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ALDERMAN OPTION AGREEMENT
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This OPTION AGREEMENT (this "Agreement") is made as of this 15th day
of June, 2000, by and between ELTON ALDERMAN, an individual ("Alderman"), and
CAROL A. AULD TTEE U/A DTD 5/13/99, a Trust ("Auld Trust"), having Carol A. Auld
as its Trustee.
R E C I T A L S:
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A. Alderman and Auld Trust are currently stockholders of Prolong
International Corporation, a Nevada corporation (the "Company"), and in exchange
for $1,500 Auld Trust desires to subject 1,500,000 of the shares of Common Stock
of the Company owned by the Trust, and any shares issuable on account of any
recapitalization, stock split, combination of shares, reclassification, stock
dividend or other change in the capital structure of the Company (herein called
the "Shares"), to the option conferred on Alderman by this Agreement; and
B. Auld Trust hereby desires to grant, and Alderman hereby desires to
receive, an option to purchase up to 1,500,000 of the Shares currently owned by
Auld Trust, on the terms and conditions set forth herein.
A G R E E M E N T:
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NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Grant of Option. In exchange for Alderman's payment to Auld Trust
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of one thousand five hundred dollars ($1,500), the receipt of which is hereby
acknowledged, Auld Trust hereby irrevocably grants to Alderman the right and
option (hereinafter called the "Option") to purchase all or any part of an
aggregate of 1,500,000 shares of Common Stock, as presently constituted, of the
Company on the terms and conditions hereinafter set forth, such number being
subject to adjustment as provided in Section 6 hereof.
2. Purchase Price. As negotiated and agreed upon by the parties
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hereto, the purchase price ("Purchase Price") for the Shares covered by the
Option shall be $1.00 per share (subject to adjustment as provided in Section 6
hereof).
3. Exercise of Option. The terms and conditions upon which the
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Option may be exercised and the Shares may be purchased are as follows:
3.1 Time of Exercise. The Option may be exercised at any time
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on or after the date hereof, but in no case may the Option be exercised later
than 5:00 p.m. California time on December 31, 2004 (the "Option Termination
Date"), at which time the Option shall terminate and shall be void and of no
further force or effect.
3.2 Method of Exercise. Alderman may, from time to time during
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the time of exercise described above, exercise in whole or in part the purchase
rights evidenced by the Option. Such exercise shall be effected by the
execution of a notice of exercise in the form attached hereto as Exhibit A (the
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"Notice of Exercise"), stating the amount of Shares and Purchase Price, and
delivery of the Notice of Exercise to Auld Trust followed by payment in full as
described below.
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3.3 Payment and Transfer of Shares. Alderman shall, within five (5)
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days following delivery of the Notice of Exercise to Auld Trust, deliver to Auld
Trust at the address specified in Section 11.1 hereof payment of the Purchase
Price in the form of any of the following as elected by Alderman: (i) cash;
(ii) check; (iii) the surrender of a number of Shares received upon such
exercise with an aggregate value equal to the Purchase Price, which surrendered
Shares shall be valued at Fair Market Value (as defined below) as of the date of
such exercise; (iv) Alderman's promissory note secured by a pledge of the Shares
purchased in a form and on terms acceptable to Auld Trust; or (v) any
combination of the foregoing. Concurrent with the delivery of the Purchase
Price by Alderman, Auld Trust shall deliver a certificate representing the
amount of Shares purchased and an endorsement in blank or stock assignment in
blank sufficient to transfer such Shares to Alderman, his permitted assign or
his or its designate. "Fair Market Value" on any given date shall mean the
value of one share of Common Stock, which shall be the closing sale price on the
Company's principal stock exchange or the average of the closing bid and asked
prices of the Common Stock in the over-the-counter market, as applicable, on the
date of valuation.
4. Representations and Warranties of Alderman. Alderman hereby
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represents and warrants to Auld Trust that:
4.1 Authorization. Alderman has full power and authority to enter
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into this Agreement, and this Agreement constitutes his valid and legally
binding obligation, enforceable in accordance with its terms.
4.2 Investment Intent. This Agreement is made with Alderman in
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reliance upon his representation to Auld Trust, which by Alderman's execution of
this Agreement he hereby confirms, that the Option acquired hereby, and the
Shares to be purchased upon his exercise of the Option, will be acquired for
investment.
4.3 Restricted Securities. Alderman understands that the Shares may
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be characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from Auld Trust in a transaction not
involving a public offering and that under such laws and applicable regulations
such Shares may be resold without registration under the Securities Act of 1933,
as amended (the "Act"), only in certain limited circumstances. In this
connection, Alderman represents that he understands the resale limitations
imposed by the Act and applicable state securities laws.
5. Legends. Auld Trust hereby agrees that as soon as practicable after
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the date hereof, the Trust shall surrender the stock certificate to the
Company's transfer agent for reissuance with a legend thereon. Auld Trust agrees
that the certificates evidencing the Shares shall bear the following legend, and
may bear additional legends as the Company or its counsel may deem necessary or
advisable:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION AGREEMENT DATED JUNE 1, 2000, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE ISSUER AND CAN BE EXAMINED UPON REQUEST.
The foregoing legend shall be removed from the certificates evidencing the
Shares that Alderman has purchased hereunder.
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6. Certain Adjustments Upon Changes in Capital Structure. In the event
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that the outstanding shares of Common Stock of the Company are hereafter
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of a
recapitalization, stock split, combination of shares, reclassification, stock
dividend or other change in the capital structure of the Company, then
appropriate adjustment shall be made to the number of Shares subject to the
unexercised portion of the Option and to the Purchase Price per share, in order
to preserve, as nearly as practical, but not to increase, the benefits of
Alderman under this Agreement.
7. Representations and Warranties of Auld Trust. Auld Trust represents
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and warrants to Alderman that:
7.1 Legal Capacity. Auld Trust has the legal capacity to read and
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understand this Agreement and to enter into this Agreement.
7.2 Binding Effect. This Agreement constitutes a valid and legally
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binding obligation of Auld Trust.
7.3 Good Title. Auld Trust holds, and shall continue to hold until
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the exercise in full or expiration of the Option pursuant to Section 3.1, good
and marketable title to the Shares, free and clear of all liens, claims, and
encumbrances whatsoever, other than resale restrictions under federal or state
securities laws. Auld Trust hereby undertakes to retain and reserve for
fulfillment of it's obligations hereunder at least the number of shares
representing the Shares that may be purchased under the Option. Upon exercise
of the Option and payment, Alderman will hold the Shares subject to the Option,
free and clear of all liens, claims and encumbrances whatsoever, other than
resale restrictions under federal or state securities laws.
8. Non-transferability. This Agreement may not be assigned or otherwise
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transferred by Alderman to any other person or entity except his heirs or
personal representatives.
9. Rights as a Stockholder. Alderman (or a successor of the Option by
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will or by the laws of descent and distribution) shall have no rights as a
stockholder with respect to any Shares covered by the Option until the date of
issuance of a stock certificate or certificates to him or her for such Shares,
notwithstanding the exercise of the Option.
10. Opportunity to Engage Legal Counsel. Each of the parties acknowledges
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that it is aware that it is entitled to consult independent legal counsel and/or
other advisors in connection with the negotiation or execution of this
Agreement, and represents and warrants to the other party and to Stradling Yocca
Carlson & Rauth, a professional corporation, that it has had full and adequate
opportunity to do so, and has either done so or has freely and knowingly
relinquished such right, and has the capacity and experience to understand this
Agreement, and fully understands all of the terms of this Agreement. The
parties acknowledge that Stradling Yocca Carlson & Rauth, which assisted in the
drafting of this Agreement, represents only the Company, and is not advising or
representing either party concerning the effects of this Agreement upon its
individual interests or otherwise, and in drafting has made no effort to balance
or mutually satisfy these interests. The parties also acknowledge that this
Agreement creates circumstances in which each of the parties has opposing
individual interests. Auld Trust hereby acknowledges that it has had the
opportunity to engage separate counsel to represent it's interests in connection
with the negotiation and execution of this Agreement.
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11. Miscellaneous.
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11.1 Notices. All notices, requests, demands or other communications
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hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or mailed, certified, return receipt requested, postage
prepaid:
If to Auld Trust, addressed to:
Carol Auld Trustee
Carol A. Auld TTEE U/A DTTD 5/13/99.
50 Niguel Point Drive
Laguna Niguel, California 92677
If to Alderman addressed to:
Elton Alderman
c/o Prolong International Corporation
6 Thomas
Irvine, California 92618
Any party hereto may from time to time, upon written notice to the
other party, designate a different address, which shall be substituted for the
one specified above for such party. If any notice or other document is sent by
certified or registered mail, return receipt requested, postage prepaid,
properly addressed as aforementioned, the same shall be deemed served or
delivered forty-eight (48) hours after mailing thereof. If any notices are sent
by facsimile ("fax") to a party, it will be deemed to have been delivered on the
date the fax thereof is actually received, provided the original thereof is sent
by mail in the manner set forth above within twenty-four (24) hours after the
fax is sent.
11.2 Attorneys' Fees. In the event of any controversy or claim or
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dispute between the parties hereto arising out of or relating to this Agreement
or any of the documents provided for herein, or the breach thereof, the
prevailing party shall be entitled to recover from the losing party reasonable
attorneys' fees, expenses and costs.
11.3 Binding Effect. This Agreement shall be binding upon the heirs,
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executors, representatives, successors and assigns of the respective parties
hereto; provided, however, that no assignment hereunder by Alderman shall be
permitted. Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
11.4 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
11.5 Headings. The subject headings of the sections and subsections
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of this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
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11.6 Waivers. Any party to this Agreement may waive any right, breach
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or default which it has the right to waive; provided that such waiver will not
be effective against the waiving party, unless it is in writing and specifically
refers to this Agreement and notice thereof is promptly given to all parties in
the manner provided in this Agreement. No waiver will be deemed to be a waiver
of any other matter, whenever occurring and whether identical, similar or
dissimilar to the matter waived.
11.7 Entire Agreement. This Agreement is the entire agreement of the
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parties concerning the subject matter hereof and supersedes all other prior or
contemporaneous agreements or understandings (whether written or oral) among the
parties, in respect to the subject matter contained herein.
11.8 Governing Law. This Agreement shall be construed in accordance
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with, and governed by, the laws of the State of California.
11.9 Further Assurances. Each party hereto shall, from time to time
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at and after the date hereof, execute and deliver such instruments, documents
and assurances and take such further actions as the other party may reasonably
request in order to carry out the purpose and intent of this Agreement.
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IN WITNESS WHEREOF, the parties to this Option Agreement have duly executed
it on the day and year first above written.
"Alderman"
/s/ Elton Alderman
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Elton Alderman
"Auld Trust"
/s/ Carol Auld, Trustee
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Carol Auld, Trustee
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EXHIBIT A
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NOTICE OF EXERCISE OF OPTION
The undersigned hereby irrevocably elects to exercise the right,
represented by the Option Agreement dated June 15, 2000, by and between the
undersigned and Carol A. Auld TTEE U/A DTD 5/13/99, Carol A. Auld as Trustee
(the "Option Agreement"), to purchase______ shares of Common Stock and herewith
tenders payment for such shares of Common Stock in the amount of $__________ in
accordance with Section 3.3 of the Option Agreement. The undersigned requests
that a certificate for such shares of Common Stock be registered in the name of
_____________________, whose address is ____________________________.
Dated: ________________
_____________________________
Elton Alderman
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Social Security Number
