by the NASD through The NASDAQ Stock Market,
Inc. ("NASDAQ") or similar organization if NASDAQ is no longer reporting such
information, or if the Shares are not quoted on NASDAQ, as determined in good
faith by resolution of the Board of Directors of the Company, based on the best
information available to it. Solely for the purposes of this Section, Market
Price shall be calculated either (i) on the date on which the form of election
attached hereto is deemed to have been sent to the Option Agent pursuant to
Section 13 hereof ("Notice Date") or (ii) as the average of the Market Price for
each of the five trading days immediately preceding the Notice Date, whichever
of (i) or (ii) results in a greater Market Price.
3. Issuance of Certificates. Upon the exercise of any Options, the
issuance of certificates for the Shares, properties or rights underlying such
Options shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder including, without limitation, any tax,
other than income taxes, which may be payable in respect of the issuance
thereof, and such certificates shall be issued in the name of, or in such names
as may be directed by, the Holder; provided, however, that the Company shall not
be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificates in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The certificates representing the Shares or other securities, property or
rights issued upon exercise of any Options shall be executed on behalf of the
Company by the manual or facsimile signature of the then present President or
any Vice President of the Company reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or any Assistant Secretary
of the Company.
4. Transfer of Options. Subject to all applicable securities laws, the
Options shall be transferable only on the books of the Company maintained at the
office of the Option Agent, upon delivery of this Agreement or a suitable
instrument of transfer duly endorsed by the Holder or by its duly authorized
attorney or representative accompanied by proper evidence of succession,
assignment or authority to transfer. Upon any registration transfer, the Company
shall execute and deliver a new copy of this Agreement to the person entitled
thereto.
5. Exercise Price and Number of Securities. Except as otherwise provided
in Section 8 hereof, each Option is exercisable to purchase one Share at an
initial exercise price equal to the Exercise Price. The Exercise Price and the
number of the Shares for which each Option may be exercised shall be the price
and the number of the Shares which shall result from time to time from any and
all adjustments in accordance with the provisions of Section 8 hereof.
6. Registration Rights.
6.1 Registration under the Securities Act of 1933. The Holder by his
acceptance hereof, covenants and agrees that the Options are being acquired as
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an investment and not with a view to the distribution thereof. Each certificate
representing the Shares and any of the other securities issuable upon exercise
of an Option (collectively, the "Option Shares") shall bear the following legend
unless (i) the Options or Option Shares are distributed to the public or sold to
the underwriters for distribution to the public pursuant to a registration
statement filed under the Securities Act of 1933, as amended (the "Act"), or
(ii) the Company has received an opinion of counsel, in form and substance
reasonably satisfactory to counsel for the Company, that such legend is
unnecessary for any such certificate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE EXTENT
APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER
SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
6.2 Piggyback Registration. If, at any time commencing after the date
hereof and expiring five (5) years thereafter, the Company proposes to register
any of its securities under the Act (other than in connection with an initial
public offering of shares of the Company or in connection with a merger or
pursuant to Form S-4 or Form S-8 or successor form thereto) it will give written
notice by registered mail, at least thirty (30) days prior to the filing of each
such registration statement, to the Holders of its intention to do so. If any of
the Holders notify the Company within twenty (20) days after mailing of any such
notice of its or their desire to include any such securities in such proposed
registration statement, the Company shall afford such Holders the opportunity to
have any such Option Shares registered under such registration statement. In the
event that such registration relates to an underwritten public offering and the
managing underwriter for said offering advises the Company in writing that in
its opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
causing a diminution in the offering price or otherwise adversely affecting the
offering, the Company will include in such registration (a) first, the
securities the Company proposes to sell, (b) second, the securities held by the
entities that made the demand for registration, and (c) third, the Option Shares
or other securities requested to be included in such registration which in the
opinion of such underwriter can be sold, pro rata among the Holders and other
owners on the basis of the number of Option Shares or other securities requested
to be registered by such Holders and other owners.
Notwithstanding the provisions of this Section, the Company shall have the
right at any time after it shall have given written notice pursuant to this
Section (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement or to withdraw the same after the filing but prior to the
effective date thereof.
6.3. Covenants of the Company With Respect to Registration. In connection
with any registration under Section 6.2, the Company covenants and agrees as
follows:
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(a) The Company shall pay all costs (excluding fees and expenses of
Holder(s)' counsel and any underwriting or selling commissions), fees and
expenses in connection with all registration statements filed pursuant to
Section 6.2 including, without limitation, the Company's legal and accounting
fees, printing expenses, blue sky fees and expenses.
(b) The Company will take all necessary action which may be required in
qualifying or registering the Option Shares included in a registration statement
for offering and sale under the securities or blue sky laws of such states as
reasonably are requested by the Holder(s), provided that the Company shall not
be obligated to execute or file any general consent to service of process or to
qualify as a foreign corporation to do business under the laws of any such
jurisdiction.
(c) The Company shall indemnify the Holder(s) of the Option Shares to be
sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement.
(d) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise the Options prior to the initial filing of any
registration statement or the effectiveness thereof.
(e) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriters, of (i) an opinion of counsel to the Company, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration relates to an underwritten public offering, a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities.
(f) The Company shall as soon as practicable after the effective date of
any registration statement filed pursuant to this Section 6, and in any event
within 15 months thereafter, make "generally available to its security holders"
(within the meaning of Rule 158 under the Act) an earnings statement (which need
not be audited) complying with Section 11(a) of the Act and covering a period of
at least 12 consecutive months beginning after the effective date of the
registration statement.
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(g) The Company's obligations under this Section shall terminate on the
fifth anniversary of the date hereof or, in respect of any Holder, when the
Option Shares and other Shares held by such Holder represent less than 1% of the
shares of such class then issued and outstanding.
7. Obligations of Holders. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 6 hereof that
each of the selling Holders shall:
(a) Furnish to the Company such information regarding themselves, the
Option Shares held by them, the intended method of sale or other disposition of
such securities, the identity of and compensation to be paid to any underwriters
proposed to be employed in connection with such sale or other disposition, and
such other information as may reasonably be required to effect the registration
of their Option Shares.
(b) Notify the Company, at any time when a prospectus relating to the
Option Shares covered by a registration statement is required to be delivered
under the Act, of the happening of any event with respect to such selling Holder
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(c) The Holder(s) of the securities to be sold pursuant to a registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against all loss, claim, damage or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holders, or their successors or assigns, for
specific inclusion in such registration statement; provided, however, that the
indemnity of such Holder(s) shall be limited to the net proceeds received by
such Holder(s) in the sale of securities pursuant to the respective registration
statement to the same extent and with the same effect as the provisions
contained in Section 6 of the Placement Agent Agreement pursuant to which the
Placement Agent has agreed to indemnify the Company.
8. Adjustments to Exercise Price and Number of Securities. The Exercise
Price in effect at any time and the number and kind of securities purchased upon
the exercise of any Option shall be subject to adjustment from time to time only
upon the happening of the following events:
(a) Stock Dividend, Subdivision and Combination. In case the Company shall
(i) declare a dividend or make a distribution on its outstanding Shares in
Shares, (ii) subdivide or reclassify its outstanding Shares into a greater
number of shares, or (iii) combine or reclassify its outstanding Shares into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of Shares outstanding after giving
effect to such action, and the numerator of which shall be the number of Shares
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
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(b) Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section, the number of Option
Shares issuable upon the exercise at the adjusted Exercise Price of each Option
shall be adjusted to the nearest number of whole Shares by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of Option Shares issuable upon exercise of the Options immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(c) Definition of Shares. For the purpose of this Section, the term
"Shares" shall mean (i) the Shares, or (ii) any other class of securities
resulting from successive changes or reclassifications of such Shares.
(d) Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company into, another entity (other than a consolidation
or merger which does not result in any reclassification or change of the
outstanding Shares), the entity formed by such consolidation or merger shall
execute and deliver to the Holder a supplemental Option agreement providing that
the Holder of each Option then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Option) to receive, upon exercise
of such Option, the kind and amount of shares of and other securities and
property receivable upon such consolidation or merger by a holder of the number
of Shares for which such Option might have been exercised immediately prior to
such consolidation, merger, sale or transfer. Such supplemental Option agreement
shall provide for adjustments that shall be identical to the adjustments
provided in Section 8. The above provision of this subsection shall similarly
apply to successive consolidations or mergers.
(e) No Adjustment of Exercise Price in Certain Cases. No adjustment of the
Exercise Price shall be made if the amount of said adjustment shall be less than
two cents ($.02) per share; provided, however, that in such case any adjustment
that would otherwise be required then to be made shall be carried forward and
shall be made at the time of and together with the next subsequent adjustment
which, together with any adjustment so carried forward, shall amount to at least
two cents ($.02) per share.
9. Exchange and Replacement of Agreements. This Agreement is exchangeable,
without expense, upon the surrender hereof by the registered Holder to the
Company c/o the Option Agent for a new Option Agreement of like tenor and date
representing in the aggregate the right to purchase the same number of Option
Shares in such denominations as shall be designated by the Holder thereof at the
time of such surrender. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Option
Agreement, and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it and reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of the
Agreement, if mutilated, the Company will make and deliver a new Option
Agreement of like tenor, in lieu thereof.
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10. Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares upon the exercise of any
Option, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of shares or other securities, properties or rights.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares, solely for the purpose
of issuance upon the exercise of the Options, such number of Shares or other
securities, properties or rights as shall be issuable upon the exercise thereof.
Every transfer agent ("Transfer Agent") for the Shares and other securities of
the Company issuable upon the exercise of the Options will be irrevocably
authorized and directed at all times to reserve such number of authorized shares
of Shares and other securities as shall be requisite for such purpose. The
Company will keep a copy of this Agreement on file with every Transfer Agent for
the Shares and other securities of the Company issuable upon the exercise of the
Options. The Company will supply every such Transfer Agent with duly executed
stock and other certificates, as appropriate, for such purpose. The Company
covenants and agrees that, upon exercise of the Options and payment of the
Exercise Price therefor, all Shares and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as any Options
shall be outstanding, the Company shall use its best efforts to cause all Shares
issuable upon the exercise of the Options to be listed (subject to official
notice of issuance) on all securities exchanges on which the Shares issued to
the public in connection herewith may then be listed and/or quoted on The NASDAQ
Stock Market.
12. No Rights as a Stockholder; Notices to Holders in Certain
Circumstances. Nothing contained in this Agreement shall be construed as
conferring upon the Holders the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company. If, however, at any time prior to the expiration of
the Options and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its securities for
the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its securities any
additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety
shall be proposed;
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then in any one or more of said events, the Company shall give written notice of
such event at least fifteen (15) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date of closing the transfer books, as the case may be.
Failure to give such notice or any defect therein shall not affect the validity
of any action taken in connection with the declaration or payment of any such
dividend, or the issuance of any convertible or exchangeable securities, or
subscription rights, options or warrants, or any proposed dissolution,
liquidation, winding up or sale.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made and
sent when delivered, or mailed by registered or certified mail, return receipt
requested:
(a) if to the registered Holder(s) of the Options, to the addresses of
such Holder as shown on the books of the Company; or
(b) if to the Company, c/o Eaton & Xxx Xxxxxx LLP, 0 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention Xxxxxxx X. XxXxxx, Esq.; or
(c) if to the Option Agent, at 0 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn: Xxxxxxx X. XxXxxx, Esq.
14. Supplements; Amendments; Entire Agreement. This Agreement contains the
entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly signed
by the party against whom enforcement of the modification or amendment is
sought. The Company may from time to time supplement or amend this Agreement
without the approval of any holders of Options in order to cure any ambiguity,
to correct or supplement any provision contained herein which may be defective
or inconsistent with any provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which the Company deems shall not adversely affect
the interests of the Holders.
15. Successors. All of the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders and
their respective successors and assigns hereunder.
16. Survival of Representations and Options. All statements in any
schedule, exhibit or certificate or other instrument delivered by or on behalf
of the parties hereto, or in connection with the transactions contemplated by
this Agreement, shall be deemed to be representations and warranties hereunder.
Notwithstanding any investigations made by or on behalf of the parties to this
Agreement, all representations, warranties and agreements made by the parties to
this Agreement or pursuant hereto shall survive.
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17. Governing Law. This Agreement shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be construed
in accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
18. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision of this Agreement.
19. Captions. The caption headings of the Sections of this Agreement are
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
20. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
registered Holder(s) of the Options and the Option Shares any legal or equitable
right, remedy or claim under this Agreement. This Agreement shall be for the
sole and exclusive benefit of the Company and any Holder(s) of the Options or
Option Shares.
21. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
ABC FUNDING, INC.
By:
--------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Financial Officer
------------------------------
Xxxxx Xxxxx
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FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 2.1
The undersigned hereby irrevocably elects to exercise the right,
represented by the Option Agreement dated ____________, to purchase Shares and
herewith tenders in payment for such securities a check payable in New York
Clearing House Funds to the order of Ene3rgy Venture, Inc. (the "Company") in
the amount of $________, all in accordance with the terms of Section 2.1 of the
Option Agreement. The undersigned requests that a certificate for such
securities be registered in the name of _______________________ , whose address
is _________________________________ and that such certificate be delivered to
____________________________________________________________ , whose address is
_______________________________________ , and if said number of shares shall not
be all the shares purchasable under the Option Agreement, that a new Option
Agreement for the balance of the Options exercisable under the Option Agreement
be registered in the name of the undersigned Option holder or his assignee as
below indicated and delivered to the address stated below.
Dated:
Signature: ___________________________________________________
(Signature must conform in all respects to name of holder as
specified on the face of the Option Agreement)
Address: _____________________________________________________
_____________________________________________________
______________________________________________________________
(Insert Social Security or Other Identifying Number of Holder)
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FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 2.2
The undersigned hereby irrevocably elects to exercise the right,
represented by the Option Agreement dated ___________, to purchase __________
Shares all in accordance with the terms of Section 2.2 of the Option Agreement.
The undersigned requests that certificates for such securities be registered in
the name of _______________________ whose address is
_______________________________ and that such certificates be delivered to
__________________________ whose address is
______________________________________.
Dated:
Signature: ___________________________________________________
(Signature must conform in all respects to name of holder as
specified on the face of the Option Agreement)
Address: _____________________________________________________
_____________________________________________________
______________________________________________________________
(Insert Social Security or Other Identifying Number of Holder)
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