Exhibit 10.23
XA, INC.
INCENTIVE STOCK OPTION AGREEMENT
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Date: August 2, 2006
To Whom It May Concern:
XA, INC. (the "Company"), for value received, hereby agrees to issue common
stock purchase options entitling Xxxx Xxxxxx ("Holder" or the "Option Holder")
to purchase an aggregate of 650,000 shares of the Company's common stock
("Common Stock"). Such option is evidenced by an option certificate in the form
attached hereto as Schedule 1 (such instrument being hereinafter referred to as
an "Option," and such Option and all instruments hereafter issued in
replacement, substitution, combination or subdivision thereof being hereinafter
collectively referred to as the "Option"). The Option is issued in consideration
for services rendered to the Company and evidences the grant of the Option to
the Holder by the Board of Directors of the Company on August 2, 2006 (the
"Grant Date"). The number of shares of Common Stock purchasable upon exercise of
the Option is subject to adjustment as provided in Section 5 below. The Option
will be exercisable by the Option Holder (as defined below) as to all or any
lesser number of shares of Common Stock covered thereby, at an initial purchase
price of US $0.75 per share (the "Purchase Price"), subject to adjustment as
provided in Section 5 below, which shall vest to the Holder as provided in
Section 3(a) below, for the exercise period defined in Section 3(b) below.
1. REPRESENTATIONS AND WARRANTIES.
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The Company represents and warrants to the Option Holder as
follows:
(a) CORPORATE AND OTHER ACTION. The Company has all requisite
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power and authority (corporate and other), and has taken all
necessary corporate action, to authorize, execute, deliver and
perform this Incentive Stock Option Agreement (the "Option
Agreement"), to execute, issue, sell and deliver the Option and a
certificate or certificates evidencing the Option, to authorize
and reserve for issue and, upon payment from time to time of the
Purchase Price, to issue, sell and deliver, the shares of the
Common Stock issuable upon exercise of the Option ("Shares"), and
to perform all of its obligations under this Option Agreement and
the Option. The Shares, when issued in accordance with this
Option Agreement, will be duly authorized and validly issued and
outstanding, fully paid and nonassessable and free of all liens,
claims, encumbrances and preemptive rights. This Option Agreement
and, when issued, each Option issued pursuant hereto, has been or
will be duly executed and delivered by the Company and is or will
be a legal, valid and binding agreement of the Company,
enforceable in accordance with its terms. No authorization,
approval, consent or other order of any governmental entity,
regulatory authority or other third party is required for such
authorization, execution, delivery, performance, issue or sale.
(b) NO VIOLATION. The execution and delivery of this Option
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Agreement, the consummation of the transactions herein
contemplated and the compliance with the terms and provisions of
this Option Agreement and of the Option will not conflict with,
or result in a breach of, or constitute a default or an event
permitting acceleration under, any statute, the Articles of
Incorporation or Bylaws of the Company or any indenture,
mortgage, deed of trust, note, bank loan, credit agreement,
franchise, license, lease, permit, or any other agreement,
understanding, instrument, judgment, decree, order, statute, rule
or regulation to which the Company is a party or by which it is
bound.
2. TRANSFER.
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(a) TRANSFERABILITY OF OPTION. The Option Holder agrees that
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this Option is not transferable by Holder.
(b) REGISTRATION OF SHARES. The Option Holder agrees not to make
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any sale or other disposition of the Shares except pursuant to a
registration statement which has become effective under the
Securities Act of 1933, as amended (the "Act"), setting forth the
terms of such offering, the underwriting discount and commissions
and any other pertinent data with respect thereto, unless the
Option Holder has provided the Company with an acceptable opinion
of counsel acceptable to the Company that such registration is
not required. Certificates representing the Shares, which are not
registered as provided in this Section 2, shall bear an
appropriate legend and be subject to a "stop-transfer" order.
3. VESTING OF OPTION, EXERCISE OF OPTION, PARTIAL EXERCISE, NOTICE.
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(a) VESTING PERIOD. This Option shall vest to Holder as follows:
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(i) Holder shall vest 216,667 of the Options upon the
twelve (12) month anniversary of the date the United States
Securities and Exchange Commission declares effective the
registration statement covering the resale of the shares of
common stock which the 11% Senior Secured Convertible
Promissory Notes ("Notes") are convertible into and the
shares of common stock which the Warrants ("Warrants") are
exercisable for, which Notes and Warrants were issued to
certain third party purchasers pursuant to a Securities
Purchase Agreement entered into in August 2006 (the
"Effectiveness Date");
(ii) Holder shall vest 216,667 of the Options upon the
twenty-four (24) month anniversary of the Effectiveness
Date.
(iii) Holder shall vest 216,666 of the Options upon the
thirty-six (26) month anniversary of the Effectiveness Date.
(b) Provided however, that all Options shall vest to Holder
immediately upon the occurrence of a "Change in Control" as
defined under the Company's 2005 Stock Incentive Plan (the
"Plan"), which includes:
(1) the adoption of a plan of merger or consolidation of
the Company with any other corporation or association as a
result of which the holders of the voting capital stock of
the Company as a group would receive less than 50% of the
voting capital stock of the surviving or resulting
corporation;
(2) the approval by the Board of Directors of the Company
of an agreement providing for the sale or transfer of
substantially all the assets of the Company; or
(3) in the absence of a prior expression of approval by the
Board of Directors, the acquisition of more than 20% of the
Company's voting capital stock by any person within the
meaning of Rule 13d-3 under the Act (other than the Company
or a person that directly or indirectly controls, is
controlled by, or is under common control with, the
Company);
(c) Provided further however, that no part of the Option shall
vest to Holder if Holder terminates Holder's employment with the
Company. In the even that the Company terminates Holder's, for
reasons other than for Cause, as set for in Holder's Employment
Agreement (or Consulting Agreement, as the case may be) with the
Company, then all Options shall immediately vest to Holder.
(d) EXERCISE PERIOD. This Option shall expire and all rights
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hereunder shall be extinguished upon the earlier of:
(i) Five (5) years from the Grant Date; or
(ii) Three (3) Months from the date Holder's employment with
the Company ceases (or in the case of a Director of the
Company, the date such Director ceases to serve as a
Director of the Company), as determined by the Board of
Directors of the Company in its sole discretion, unless such
employment shall have terminated:
(1) as a result of the Disability of Holder, as
defined in the Plan, in which event such exercise
period shall expire on the date twelve (12) months
following a such termination of service by the Company,
not to exceed the time period specified in Section
3(b)(i) above; or
(2) as a result of the death of Holder (other than as
a result of disability), in which event such exercise
period shall expire on the date twelve (12) months
after the date of Holder's death, not to exceed the
time period specified in Section 3(b)(i) above.
(e) EXERCISE IN FULL. Subject to Section 3(a) and 3(b), a Option
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may be exercised in full by the Option Holder by surrender of the
Option, with the Form of Subscription attached hereto as Schedule
2 executed by such Option Holder, to the Company, accompanied by
payment as determined by 3(e) below, in the amount obtained by
multiplying the number of Shares represented by the respective
Option by the Purchase Price per share (after giving effect to
any adjustments as provided in Section 5 below).
(f) PARTIAL EXERCISE. Subject to Section 3(a) and 3(b), each
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Option may be exercised in part by the Option Holder by surrender
of the Option, with the Form of Subscription attached hereto as
Schedule 2 at the end thereof duly executed by such Option
Holder, in the manner and at the place provided in Section 3(c)
above, accompanied by payment as determined by 3(e) below, in
amount obtained by multiplying the number of Shares designated by
the Option Holder in the Form of Subscription attached hereto as
Schedule 2 to the Option by the Purchase Price per share (after
giving effect to any adjustments as provided in Section 5 below).
Upon any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the Option
Holder a new Option of like tenor, in the name of the Option
Holder, calling in the aggregate for the purchase of the number
of Shares equal to the number of such Shares called for on the
face of the respective Option (after giving effect to any
adjustment herein as provided in Section 5 below) minus the
number of such Shares designated by the Option Holder in the
aforementioned form of subscription.
(g) PAYMENT OF PURCHASE PRICE. The Purchase Price may be made by
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any of the following or a combination thereof, at the election of
the Option Holder:
(i) In cash, by wire transfer, by certified or cashier's
check, or by money order; or
(ii) By delivery to the Company of an exercise notice that
requests the Company to issue to the Option Holder the full
number of shares as to which the Option is then exercisable,
less the number of shares that have an aggregate Fair Market
Value, as determined by the Board in its sole discretion at
the time of exercise, equal to the aggregate purchase price
of the shares to which such exercise relates. (This method
of exercise allows the Option Holder to use a portion of the
shares issuable at the time of exercise as payment for the
shares to which the Option relates and is often referred to
as a "cashless exercise." For example, if the Option Holder
elects to exercise 1,000 shares at an exercise price of
$0.25 and the current Fair Market Value of the shares on the
date of exercise is $1.00, the Option Holder can use 250 of
the 1,000 shares at $1.00 per share to pay for the exercise
of the entire Option (250 x $1.00 = $250.00) and receive
only the remaining 750 shares).
For purposes of this section, "Fair Market Value" shall
be defined as the average closing price of the Common Stock
(if actual sales price information on any trading day is not
available, the closing bid price shall be used) for the five
trading days prior to the date of exercise of this Option
(the "Average Closing Bid Price"), as reported by the
National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if the Common Stock is not
traded on NASDAQ, the Average Closing Bid Price in the
over-the-counter market; provided, however, that if the
Common Stock is listed on a stock exchange, the Fair Market
Value shall be the Average Closing Bid Price on such
exchange; and, provided further, that if the Common Stock is
not quoted or listed by any organization, the fair value of
the Common Stock, as determined by the Board of Directors of
the Company, whose determination shall be conclusive, shall
be used). In no event shall the Fair Market Value of any
share of Common Stock be less than its par value.
(h) NOTICE OF EXERCISE AND/OR SALE BY HOLDER. The Holder
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shall notify the Company if Holder sells or otherwise
transfers any Shares acquired upon exercise of the Option
within two (2) years of the Grant Date of such Option or
within one (1) year of the date such Shares were acquired by
Holder upon the exercise of such Option.
4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
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Any exercise of the Option pursuant to Section 3 shall be deemed
to have been effected immediately prior to the close of business on
the date on which the Option together with the Form of Subscription
and the payment for the aggregate Purchase Price shall have been
received by the Company. At such time, the person or persons in whose
name or names any certificate or certificates representing the Shares
or Other Securities (as defined below) shall be issuable upon such
exercise shall be deemed to have become the holder or holders of
record of the Shares or Other Securities so purchased. As soon as
practicable after the exercise of any Option in full or in part, and
in any event within Ten (10) business days thereafter, the Company at
its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of, and delivered to the
purchasing Option Holder, a certificate or certificates representing
the number of fully paid and nonassessable shares of Common Stock or
Other Securities to which such Option Holder shall be entitled upon
such exercise, plus in lieu of any fractional share to which such
Option Holder would otherwise be entitled, cash in an amount
determined pursuant to Section 6(e). The term "Other Securities"
refers to any stock (other than Common Stock), other securities or
assets (including cash) of the Company or any other person (corporate
or otherwise) which the Option Holder at any time shall be entitled to
receive, or shall have received, upon the exercise of the Option, in
lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement
of Common Stock or Other Securities pursuant to Section 5 below or
otherwise.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES PURCHASABLE.
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The Purchase Price and the number of Shares are subject to
adjustment from time to time as set forth in this Section 5.
(a) In case the Company shall at any time after the date of this
Option Agreement (i) declare a dividend on the Common Stock in
shares of its capital stock, (ii) subdivide the outstanding
Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of Common Stock, or (iv) issue any shares of its
capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then
in each case the Purchase Price, and the number and kind of
Shares receivable upon exercise, in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination, or reclassification shall be
proportionately adjusted so that the holder of any Option
exercised after such time shall be entitled to receive the
aggregate number and kind of Shares which, if such Option had
been exercised immediately prior to such record date, he would
have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) No adjustment in the Purchase Price shall be required if
such adjustment is less than US $0.01; provided, however, that
any adjustments which by reason of this subsection (b) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 5 shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(c) Upon each adjustment of the Purchase Price as a result of
the calculations made in subsection (a) of this Section 5, the
Option outstanding prior to the making of the adjustment in the
Purchase Price shall thereafter evidence the right to purchase,
at the adjusted Purchase Price, that number of Shares (calculated
to the nearest thousandth) obtained by (i) multiplying the number
of Shares purchasable upon exercise of the Option immediately
prior to adjustment of the number of Shares by the Purchase Price
in effect prior to adjustment of the Purchase Price and (ii)
dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
6. FURTHER COVENANTS OF THE COMPANY.
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(a) DILUTION OR IMPAIRMENTS. The Company will not, by amendment
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of its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger or
dissolution, avoid or seek to avoid the observance or performance
of any of the terms of the Option or of this Option Agreement,
but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the
Option Holder against dilution or other impairment. Without
limiting the generality of the foregoing, the Company:
(i) shall at all times reserve and keep available, solely
for issuance and delivery upon the exercise of the Option,
all shares of Common Stock (or Other Securities) from time
to time issuable upon the exercise of the Option and shall
take all necessary actions to ensure that the par value per
share, if any, of the Common Stock (or Other Securities) is
at all times equal to or less than the then effective
Purchase Price per share; and
(ii) will take all such action as may be necessary or
appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common
Stock or Other Securities upon the exercise of the Option
from time to time outstanding.
(b) TITLE TO STOCK. All Shares delivered upon the exercise of
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the Option shall be validly issued, fully paid and nonassessable;
each Option Holder shall, upon such delivery, receive good and
marketable title to the Shares, free and clear of all voting and
other trust arrangements, liens, encumbrances, equities and
claims whatsoever; and the Company shall have paid all taxes, if
any, in respect of the issuance thereof.
(c) REPLACEMENT OF OPTION. Upon receipt of evidence reasonably
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satisfactory to the Company of the loss, theft, destruction or
mutilation of any Option and, in the case of any such loss, theft
or destruction, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in
the case of any such mutilation, upon surrender and cancellation
of such Option, the Company, at the expense of the Option Holder,
will execute and deliver, in lieu thereof, a new Option of like
tenor.
(d) FRACTIONAL SHARES. No fractional Shares are to be issued
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upon the exercise of any Option, but the Company shall round any
fraction of a share to the nearest whole Share.
7. HOLDERS OF SHARES.
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The Option is issued upon the following terms, to all of which
each Option Holder by the taking thereof consents and agrees: any
person who shall become a holder or owner of Shares shall take such
shares subject to the provisions of Section 2(b) hereof; each prior
taker or owner waives and renounces all of his equities or rights in
such Option in favor of each such permitted bona fide purchaser, and
each such permitted bona fide purchaser shall acquire absolute title
thereto and to all rights presented thereby.
8. MISCELLANEOUS.
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All notices, certificates and other communications from or at the
request of the Company to any Option Holder shall be mailed by first
class, registered or certified mail, postage prepaid, to such address
as may have been furnished to the Company in writing by such Option
Holder, or, until an address is so furnished, to the address of the
last holder of such Option who has so furnished an address to the
Company, except as otherwise provided herein. This Option Agreement
and any of the terms 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 Option Agreement shall be construed and
enforced in accordance with and governed by the laws of the State of
Illinois. The headings in this Option Agreement are for purposes of
reference only and shall not limit or otherwise affect any of the
terms hereof. This Option Agreement, together with the forms of
instruments annexed hereto as schedules, constitutes the full and
complete agreement of the parties hereto with respect to the subject
matter hereof. For purposes of this Option Agreement, a faxed
signature shall constitute an original signature. A photocopy or faxed
copy of this Agreement shall be effective as an original for all
purposes.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be executed
on this 2nd day of August, 2006, in Chicago, Illinois, by its proper corporate
officers, thereunto duly authorized.
XA, INC.
By /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx, President
SCHEDULE 1
OPTION
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THIS OPTION AND THE SECURITIES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER: (A) THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IN
RELIANCE UPON THE EXEMPTIONS FROM REGISTRATION PROVIDED IN SECTIONS 3 AND 4 OF
SUCH ACT AND REGULATION S PROMULGATED THEREUNDER; OR (B) ANY STATE SECURITIES
LAWS IN RELIANCE UPON APPLICABLE EXEMPTIONS THEREUNDER. THIS OPTION MAY NOT BE
EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS REGISTERED UNDER THE ACT OR
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS OPTION MUST BE ACQUIRED
FOR INVESTMENT ONLY FOR THE ACCOUNT OF THE INVESTOR, AND NEITHER THE OPTION NOR
THE UNDERLYING STOCK MAY BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE PROVISIONS
OF REGULATION S AND OTHER LAWS OR PURSUANT TO REGISTRATION UNDER THE ACT OR AN
AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING THIS
OPTION OR THE SECURITIES TO BE ISSUED UPON ITS EXERCISE MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE ACT.
To Purchase 650,000 Shares
of Common Stock
XA, INC.
This certifies that, for value received, the hereafter named registered owner is
entitled, subject to the terms and conditions of this Option, until the
expiration date, to purchase the number of shares (the "Shares") set forth above
of the common stock ("Common Stock"), of XA, INC. (the "Company") from the
Company at the purchase price per share hereafter set forth below, on delivery
of this Option to the Company with the exercise form duly executed and payment
of the purchase price (in cash or by certified or bank cashier's check payable
to the order of the Company) for each Share purchased. This Option is subject to
the terms of the Option Agreement between the parties thereto dated as of August
2, 2006, the terms of which are hereby incorporated herein. Reference is hereby
made to such Option Agreement for a further statement of the rights of the
holder of this Option.
Registered Owner: Xxxx Xxxxxx Date: August 2, 2006
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Purchase Price
Per Share: US $0.75
Vesting Date: The Option vests over the time period provided in Section 3
of the Option Agreement, at 5:00 p.m. Central Standard Time on
the dates provided in Section 3. This Option should only be read
in conjunction with the Option Agreement.
Expiration Date: Subject to Section 3(b) of the Option Agreement, 5:00 p.m.
Central Standard Time.
WITNESS the signature of the Company's authorized officer:
XA, INC.
By /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx, President
SCHEDULE 2
FORM OF SUBSCRIPTION
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(To be signed only upon exercise of Option)
To XA, INC.:
The undersigned, the holder of the enclosed Option, hereby irrevocably elects to
exercise the purchase right represented by such Option for, and to purchase
thereunder, * shares of Common Stock of XA, INC. and herewith
makes payment of US $_______________ (or elects to pay for the exercise in
shares of common stock pursuant to Section 3(e)(ii) of the Option Agreement as
evidenced by the calculation below by checking this box ),, and requests that
the certificate or certificates for such shares be issued in the name of and
delivered to the undersigned.
Dated:
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(Signature must conform in all respects to
name of holder as specified on the face of the
enclosed Option)
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(Printed Name)
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(Address)
(*) Insert here the number of shares called for on the face of the Option
or, in the case of a partial exercise, the portion thereof as to which the
Option is being exercised, in either case without making any adjustment for
additional Common Stock or any other stock or other securities or property
which, pursuant to the adjustment provisions of the Option Agreement pursuant to
which the Option was granted, may be delivered upon exercise.
CALCULATION PURSUANT TO SECTION 3(E)(II) OF THE OPTION AGREEMENT
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= TOTAL SHARES EXERCISED
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= PURCHASE PRICE (as defined and adjusted in the Option
-------------- Agreement)
= FAIR MARKET VALUE - the average closing price of the
-------------- Common Stock (if actual sales price information on any trading
day is not available, the closing bid price shall be used) for
the five trading days prior to the date of exercise of this
Option (the "Average Closing Bid Price"), as reported by the
National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), or if the Common Stock is not traded on
NASDAQ, the Average Closing Bid Price in the over-the-counter
market; provided, however, that if the Common Stock is listed on
a stock exchange, the Fair Market Value shall be the Average
Closing Bid Price on such exchange; and, provided further, that
if the Common Stock is not quoted or listed by any organization,
the fair value of the Common Stock, as determined by the Board of
Directors of the Company, whose determination shall be
conclusive, shall be used). In no event shall the Fair Market
Value of any share of Common Stock be less than its par value.
Total Shares Exercised x Purchase Price
= Shares to be Issued = Total Shares Exercised - ---------------------------------------
--------- Fair Market Value
