EXHIBIT 1
EXHIBIT A TO
EXECUTIVE CONSULTING
AGREEMENT
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement") effective as of the 1st day of
May, 2000 between XXXXXX XXXXXXXX'X INC., a Utah corporation with offices at
0000 Xxxxxxxxxx Xxx, Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxx 00000 (the "Corporation"),
and XXXXX X. XXXXXXXXXX (the "Optionee") residing at 000 Xxxxxxxx Xxxx, Xxxxx
Xxxxx, Xxx Xxxx 00000
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, an affiliate of the Optionee is executing and delivering
contemporaneously with this Agreement an Executive Consulting Agreement (the
"Consulting Agreement") which provides for, among other things, the requirement
that the Corporation issue to the Optionee stock options to acquire shares of
the Corporation's common stock, par value $.37 per share (the "Common Stock");
and
WHEREAS, the Optionee is executing and delivering the Consulting Agreement
for the purpose of confirming his intention, as the sole stockholder of such
affiliate, to cause such affiliate to perform the Consulting Agreement; and
WHEREAS, the parties desire to set forth the terms and conditions of the
stock options in this Agreement;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the parties hereby agree as follows:
ARTICLE I
GRANT OF OPTIONS
Section 1.1 Grant of Option
On and as of the date hereof, the Corporation irrevocably grants to the
Optionee stock options to purchase 5,000,000 shares of the Common Stock (any
such shares, the "Shares") upon the terms and conditions set forth herein (the
"Options").
1
Section 1.2 Exercise Price
Subject only to the terms of Section 2.3 of this Agreement, the exercise
price shall be $.37 per Share without commission or other charge (the "Exercise
Price"). The Special Exercise Price described in Section 2.3 of this Agreement
shall be $.01 without commission or other charge.
Section 1.3 Adjustments in Options
In the event of a stock split, stock dividend, combination of shares or
similar event or in the event that the outstanding shares of Common Stock
subject to the Options are, from time to time, changed into or exchanged for a
different number or kind of shares of Common Stock or other securities of the
Corporation by reason of a merger, consolidation, recapitalization,
reclassification, or otherwise, the Corporation shall make an appropriate and
equitable adjustment in the number and kind of shares or other consideration as
to which the Options, or portions thereof then unexercised, shall be
exercisable.
ARTICLE II
PERIOD OF EXERCISABILITY
Section 2.1 Exercisability
The Options are fully vested immediately upon the execution and delivery of
this Agreement, subject only to the forfeiture provisions set forth in Section
2.2 of this Agreement. The Options shall remain exercisable until 5:00 p.m. New
York City time on September 30, 2007 (the "Expiration Date").
Section 2.2 Forfeiture of Options
In the event the retention of RJS Consulting Corp. (the "Executive") under
the Consulting Agreement is terminated by the Executive for any reason other
than Good Reason (as such term is defined in the Consulting Agreement) or by the
Corporation for Cause (as such term is defined in the Consulting Agreement) at
any time prior to October 1, 2002, then the Optionee shall forfeit that number
of Options (to the extent not previously exercised) equal to the product of
100,000 times the number of months between the Date of Termination (as such term
is defined in the Consulting Agreement) and October 1, 2002. Any such forfeited
Options shall be deemed null and void.
Section 2.3 Special Exercises
(a) Notwithstanding any other provision of this Agreement, in the event the
retention of the Executive under the Consulting Agreement is terminated by the
Executive for Good Reason, or is terminated by the Corporation without Cause,
the Optionee
2
may exercise all outstanding Options at any time before the Expiration Date at
the Special Exercise Price set forth in Section 1.2 of this Agreement.
(b) Notwithstanding any other provision of this Agreement, in the event the
retention of the Executive under the Consulting Agreement is terminated by
reason of the death or Disability (as such term is defined in the Consulting
Agreement) of the Optionee, the Options shall remain exercisable through the
Expiration Date at the Exercise Price.
ARTICLE III
EXERCISE OF OPTION
Section 3.1 Persons Eligible to Exercise
During the Optionee's lifetime, only the Optionee may
exercise the Options.
After the death or Disability (as such term is defined in the Consulting
Agreement) of the Optionee and prior to the close of business on the Expiration
Date, the Options may be exercised by the Optionee's personal representative,
conservator, or by any person empowered to do so under the Optionee's will or
under the then applicable laws of descent and distribution. The party entitled
to exercise the Options shall be referred to herein as the "Exercising Party."
Section 3.2 Partial Exercise
The Options or any exercisable portion thereof may be exercised in whole or
in part at any time prior to the close of business on the Expiration Date.
Section 3.3 Manner of Exercise
The Options may be exercised solely by delivering to the Corporation all of
the following prior to the close of business on the Expiration Date:
(a) Notice in writing signed by the Exercising Party, stating the number of
Shares with respect to which the Options are exercised;
(b) Full payment (in cash, by check or by a combination thereof) for the
Shares with respect to which such Options or portion thereof is exercised, at
either the Exercise Price or the Special Exercise Price, whichever applies;
(c) In the event that the Exercising Party is not the Optionee, appropriate
proof, in the reasonable judgment of the Corporation, of the right of such
person to exercise the Options; and
(d) The Corporation covenants to provide to the Optionee, upon Optionee's
or Optionee's representative's request, a loan to enable Optionee to exercise
the Options hereunder. Any such loan shall have a term of ten (10) business days
and shall be interest-free.
3
Section 3.4 Shares to be Issued
The Shares deliverable upon the exercise of the Options, or any portion
thereof, shall be fully paid and nonassessable. Promptly after proper exercise
of the Options or any portion thereof, the Corporation shall deliver to the
Optionee one or more stock certificates for the appropriate number of Shares
issued in connection with such exercise. The Corporation shall not deduct from
or withhold any Shares issuable pursuant hereto on account of any Federal, State
or local income or other taxes.
Section 3.5 No Rights as Stockholder
Neither the Optionee nor any Exercising Party shall be a stockholder of the
Corporation as to any Shares covered by the Options prior to the exercise of the
Options.
ARTICLE IV
REGISTRATION RIGHTS
Section 4 Registration of Securities
(a) If, at any time the Corporation proposes to register any of its
securities under the Securities Act of 1933, as amended (the "Securities Act")
other than in connection with a merger or pursuant to Form S-8 or other
comparable form, it will give written notice by registered mail, at least thirty
(30) days prior to the filing of any such registration statement, pre-effective
or post-effective amendment thereto (the "Registration Statement"), to the
Optionee of its intention to do so. If the Optionee notifies the Corporation
within twenty (20) days after receipt of any such notice of his desire to
include the Shares purchased pursuant to this Agreement and owned by him in such
proposed Registration Statement, the Corporation shall afford the Optionee the
opportunity to have all or any of his shares registered under such Registration
Statement. However, there can be no assurance that the Corporation will
effectuate any public offering of its securities.
If the managing underwriter in such underwritten offering shall advise the
Corporation that it declines to include a portion or all of the Shares requested
by the Optionee or its Permitted Assignee (collectively, the "Holders") in the
Registration Statement, then (i) registration of all of the Shares sold in
connection with the Offering shall be excluded from such Registration Statement
on the condition that all securities to be registered by other selling security
holders, if any, are also excluded and (ii) registration of a portion of such
Shares shall be excluded if such portion is allocated among the Optionee and any
other selling security holders in proportion to the respective numbers of
securities to be registered by each such Holder and other selling security
holder. In such event the Corporation shall give the Optionee prompt notice of
the number of Shares excluded.
Notwithstanding the provisions of this Section 4(a), the Corporation 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 the
Shares shall have been made) to
4
elect not to file any such proposed registration statement, or to withdraw the
same after the filing but prior to the effective date thereof.
(b) In the case of each registration effected by the Corporation pursuant
to Section 4(a), the Corporation will keep the Optionee or its Permitted
Assignee advised in writing as to the initiation of each registration and as to
the completion thereof. As used in this Agreement, "Permitted Assignee" shall
mean an "affiliate" of the Optionee as defined in Rule 144 of the Securities Act
or any other transferee pursuant to a transfer made in compliance with
applicable state and federal securities laws. At its expense, the Corporation
will:
(i) Keep such registration effective for a
period of 9 months or until the Optionee or
his Permitted Assignee has completed the
distribution described in the Registration
Statement relating thereto, whichever occurs
later.
(ii) Furnish such number of prospectuses and
other documents incident thereto as the
Optionee or its Permitted Assignee from time
to time may reasonably request.
(c) Indemnification will be furnished as follows:
(i) The Corporation will indemnify the Optionee and any Permitted Assignees
whose Shares are included in any registration when registration has been
effected pursuant to paragraph (a), and each underwriter, if any, and each
person who controls any underwriter within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended (the "Exchange Act") against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement or prospectus incident to
any such registration or based on any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that the Corporation will be not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon information furnished to the Corporation by the Optionee or
a Permitted Assignee whose Shares are included in such registration or by any
underwriter specifically for use herein.
(ii) The Optionee and each Permitted Assignee
will, if Shares held by them are included in
the securities as to which such registration
is being effected, indemnify the
Corporation, each of its directors, and
officers and counsel and each underwriter,
if any, of the
5
Corporation's securities covered by the
Registration Statement, each person who
controls the Corporation or such underwriter
within the meaning of the Exchange Act and
the Securities Act and the rules and
regulations thereunder, each other
stockholder participating in such
distribution and each of his officers,
directors and partners, and each person
controlling such other stockholder, against
all claims, losses, damages and liabilities
(or actions in respect thereto) arising out
of or based on any untrue statement (or
alleged untrue statement) of a material fact
contained in any such registration
statement, prospectus, or any omission (or
alleged omission) to state therein a
material fact required to be stated therein
in order to make the statements therein not
misleading in each case to the extent, but
only to the extent, that such untrue
statement (or alleged untrue statement) or
omission (or alleged omission) is made in
such document in reliance upon and in
conformity with information furnished to the
Corporation by the Optionee and each
Permitted Assignee, including the
information set forth in this Agreement;
provided, however, that the obligations of
the Optionee and each Permitted Assignee
hereunder shall be limited to an amount
equal to the proceeds received by such
holder or each Permitted Assignee, as the
case may be, of securities sold as
contemplated herein.
(iii) Each party entitled to indemnification under this agreement (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under Section 4 hereof. Each Indemnified
Party shall furnish such information regarding itself or the claim in question
as an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with the defense of such claim and any
litigation resulting therefrom.
(d) The Optionee shall furnish to the Corporation such information
regarding the Optionee and any information relating to the registration of any
of the
6
Corporation's securities proposed by the Optionee as the Corporation may
reasonably request in writing and as shall be reasonably required in connection
with any registration.
(e) The rights granted pursuant to this Section 4 will expire if the Shares
issued upon exercise of the Options are available for sale under Rule 144(k) of
the Securities Act in the opinion of counsel to the Corporation.
ARTICLE V
MISCELLANEOUS
Section 5.1 Options Transferable
The Optionee's rights under this Agreement may be transferred or assigned
in the discretion of the Optionee, including, without limitation, by will or by
the applicable laws of descent and distribution and in connection with brokerage
accounts held by the Optionee. Neither the Options nor any interest or right
therein or part thereof shall be liable for the debts, contracts or engagements
of the Optionee or his legal successors or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means, whether such disposition be voluntary or involuntary or occur by
operation of law by judgement, levy, attachment, garnishment or any other legal
or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect. All of the terms and provisions
of this Agreement shall be binding on, and shall inure to the benefit of, the
respective legal successors and assigns of the parties.
Section 5.2 Shares to be Reserved
The Corporation shall at all times during the term of the Options reserve
and keep available such number of shares of Common Stock as will be sufficient
to satisfy the requirements of this Agreement.
Section 5.3 Arbitration
Any controversy or claim arising out of or relating to this Agreement, the
breach thereof, or any other aspect of the relationship between the parties, or
relating to the scope of this arbitration provision, shall be settled
exclusively by private arbitration before JAMS Endispute, New York, New York (or
any successor thereto) or, if such entity is no longer operating, such other
dispute resolution agency as may be acceptable to the Company and the Optionee.
The arbitration of such issues, including the determination of the amount of any
damages suffered by either party hereto by reason of the acts or omissions of
the other, shall be to the exclusion of any court of law. The decision of the
arbitrators or a majority of them shall be final and binding on both parties and
their respective heirs, executors, administrators, successors and assigns. There
shall be three arbitrators, one to be chosen directly by each party and the
third arbitrator to be selected jointly by the Company and the Optionee from a
list of arbitrators provided by JAMS Endispute or such other dispute resolution
agency. In all events the arbitrators so chosen shall be experienced in the
valuations and business operations of closely-held
7
business which complete and initial public offering of equity securities under
the Securities Act of 1933, as amended. Each party shall pay the fees of the
arbitrator selected by him and of his own attorneys and the expenses of his
witnesses and all other expenses connected with the presentation of his case.
All other costs of the arbitration, including the cost of the record or
transcripts thereof, if any, administrative fees, and all other fees and costs
shall be borne equally by the parties.
Section 5.4 Entire Agreement
This Agreement supersedes and cancels any and all prior agreements between
the parties hereto, express or implied, relating to the subject matter hereof.
This Agreement, together with the Consulting Agreement, sets forth the entire
agreement between the parties hereto. It may not be changed, altered, modified
or amended except in a writing signed by both parties.
Section 5.5 Non-Waiver
The failure or refusal of either party to insist upon the strict
performance of any provision of this Agreement or to exercise any right in any
one or more instances or circumstances shall not be construed as a waiver or
relinquishment of such provision or right, nor shall such failure or refusal be
deemed a custom or practice contrary to such provision or right.
Section 5.6 Non-Assignment
The Optionee shall have no right to delegate any of the duties created by
this Agreement, and any delegation or attempted delegation of the Optionee's
duties, shall be null and void. In all other respects, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, beneficiaries, personal representatives, successors, permitted
assigns, officers and directors.
Section 5.7 Severability
If any paragraph, term or provision of this Agreement shall be held or
determined to be unenforceable, the balance of this Agreement shall nevertheless
continue in full force and effect unaffected by such holding or determination.
In addition, in any such event, the parties agree that it is their intention and
agreement that any such paragraph, term or provision which is held or determined
to be unenforceable as written, shall nonetheless be enforced and binding to the
fullest extent permitted by law as though such paragraph, term or provision has
been written in such a manner and to such an extent as to be enforceable under
the circumstances. Without limitation of the foregoing, with respect to any
restrictive covenant contained herein, if it is determined that any such
provision is excessive as to duration or scope, it is intended that it
nonetheless be enforced for such shorter duration or with such narrower scope as
will render it enforceable.
Section 5.8 Notices
8
All notices hereunder shall be in writing. Notices may be delivered
personally, or by mail, postage prepaid, to the respective addresses noted
above.
Section 5.9 Governing Law
This Agreement shall be governed in all respects by the laws of the State
of New York without regard to principles of conflicts of laws.
Section 5.10 Captions and Titles
Captions and titles have been used in this Agreement only for convenience,
and in no way define, limit or describe the meaning of this Agreement or any
part thereof.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto on the date first set forth above.
XXXXXX XXXXXXXX'X INC.
By:/s/Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: Chairman
AGREED AND ACCEPTED BY:
/s/Xxxxx X. Xxxxxxxxxx
Xxxxx X. Xxxxxxxxxx
9
