Exhibit 10.22
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 ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("Holder" or the "Option Holder")
to purchase an aggregate of 850,000 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 power
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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 this
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Option is not transferable by Holder.
(b) REGISTRATION OF SHARES. The Option Holder agrees not to make any
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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 283,333 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 283,333 of the Options upon the
twenty-four (24) month anniversary of the Effectiveness Date.
(iii) Holder shall vest 283,334 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 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 may
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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 Option
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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 any
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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 shall notify
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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 of
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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 the
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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 upon the
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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/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇, Chief Operating Officer
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 850,000 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: ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇, Chief Operating Officer
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.
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CALCULATION PURSUANT TO SECTION 3(E)(II) OF THEOPTION 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