EXHIBIT 10.3
WORLDQUEST NETWORKS, INC.
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is entered into as of December 7,
1998 between WorldQuest Networks, Inc., a Texas corporation (the "Company"), and
Xxxxxxx X. Xxxxxx, an employee of the Company (the "Employee").
Recitals:
The Company desires to grant to the Employee a Nonqualified Stock Option to
purchase shares of its Common Stock, $0.10 par value, pursuant to the terms and
conditions of this Agreement.
The parties agree as follows:
1. Grant of option. The Company hereby grants to the Employee the right
and option (the "Option") to purchase all or any part of an aggregate of 167,867
shares (the "Shares") of its Common Stock, $0.10 par value, which constitutes
five percent (5%) of the fully diluted outstanding shares of Common Stock of the
Company after giving effect to the granting of this Option, on the terms and
conditions and subject to all the limitations set forth herein.
2. Purchase Price. The purchase price of the Shares covered by the Option
shall be $3.33 per share.
3. Vesting of Option. Subject to the other terms and conditions of this
Agreement, the Shares exercisable upon exercise of the Option granted hereby
shall vest in accordance with the following schedule: (i) 20% shall vest on the
first anniversary of the date of this Agreement if Employee continues to be
employed by the Company on such date, (ii) 30% shall vest on the second
anniversary of the date hereof if Employee continues to be employed by the
Company on such date, and (iii) 50% shall vest on the third anniversary of the
date hereof if Employee continues to be employed by the Company on such date.
Any non-vested Shares under the Option granted hereby shall be deemed to
have immediately and automatically vested two business days prior to the
occurrence of any of the following events: (i) a change of control of the
Company, which shall mean some person or entity other than WorldQuest Networks,
LLC or B. Xxxxxxx Xxxxx or an entity controlled by him owns more than 50% of the
voting capital stock or 50% in value of the voting and nonvoting capital stock
of the Company; (ii) the Company successfully closes an initial public offering
of its Common Stock which results in the Common Stock being registered under
Section 12 of the Securities Exchange Act of 1934, as amended; (iii) a sale of
all or substantially all of the assets of the Company; (iv) the merger or
consolidation of the Company into another entity that is the surviving entity;
(v) a partial or complete liquidation or dissolution of the Company; or (vi) the
Company's shares of Common Stock are changed into or exchanged for shares of
stock of another corporation or entity or are converted to cash pursuant to a
plan of merger, consolidation or similar arrangement.
4. Exercise of Option. Subject to the other terms and conditions of this
Agreement, the vested Shares granted pursuant to this Option may be exercised at
any time during the term of this Agreement in accordance with the terms of
paragraph 7.
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5. Term of Option. The Option shall terminate on the seventh (7th)
anniversary of the date hereof, but shall be subject to earlier termination as
provided herein.
In the event the Employee's employment is terminated by the Company for
"Cause" (as hereinafter defined), or the Employee voluntarily leaves the
employment of the Company, the unvested Shares granted pursuant to this Option
shall be immediately forfeited; provided, however, that notwithstanding the
vesting schedule set forth above, if Employee's employment is terminated by the
Company on or after June 7th in any year, any Shares which would have otherwise
vested on December 7th of such year shall not be forfeited and shall be deemed
vested notwithstanding such termination. If the Employee's employment is
terminated without "Cause" by the Company, this Option shall continue in effect
and any non-vested Shares under the Option shall be deemed to vest on the dates
set forth in paragraph 3 even though Employee is not employed by the Company on
any of such vesting dates. For purposes of this Agreement, the term "Cause"
shall mean and be strictly limited to: (1) being indicted for or formally
charged with a crime constituting a felony under state or federal law; (2)
committing fraud on the Company; (3) gross misconduct by Employee, such as
intoxication on the job, use of drugs on the job for non-medical purposes, or
other gross misconduct which has a material adverse effect on the business of
the Company; or (4) Employee continuing to act beyond his scope of authority
granted by the Board of Directors of the Company after written notice from the
Board to Employee to cease such actions.
If the Employee ceases to be an employee of the Company by reason of death
or disability, the Option shall terminate one year after the date of death or
disability and may be exercised by Employee's estate or heirs during such one-
year period if otherwise exercisable during such one-year period under the terms
hereof.
6. Non-Assignability. The Option shall not be transferable by the
Employee otherwise than by will or by the laws of descent and distribution and
shall be exercisable, during the Employee's lifetime, only by the Employee or
his or her guardian or legal representative. The Option shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment or similar process. Any
attempted transfer, assignment, pledge, hypothecation or other disposition of
the Option or of any rights granted hereunder contrary to the provisions of this
paragraph 6, or the levy of any attachment or similar process upon the Option or
such rights, shall be null and void.
7. Manner of Exercising Option and Issue of Shares. The Option relating
to vested Shares may be exercised in whole or in part by giving written notice
to the Company, together with the tender of the Option purchase price. Such
written notice shall be signed by the person exercising the Option, shall state
the number of Shares with respect to which the Option is being exercised, shall
contain any representation required by paragraph 8 below and shall otherwise
comply with the terms and conditions of this Agreement. The Company shall pay
all transfer or original issue taxes with respect to the issue of the Shares
pursuant hereto and all other fees and expenses necessarily incurred by the
Company in connection herewith. Except as specifically set forth herein,
Employee acknowledges that any income or other taxes due from him with respect
to this Option or the Shares issuable pursuant to this Option shall be the
responsibility of Employee and that the Company may, in accordance with the
Internal Revenue Code, require Employee to pay additional withholding taxes in
respect of the amount that is considered compensation includable in Employee's
gross income. Employee shall have rights as a shareholder only with respect to
any Shares covered by the Option after due exercise of the Option and tender of
the full exercise price for the Shares being purchased pursuant to such
exercise.
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8. Purchase for Investment. Unless the offering and sale of the Shares
to be issued upon the particular exercise of the Option shall have been
effectively registered under the Securities Act of 1933, as amended, or any
successor legislation (the "Act"), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:
The person(s) who exercise the Option shall represent to the Company, at
the time of such exercise, that such person(s) are, acquiring such Shares for
his or her own account, for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares, in which event the
person(s) acquiring such Shares shall be bound by the provisions of the
following legend which shall be endorsed upon the certificate(s) evidencing
their option Shares issued pursuant to such exercise:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH
REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED, EXCEPT UPON DELIVER TO THE COMPANY OF AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR
SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS
MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED
THEREUNDER."
Without limiting the generality of the foregoing, the Company may delay
issuance of the Shares until completion of any action or obtaining of any
consent, which the Company deems necessary under any applicable law (including
without limitation state securities or "blue sky" laws).
9. Noncompetition and Nonsolicitation. In order to induce the Company to
grant the Option granted hereby to Employee, Employee covenants that for a
period of one (1) year from the date of the termination of Employer's employment
for any reason whatsoever (or if this period shall be unenforceable, for such
lesser period as shall be enforceable), Employee will not, either directly or
indirectly, anywhere in the world (or if this area shall be unenforceable for
such area as shall be enforceable):
(a) for Employee's own behalf or on behalf of any other individual,
partnership, association, corporation, firm, group, organization or other
entity ("person"), hire or solicit or in any manner attempt to influence or
induce any employee employed by the Company at the time of termination of
Employee's employment with the Company to leave the employment of the
Company, nor use or disclose to any person any information concerning the
names and addresses of such employees; or
(b) call on, solicit, or take away, or attempt to call on, solicit, or
take away any of the customers, clients, prospective customers or
prospective clients of the Company on whom Employee called, with whom he
became acquainted, or the
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names of which he learned while employed by the Company, either for
Employee's own behalf or for any other person for purposes of such person
competing directly against the Company, except with the prior written
consent of the Company; or
(c) perform any act or engage in any activity which interferes,
directly or indirectly, with any relationship between the Company and any
client, customer, prospective client or prospective customer of the
Company.
The term "prospective client" or "prospective customer", as used in this
Agreement, refers to any person whose business has been solicited by the Company
or its agents at any time during one (1) year preceding the termination of
employment of Employee. The term "business", as used in this Agreement, shall
mean the specific business in which the Company is engaged at the time of
termination of employment and the term "prospective business", as used in this
Agreement, shall mean any specific prospective or potential business of the
Company which the Company has not commenced but which has been identified or
discussed in strategic or other business plans or meetings, either internally or
externally, as a pending business which the Company intends to actively pursue.
10. Notices. Any notice to be given under this Agreement shall be deemed
sufficient if addressed in writing, and delivered by registered or certified
mail or delivered personally, in the case of the Company to its principal
business office and in the case of the Employee, to his address appearing on the
records of the Company, or to such other address as he may have designated in
writing to the Company.
11. Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws, and not the laws of conflict, of the State of
Texas.
12. Benefit of Agreement. This Agreement shall be for the benefit of and
shall be binding upon the heirs, executors, administers and successors of the
parties hereto.
13. Adjustment of Shares. Wherever this Agreement specifies a number of
shares of Common Stock or a purchase price per share, the specified number of
Shares of Common Stock to be received on exercise and the applicable purchase
price per share shall be changed to reflect adjustments (which may require that
additional securities or other property be delivered on exercise) required by
this paragraph 13, as follows:
(a) If a stock or property dividend is declared to the holders of
shares of the same class of securities of the Company as is issuable upon
exercise of this Option, there shall be added with respect to each Share
issuable upon exercise of this Option the amount of the dividend, stock or
property, which would have been issued to Employee had Employee been the
holder of record of such issuable share at the dividend record date. Such
additional stock or property resulting from such dividend shall be
delivered without additional cost upon the exercise of this Option. Any
distribution to the holders of Common Stock of the Company of any kind,
other than a distribution of cash as a dividend out of profits of the
Company for the current year of the dividend, shall be treated as a stock
or property dividend for purposes of this subparagraph 13(a). If Employee
is entitled to receive cash upon exercise of this Option under this
subparagraph 13(a), Employee may, at Employee's option, elect to reduce the
applicable purchase price by all or part of the cash to be received by
Employee upon exercise under this subparagraph 13(a).
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(b) If an increase has been effected in the number of outstanding
shares of the same class of securities of the Company as is issuable upon
exercise of this Option by reason of a subdivision of such shares, the
number of Shares which may thereafter be purchased upon exercise of this
Option shall be increased with respect to each Share issuable upon exercise
of this Option by the number of Shares which could have been received by
Employee at the time of such subdivision had he been the holder of record
of such issuable Shares at the record and/or effective date of the
subdivision. In such event, the purchase price per Share under this Option
shall be proportionately reduced.
(c) If a decrease has been effected in the number of outstanding
shares of the same class of securities of the Company as is issuable upon
exercise of this Option by reason of a reverse stock split, the number of
Shares which may thereafter be purchased upon exercise of this Option shall
be changed with respect to each Share issuable upon exercise of this Option
to the number of Shares which would have been held by Employee at the time
of said reverse stock split had Employee been the holder of such issuable
Share at the record and/or effective date of the reverse stock split. In
such event, the purchase price per Share shall be proportionately
increased.
EXECUTED effective as of December 7, 1998.
COMPANY:
WORLDQUEST NETWORKS, INC.
By: /s/ B. XXXXXXX XXXXX
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B. Xxxxxxx Xxxxx, Chairman of
the Board
EMPLOYEE:
/s/ XXXXXXX X. XXXXXX
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Xxxxxxx X. Xxxxxx
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