EXHIBIT 7.(A)
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ROANOKE TECHNOLOGY CORPORATION
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered
into as of January 10, 2000 (the "Date of Grant"), by and
between ROANOKE TECHNOLOGY CORPORATION, a Florida
corporation (the "Company"), and EDWIN FOSTER, JR. (the
"Optionee").
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RECITALS
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A. The parties have entered into an employment
arrangement with Employment Agreement pursuant to which
Optionee will be employed as an executive of the Company.
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B. The grant of the Option evidenced by this
Agreement has been made by the Company for the purpose of
inducing Optionee to remain employed by the Company.
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AGREEMENT
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NOW THEREFORE, the parties hereto, for good and
sufficient consideration the receipt of which is hereby
acknowledged, and intending to be legally bound, do hereby
agree as follows:
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1. Grant of Option. The Company hereby grants Optionee
an option (the "Option") to purchase a total of One Hundred
Thousand (100,000) shares (the "Shares") of its common stock
(the "Common Stock"), subject to the terms and conditions
set forth herein. The number of Shares is subject
adjustment pursuant to Section 7 hereof.
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2. Exercise Price. The exercise price is $1.00 for each
share of Common Stock (the "Exercise Price") subject to
adjustment pursuant to Section 7 hereof.
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3. Vesting of Option.
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3.1 Annual Increments. This Option shall accrue in the
Optionee in equal annual increments over the 4 years
commencing with June 1999. Prior to any adjustment in the
number of Shares pursuant to Section 7, each such annual
increment shall relate to 25,000 Shares. Vesting of the
initial year of Options shall occur on June 1, 2000.
Thereafter, each increment shall occur on the first day of
June of each year.
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3.2 Termination of Vesting. The vesting of the Option
under Section 3.1 shall cease the Optionee's death or upon
the termination of Optionee's employment by the Company.
Any increments of the Option which have already vested in
the Optionee shall not be affected by such termination.
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3.3 Acceleration of Vesting.
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3.1 Change in Control. A "Change in Control" for
purposes of this Agreement shall mean (i) a single entity or
group of affiliated entities acquires more than 25% of the
stock of the Company issued and outstanding immediately
prior to such acquisition; (ii) any person or entity
initiates a tender offer or exchange offer to acquire more
than 25% of the stock of the Company issued and outstanding
immediately prior to such initiation; or (iii) shareholder
approve the consummation of any merger of the Company or any
sale or other disposition of all or substantially all of its
assets, if the shareholders of the Company immediately
before such transaction own, immediately after consummation
of such transaction, equity securities (other than options
and other rights to acquire equity securities) possessing
less than 25% of the voting power of the surviving or
acquiring corporation.
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3.32 Acceleration. If a Change in Control has occurred
or if the Company enters into any contract or agreement
pursuant to which a Change in Control is intended to occur,
the Option shall immediately become vested in full. The
Company shall notify the Optionee at least (10) business
days in advance of any Changes in Control or execution of
any such contract or agreement.
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3.3.3 Exception for Public Offering or Private
Placement. Notwithstanding the above, a "Change of Control"
shall not include the Company's undertaking of a public
offering or an equity private placement of its securities.
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4. Exercise of Option.
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4.1 Right to Exercise. Subject to Section 4.3 below,
each increment of this Option shall be exercisable,
cumulatively, at any time on or after the date is haws
vested in the Optionee, provided, however, that this Option
may not be exercised prior to June 1, 2000. This Option may
be exercised only to the extent that it has bested on
Optionee under Section 3. Subject to the foregoing, this
Option may be exercised in whole or part. This Option may
not be exercised for a fraction of a Share.
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4.2 Method of Exercise. This Option shall be
exercisable by written notice which shall state the election
to exercise the Option, the number of Shares in respect of
which the Option is being exercised, and the name in which
such shares are to be registered. Such written notice shall
be signed by the Optionee and shall be delivered in person,
by a recognized overnight delivery service, or by certified
mail to the Secretary of the Company. The written notice
shall be accompanied by payment of the exercise price as
contemplated by Section 4.4. The date of exercise shall be
the date such notice is received bu the Company. For income
tax purposes, the Shares shall be considered transferred to
the Optionee on the date of exercise.
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4.3 Expiration of Option. The Option may not be
exercised more than ten (10) years from the Date of Grant,
and may be exercised during such term only in accordance
with the terms of this Agreement. In the event that
Optionee's employment by the Company is terminated then this
Option may not be exercised more than five (5) years from
the Date of Grant.
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4.4 Method of Payment.
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4.4.1. General Rule. The Exercise Price for any
Shares purchased under this Option shall be payable (i) in
cash, (ii) by check, (iii) subject to Section 4.4.2., by
promissory note, (iv) with Shares which have already been
owned by the Optionee for more than six months and which are
surrendered to the Company in good form for transfer (such
Shares to be values at their fair market value on the date
when the new Shares are purchased under this Option), (v) by
delivery of an irrevocable direction to a recognized
securities broker to sell Shares and to deliver all or part
of the sales proceeds to the Company in payment of all or
part of the Exercise Price and any holding taxes, (vi) by
delivery of an irrevocable direction to pledge Shares to a
recognized securities broker or lender, as security for a
loan, and to deliver all or part of the loan proceeds to the
Company in payment of all or part of the Exercise Price and
any withholding taxes, or (vii) by any combination of the
above.
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4.4.2. Promissory Note. Payment may be made with a
non-recourse promissory note executed by the Optionee (each
a "Note"). Such Note shall bear interest at the Applicable
Federal Rate specified pursuant to Section 1274(d) of the
Internal Revenue Code of 1986, as amended (the "Code"), for
a term of five years with interest only payable annually
during the term. Notwithstanding such five-year term, the
Note will become due and payable in full upon the resale by
Optionee of the Shares issued upon exercise of this Option.
The Optionee shall pledge Shares received upon exercise to
the Company for the purpose of securing payment for the
Note, and the Company may require that the certificate(s)
representing such Shares be held by the Company as a
security holder in order to perfect the Company's security
interest. The Optionee may not exercise through the use of
a Note at any time after the termination of his employment
with the Company in accordance with the Employment
Agreement.
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5. Securities Law Matters.
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5.1 Rule 701. The Company represents that this Option
and the shares are being offered and issued to the Optionee
pursuant to the exemption afforded by Rule 701 promulgated
by the Securities and Exchange Commission, as well as other
properly-available exemptions from registration under the
Securities Act of 1933, as amended (the "Securities Act"),
and from the applicable state securities or "Blue Sky" laws
(the "Blue Sky Laws").
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5.2 Registration. The Company hereby agrees the it
will file a Registration Statements on Form S-8 (or such
other form as is then appropriate, the "Registration
Statement") registering Shares under the Securities Act.
The Company further agrees that it will cause the
registration Statements to become effective on or before
July 1, 2000. IN addition, the Company will take all
necessary action to qualify the Shares under the Blue Sky
Laws on or before such date.
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6. Non-Transferability of Option; Death. This Option may
not be transferred in any manner otherwise than by will or
by the laws of descent or distribution any may be exercised
during the lifetime of Optionee only by Optionee. In the
event of death of Optionee during the term of this Option,
the Option may be exercised at any time prior to the date of
expiration of the term of this Option set forth in Section
4.3, by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued
at the date of death. The terms of this Option shall be
binding upon the executors, administrators, heirs and
successors of the Optionee and upon any successor by
operation of law to the Company.
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7. Adjustment of Number of Shares and Exercise Price. If
any of the following events shall occur ant any time or from
time to time prior to the exercise in full or expiration of
the Option, the following adjustments shall be made in the
number of Shares subject tot he Option and to the Exercise
Price.
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7.1 Recapitalization. In case the Company effects a
subdivision, combination, reclassification or other
recapitalization or its outstanding shares of Common Stock
into a greater or lesser number of shares of Common Stock,
the Exercise Price in effect immediately after such
subdivision, combination, reclassification or other
recapitalization shall be proportionately decreased or
increased, as the case may be.
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7.2 Stock Dividends. If the Company shall declare a
dividend on its Common Stock payable in stock or other
securities of the Company, the Optionee shall, without
additional cost be entitled to receive upon the exercise of
the Option, in addition to the Shares to which the Optionee
is otherwise entitled upon such exercise, the number of
shares of stock or other securities that the Optionee would
have been entitled to receive if the Optionee had been a
holder, on the record date of such dividend, of the number
of Shares os purchased under the Option. No adjustments
shall be made for dividends in cash or property.
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7.3 Number of Shares Adjusted. After any adjustment of
the Exercised Price pursuant to this Section, the number of
Shares issuable at the new Exercise Price shall be adjusted
to the number obtained by (i) multiplying the number of
Shares issuable upon exercise of the Option immediately
before such adjustment by the Exercise Price in effect
immediately before such adjustment and (ii) dividing the
product so obtained by the new Exercise Price.
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8. Merger.
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8.1 Assumption. IN the event of any merger,
consolidation or purchase of substantially all shares of the
Company where the holders of Common Stock are to receive
stock or other securities of the surviving or acquiring
company, the Option shall be assumed by, be binding upon and
inure to the benefit of such surviving or acquiring company,
and shall continue to be governed by, to the extent
applicable, the terms and conditions of this Agreement.
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8.2 Adjustment. After the consummation of a
consolidation or merger of the Company with or into any
other corporation, then the Optionee shall have the right to
receive the kind and amount of shares of stock or other
securities or property receivable upon such consolidation or
merger by a holder of the number of shares of Common Stock
issuable upon exercise of the Option immediately prior to
such consolidation or merger.
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9. General Provisions.
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9.1 Amendments; Waivers. This Agreement may be amended
only by agreement in writing of all parties. No waiver of
any provision nor consent to any exception to the terms of
this Agreement shall be effective unless in writing and
signed by the party to be bound and then only to the
specific purpose, extent and instance so provided.
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9.2 Entire Agreement. This Agreement, together with
its exhibit, constitutes the entire agreement among the
parties pertaining to the subject matter hereof and
supercedes all prior agreements and understandings of the
parties in connection therewith.
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9.3 Governing Law. The Agreement and the legal
relations between the parties shall be governed by and
construed in accordance with the laws of the State of North
Carolina applicable to contracts made and performed in such
states.
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9.4 Attorney's Fees. Should any action or proceeding
be bought to construe or enforce the terms and conditions of
this Agreement or the rights of the parties hereunder, the
losing party shall pay to the prevailing party all court
costs and reasonable attorney's fees and costs (at the
prevailing party's attorney then current rates) incurred in
such action or proceeding. A party that voluntarily
dismisses an action or proceeding shall be considered a
losing party for purposes of this provision. Attorney's
fees incurred in enforcing any judgment in respect of this
Agreement are recoverable as a separate item. The
proceeding sentence is intended to be severable from the
other provisions of this Agreement and to survive any
judgment and, to the maximum extent permitted by law, shall
not be deemed merged into any such judgment.
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9.5 Receipt of Agreement. Each of the parties hereto
acknowledges that he or it has read this Agreement in its
entirety and does hereby acknowledge receipt of al fully
executed copy thereof. A fully executed copy shall be an
original for all purposes, and is a duplicate original.
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9.6 Notices. Any written notice required or permitted
to be given shall be deemed delivered either when personally
delivered or when mailed, registered or certified, postage
prepaid with return receipt requested, if to Optionee,
addressed to Optionee at the last residence address of
Optionee as provided by him to the Company from time to
time, and if to the Company, addressed to the Chairman of
the Board of the company at the principle office of the
Company.
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9.7 Severability. If any provision of the Agreement is
determined to be invalid, illegal or unenforceable by any
government entity, the remaining provisions of the Agreement
to the extent permitted by law shall remain in full force
and effect.
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IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
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"COMPANY"
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ROANOKE TECHNOLOGY
CORPORATION
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By: /s/ David L. Smith
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David L. Smith
Chief Executive Officer and
President
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"OPTIONEE"
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/s/ Edwin E. Foster, Jr.
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Edwin E. Foster, Jr.
Corporate Secretary
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