Stock Option Agreement between Critical Home Care, Inc. and John E. Elliott, II (May 7, 2004)

Summary

Critical Home Care, Inc. and executive John E. Elliott, II entered into this agreement granting Elliott options to purchase up to 4,000,000 shares of company stock at $0.25 per share. The options vest in stages based on the company achieving specific financial targets (Adjusted EBITDA) from 2006 to 2008. If Elliott’s employment ends under certain conditions or if there is a change of control, unvested options may vest immediately. The agreement also covers option exercise procedures, tax withholding, and the company’s obligation to register shares for public resale after exercise.

EX-10.7 18 ex10-7elliotttoptionagree.txt ELLIOTT OPTION STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT is made and entered into this 7th day of May, 2004 by and between Critical Home Care, Inc., a Nevada corporation (the "Company") and John E. Elliott, II ("Executive"). W I T N E S E T H : WHEREAS, Executive is a key employee of the Company; WHEREAS, the Board of Directors ("Board") of the Company believes it is in the best interests of Company and its shareholders to grant Executive options to acquire voting common stock of the Company pursuant to and in accordance with the terms of this Agreement; NOW, THEREFORE, in consideration of the above premises, Company and Executive agree as follows: 1. Grant of Stock Options. Subject to the terms and conditions set forth in this Agreement, Executive is hereby granted six (6) separate stock options ("Option" or "Options") to acquire up to four million (4,000,000) shares ("Option Shares") of Company voting common stock as set forth below. Number of Shares Subject to the Option Option #1 500,000 Option #2 500,000 Option #3 500,000 Option #4 500,000 Option #5 1,000,000 Option #6 1,000,000 2. Exercise Price. The exercise price ("Exercise Price") under each Option shall be $.25 per Option Share. 3. Vesting of Options. The Options may not be exercised until such time that the Options become vested. Except as otherwise provided herein, the Options shall vest, and be exercisable by Executive, as follows ("Vesting Date"): Option #1 If the Company's Adjusted EBITDA (as hereinafter defined) for fiscal year 2006 is equal to or exceeds Ten Million Seven Hundred Thousand ($10,700,000) Dollars, then Option #1 shall immediately vest in its entirety. Option #2 If the Company's Adjusted EBITDA for fiscal year 2006 is equal to or exceeds Eleven Million ($11,000,000) Dollars, then Option #2 shall immediately vest in its entirety. Option #3 If the Company's Adjusted EBITDA for fiscal year 2007 is equal to or exceeds Thirteen Million Five Hundred Thousand ($13,500,000) Dollars, then Option #3 shall immediately vest in its entirety. Option #4 If the Company's Adjusted EBITDA for fiscal year 2007 is equal to or exceeds Fourteen Million ($14,000,000) Dollars, then Option #4 shall immediately vest in its entirety. Option #5 If the Company's Adjusted EBITDA for fiscal year 2008 is equal to or exceeds Seventeen Million Five Hundred Thousand ($17,500,000) Dollars, then Option #5 shall immediately vest in its entirety. Option #6 If the Company's EBITDA for fiscal year 2008 is equal to or exceeds Eighteen Million Five Hundred Thousand ($18,500,000) Dollars, then Option #6 shall immediately vest in its entirety. Notwithstanding the foregoing, all unvested Options (that have otherwise been terminated under Section 6(b)) shall immediately vest and be fully exercisable by Executive if (a) Executive's employment with the Company is terminated by the Company for any reason other than For Cause (as defined in the Employment Agreement between the Company and Executive, "Employment Agreement); (b) Executive terminates his employment with the Company for Good Reason (as defined in the Employment Agreement); or (c) the Company undergoes a Change of Control (as defined in the Company's 2002 Stock Option Plan). 4. Exercise of Options. Except as otherwise provided in this Agreement, Executive may exercise a vested Option with respect to all or part of the Option Shares subject to such Option as follows: (a) As long as Executive is employed by the Company, then Executive may exercise a vested Option any time following the Vesting Date for such Option; (b) If Executive's employment with the Company is terminated for any reason, then Executive (or the personal representative of his estate) may exercise a vested Option at any time during the one (1) year period following the date of Executive's termination of employment. Executive (or the personal representative of his estate) shall exercise an Option by delivering written notice of such exercise ("Exercise Notice") to the Board. The Exercise Notice shall specify the Option being exercised and the number of Option Shares being purchased, and shall be accompanied with payment in full for the Option Shares being acquired. 5. Adjusted EBITDA. For purposes of this Agreement, the term "Adjusted EBITDA" means the Company's earnings before interest, taxes, depreciation and amortization (including any write down of goodwill) as determined by the Company's independent certified public account using generally accepted accounting principles, plus the amount of compensation expense deducted by the Company on account of the issuance of any stock (including restricted stock) or the issuance or exercise of any stock options (including the Options), warrants or similar instruments that can be converted into common stock of the Company. 6. Termination of Options. (a) Vested Options shall terminate and expire if Executive (or the personal representative of his estate) fails to timely exercise such vested Options as provided under this Agreement; (b) Unvested Options shall terminate and expire as follows: (i) If the Company fails to achieve the EBIDTA target set forth in Section 3 above with respect to such Option; (ii) If Executive voluntarily terminates his employment with the Company for any reason other than for Good Reason; or (iii)If Executive's employment with the Company is terminated by the Company for Cause (as defined in the Employment Agreement). 7. Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Option Shares covered by the Options, as well as the Exercise Price, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock of the Company resulting from a stock split, reverse stock split, stock dividend, combination, recapitalization or reclassification of the Stock, or any other increase or decrease in the number of issued shares of Stock effected without receipt of consideration by the Company. Such adjustment shall be made in good faith by the Board, whose determination in that respect shall be final, binding and conclusive. 8. Withholding. As a condition to the exercise of an Option, Executive shall remit to the Company such payment as requested by the Company in order to allow the Company to remit all federal, state and local withholding taxes required with respect to the exercise of the Option. The Executive hereby further agrees that the Company may, at its option, deduct from his salary, bonus and/or any other payment of any kind due to the Executive, the amount of any federal, state or local taxes required by law to be withheld with respect to the exercise of the Option. 9. Registration of Option Shares. Company agrees to use its best efforts to file and cause to become effective within six (6) months following Executive's exercise of an Option registration statements under the Securities Act of 1933 registering the Option Shares acquired by Executive for public resale. 10. Counterparts. This Agreement may be executed in one or more counterparts, each counterpart of which will be regarded for all purposes as an original. 11. Governing Law. This Agreement, including the validity hereof and the rights and obligations of the parties hereunder and all amendments and supplements hereof and all waivers and consents hereunder, shall be construed in accordance with and governed by the domestic substantive laws of the State of Florida without giving effect to any choice of law or conflicts of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction. 12. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any and all other previous or contemporaneous communications, representations, understandings, agreements, negotiations and discussions, either oral or written, between the parties. There are no oral or other agreements representations or understandings of the parties not expressly set forth herein. 13. Amendment of Agreement. This Agreement may be altered or amended in any of its provisions only by the mutual written agreement of the Executive and an officer duly appointed by resolution of the Board. 14. Waiver. The waiver of a breach of any provision of this Agreement by any party shall not operate or be construed as a waiver of any subsequent breach. Each and every right, remedy and power granted herein to any party or allowed by law or equity shall be cumulative and not exclusive of any other. 15. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 16. Interpretation of Agreement. Where appropriate in this Agreement, words used in the singular shall include the plural, and words used in the masculine shall include the feminine and neuter. All headings which are used in this Agreement are for the convenience of the reader only and shall not be used to limit or construe any of the provisions hereof. The parties hereto have executed this Agreement on the date first written above. "COMPANY" CRITICAL HOME CARE, INC., a Nevada corporation By:/s/ David Bensol ------------------- David Bensol Its:President "EXECUTIVE" /s/John E. Elliott, II ____________________________________________________ John E. Elliott, II