EXHIBIT 10.7
NEITHER THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE SECURITIES ACT) OR THE SECURITIES LAWS OF ANY
STATE. NEITHER THE SECURITIES REPRESENTED HEREBY MAY BE SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED NOR MAY THE SHARES BE
ISSUED UPON EXERCISE UNLESS SUCH SECURITIES AND SHARES ARE
REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR THE COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH SALE, TRANSFER, PLEDGE OR ISSUANCE IS EXEMPT
FROM REGISTRATION.
Vidshadow, Inc.
STOCK OPTION AGREEMENT
THIS STOCK
OPTION AGREEMENT (the “Agreement”), is made as of
this day, the 20th of May 2008 by and between Vidshadow, Inc., a
Delaware corporation (the “Company”), and Mark
Gaeta (the “Optionee”).
R E C
I T A L
On
December 28, 2007, the following options were granted by
Vidshadow, Inc., a California corporation (“Vidshadow
California”), to the Optionee:
Number
of Shares; Option Price. the Optionee was granted the option
(“Option”) to purchase (i) Common Shares of Vidshadow
California (“Common Shares”) equal to up to two percent
(2.0%) of the fully-diluted outstanding shares of Vidshadow
California’s capital stock at a purchase price per share
calculated by dividing $100,000,000 by the number of fully-diluted
shares of Vidshadow California’s capital stock outstanding at
the time of such purchase, (ii) Common Shares equal to up to three
percent (3.0%) of the fully-diluted outstanding shares of Vidshadow
California’s capital stock at a purchase price per share
calculated by dividing $70,000,000 by the number of fully-diluted
shares of Vidshadow California’s capital stock outstanding at
the time of such purchase, and (iii) Common Shares equal to up to
five percent (5.0%) of the fully-diluted outstanding shares of
Vidshadow California’s capital stock at a purchase price per
share calculated by dividing $50,000,000 by the number of
fully-diluted shares of Vidshadow California’s capital stock
outstanding at the time of such purchase.
Effective
December 31, 2007, Vidshadow California’s Board of
Directors modified the grant to the Optionee of an option to
purchase the Common Shares specified in Paragraph 1 hereof, at the
price specified therein, such option to be for the term and upon
the terms and conditions hereinafter stated.
On March
13, 2008 , the aforementioned options were effectively replaced
with identical options from the Company, pursuant to a share
exchange agreement entered into in connection with the reverse
merger between Vidshadow California and the Company that took place
on March 13, 2008.
The Board
of Directors, or such other committee or individual that the Board
of Directors appoints, shall be the “Administrator” for
purposes of this Agreement.
A G R E E M E N T
NOW,
THEREFORE, in consideration of the promises and of the undertakings
of the parties hereto contained herein, it is hereby agreed:
1.
Number
of Shares; Option Price. Pursuant to said action of the Board
of Directors, the Company hereby grants to Optionee the option
(“Option”) to purchase, upon and subject to the terms
and conditions hereof, 1,299,962 , 1,949,943 and
3,249,906 Common Shares (“Common Shares”) of
the Company at purchase prices per share of $1.54, $1.08, and
$0.77, respectively.
2.
Term.
This Option shall expire on December 27, 2014 unless
such Option shall have been terminated prior to that date in
accordance with the provisions of this Agreement. The term
“Affiliate” as used herein shall have the meaning as
set forth in the Federal Securities laws of the United States.
3.
Shares
Subject to Exercise. All Common Shares subject to exercise
shall be exercisable immediately. All Common Shares shall
thereafter remain subject to exercise for the term specified in
Paragraph 2 hereof.
4.
Method and
Time of Exercise. The Option may be exercised by written
notice delivered to the Company at its principal executive office
stating the number of Common Shares with respect to which the
Option is being exercised, together with:
(A)
a check or
money order made payable to the Company in the amount of the
exercise price and any withholding tax, as provided under Paragraph
5 hereof; or
(B)
if
expressly authorized in writing by the Administrator, in its sole
discretion, at the time of the Option exercise, the tender to the
Company of Common Shares owned by Optionee having a fair market
value, as determined by the Administrator, not less than the
exercise price, plus the amount of applicable federal, state and
local withholding taxes; or
(C)
the Optionee may, at its option, elect to exercise this
Option, in whole or in part and at any time or from time to time,
on a cashless basis, by surrendering this Option, with the purchase
form attached to this Option as Exhibit A duly executed by or on
behalf of the Optionee, at the principal office of the Company, or
at such other office or agency as the Company may designate, by
canceling a portion of this Option in payment of the Exercise Price
payable in respect of the number of Common Shares purchased upon
such exercise. In the event of an exercise pursuant to this
subsection 4(c), the number of Common Shares issued to the Holder
shall be determined according to the following formula:
X =
Y(A-B)
A
Where:
X =
the number of Common Shares that shall be issued
to the Holder;
Y =
the number of Common Shares for which this Option is
being exercised (which shall include both the number of Common
Shares issued to the Holder and the number of Common Shares subject
to the portion of the Option being cancelled in payment of the
Exercise Price);
A =
the Fair Market Value (as defined below) of one Common
Share; and
B =
the Exercise Price then in effect.
(ii) The Fair Market Value per Common Share shall
be determined as follows:
(a) If the
Common Shares are listed on a national securities exchange, the
Nasdaq Stock Market, the OTC Bulletin Board or another nationally
recognized trading system as of the Exercise Date, which shall be
deemed to have been effected immediately prior to the close of
business on the business day on which this option shall have been
surrendered to the Company as provided in Section 4(c) hereof
(“Exercise Date”), the Fair Market Value per Common
Share shall be deemed to be the average of the high and low
reported sale prices per Common Share thereon on the trading day
immediately preceding the Exercise Date, as defined below, (
provided that if the Common Shares are not so listed on such
day, the Fair Market Value per Common Share shall be determined
pursuant to clause (b) below).
(b) If the
Common Shares are not listed on a national securities exchange, the
Nasdaq Stock Mark
