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EXHIBIT-10.3
 
NEITHER THIS NON-QUALIFIED STOCK OPTION (“OPTION”) NOR THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE BEEN THE SUBJECT OF REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE AND THE SAME
HAVE BEEN (OR WILL BE, WITH RESPECT TO THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF) ISSUED IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT AND SUCH LAWS. NEITHER THIS OPTION NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR (II) AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER
OR DISPOSITION DOES NOT VIOLATE THE ACT, THE RULES AND REGULATIONS THEREUNDER,
OR APPLICABLE STATE SECURITIES LAWS.

         
Number of Shares Purchasable
Issue Date: February 25, 2014   Upon Exercise of Option: 500,000

 
Void after 5:00 p.m. Eastern Standard Time on March 31, 2017
 
NON-QUALIFIED STOCK OPTION AGREEMENT
 
TX HOLDINGS, INC.
 
This is to certify that, subject to the provisions of this Non-Qualified Stock
Option Agreement (“Option Agreement”) and for value received, William L.
Shrewsbury (the "Holder"), is entitled to purchase five hundred thousand
(500,000) shares of common stock, no par value per share (the "Common Stock;"
that option, the “Option”), subject to adjustment as set forth herein, of TX
Holdings, Inc., a Georgia corporation ("Company"), at any time during the period
beginning April 1, 2014 (“Vesting Date”), and ending March 31, 2017 ("Expiration
Date"), but not later than 5:00 p.m. Eastern Standard Time on the Expiration
Date, at an exercise price of $0.0924 per share, subject to adjustment as set
forth herein  ("Exercise Price").
 
1.           Exercise of Option.  Subject to the provisions of Section 8 below,
this Option may be exercised in whole or in part at any time or from time to
time on or after the Vesting Date and until the Expiration Date; provided,
however, that if either of such days is a day on which banking institutions are
authorized by law to close (a "Bank Holiday"), then on the next succeeding day
which shall not be a Bank Holiday.
 
2.           Method of Exercise.  On or after the Vesting Date, the Options may
be exercised in whole or in party by presentation and surrender of this Option
Agreement to the Company at its principal office or at the office of its
transfer agent, if any (the "Transfer Agent").  The presentation and surrender
of this Option Agreement for exercise must be accompanied by: (i) the form of
subscription which is attached hereto in Annex A (the "Form of Subscription")
duly executed with signature guaranteed; (ii) payment of the aggregate Exercise
Price for the number of shares specified in such form; and (iii) execution and
delivery to the Company of an investor representation letter in form acceptable
to the Company.  If this Option should be exercised in part only, upon
presentation and surrender of this Option Agreement to the Company or the
Transfer Agent for cancellation, the Company shall execute and deliver a new
Option Agreement evidencing the rights of the Holder to purchase the balance of
the shares purchasable hereunder.  Upon receipt of this Option Agreement by the
Company at its office or by the Transfer Agent at its office in proper form for
exercise, the Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such exercise; provided, however, that if at the date of
surrender of this Option Agreement and payment of the aggregate Exercise Price,
the transfer books for the Common Stock shall be closed, the certificates
representing the Common Stock or other securities subject to issuance upon such
exercise shall be issuable as of the date on which the Company's transfer books
shall next be opened.  Until such date, the Company shall be under no duty to
deliver any certificate representing such Common Stock or other securities and
the Holder shall not be deemed to have become a holder of record or owner of
such Common Stock or such other securities.
 

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3.           Forms of Payment Authorized.                 Upon exercise of this
Option, the Holder shall pay the Exercise Price with cash or by certified or
banker’s check.
 
4.           Reservation of Shares.     There shall at all times be reserved for
issuance upon exercise of this Option such number of shares of Common Stock as
shall be subject hereto.
 
5.           Fractional Shares.    Notwithstanding any other provision hereof,
the Company shall not be required to issue fractional shares of Common Stock
upon the exercise of the Options.  If any fraction of a share would, except for
the provisions hereof, be issuable upon the exercise of this Option, then: (a)
if the fraction of a share otherwise issuable is equal to or less than one-half,
the Company shall round down and issue only the largest whole number of shares
of Common Stock to which the Holder is otherwise entitled, or (b) if the
fraction of a share otherwise issuable is greater than one-half, the Company
shall round up and issue one additional share of Common Stock in addition to the
largest whole number of shares of Common Stock to which the Holder is otherwise
entitled.
 
6.           Rights of the Holder.     Prior to the exercise of the Option, the
Holder shall not be entitled by virtue hereof to any rights of a stockholder in
the Company, either at law or equity.  The rights of the Holder are limited to
those expressed in this Option Agreement and are enforceable against the Company
only to the extent set forth herein.
 
7.           Anti-Dilution Provisions.    The Exercise Price and the number and
kind of securities purchasable upon the exercise of this Option shall be subject
to adjustment from time to time as hereinafter provided:
 
  (a)           In case the Company shall issue shares of Common Stock as a
dividend upon shares of Common Stock or in payment of a dividend thereon, or
shall subdivide the number of outstanding shares of its Common Stock into a
greater number of shares or shall contract the number of outstanding shares of
its Common Stock into a lesser number of shares, the Exercise Price then in
effect shall be adjusted, effective at the close of business on the record date
for the determination of stockholders entitled to receive the same, to the price
(computed to the nearest cent) determined by dividing (i) the product obtained
by multiplying the Exercise Price in effect immediately prior to the close of
business on such record date by the number of shares of Common Stock outstanding
prior to such dividend, subdivision or contraction, by (ii) the number of shares
of Common Stock outstanding immediately after such dividend, subdivision, or
contraction.
 
 (b)           If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with or into
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the Holder shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
specified in this Option Agreement and in lieu of the shares of Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented by this Option Agreement, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock immediately theretofore purchasable
and receivable upon the exercise of the rights represented by this Option
Agreement had such reorganization, reclassification, consolidation, merger or
sale not taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of the Holder to the end that the
provisions of this Option Agreement (including, without limitation, provisions
for adjustment of the Exercise Price and of the number of shares of Common Stock
or other securities issuable upon the exercise of this Option) shall thereafter
be applicable as nearly as may be practicable in relation to any shares of
stock, securities, or assets thereafter deliverable upon exercise of this
Option.  The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or
merger or the corporation purchasing such assets shall assume, by written
instrument, the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the Holder
may be entitled to purchase; and such successor corporation agrees to be bound
by the provisions of Section 7 hereof with respect to any securities issued
pursuant to such consolidation, merger or purchase of assets.
 

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  (c)           Upon each adjustment of the Exercise Price pursuant hereto, the
number of shares of Common Stock specified in this Option shall thereupon
evidence the right to purchase that number of shares of Common Stock (calculated
to the nearest hundredth of a share of Common Stock) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock purchasable immediately prior to such adjustment upon
exercise of this Option and dividing the product so obtained by the Exercise
Price in effect after such adjustment.
 
  (d)           Irrespective of any adjustments to the number or kind of
securities issuable upon exercise of this Option or in the Exercise Price, any
warrants thereafter issued may continue to express the same number of shares of
Common Stock and Exercise Price as are stated in the warrants previously issued.
 
  (e)           The Company may, at its sole option, retain the independent
public accounting firm regularly retained by the Company, or another firm of
independent public accountants of recognized standing selected by the Company's
board of directors (the "Board of Directors"), to make any computation required
under this section and a certificate signed by such firm shall be conclusive
evidence of any computation made under this section.
 
  (f)           Whenever there is an adjustment in the Exercise Price and/or in
the number or kind of securities issuable upon exercise of this Option, as
provided herein, the Company shall: (i) promptly file in the custody of its
Secretary or Assistant Secretary a certificate signed by the Chairman of the
Board of Directors or the Chief Executive Officer of the Company and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Company, showing in detail the facts requiring such adjustment and the
number and kind of securities issuable upon exercise of this Option after such
adjustment; and (ii) cause a notice to be sent to the Holder stating that such
adjustment has been effected and stating the Exercise Price then in effect and
the number and kind of securities issuable upon exercise of this Option.
 
  (g)           The Exercise Price and the number of shares issuable upon
exercise of this Option shall only be adjusted in the manner and upon the
conditions heretofore specifically referred to in Subsections 7(a) through 7(f)
above.
 
8.           Transfer to Comply with the Securities Act and Other Applicable
Securities Laws. Neither this Option nor the shares of Common Stock (or other
securities) issuable upon exercise hereof have been registered under the
Securities Act of 1933, as amended (“Securities Act”) or under state securities
laws.  This Option may not be transferred, assigned, pledged, sold, or otherwise
disposed of and the shares of Common Stock (or other securities) issuable upon
exercise of this Option may not be transferred, assigned, pledged, sold or
otherwise disposed of in the absence of registration under or exemption from the
applicable provisions of the Securities Act unless the Holder provides the
Company with an opinion of counsel in form and substance satisfactory to the
Company (together with such other representations and warranties as the Company
may request) that the shares of Common Stock issued or issuable, as applicable,
upon exercise of this Option may be legally transferred without violating the
Securities Act, and any other applicable securities law and then only against
receipt of an agreement of the transferee (in form and substance satisfactory to
the Company) to comply with the provisions of this section with respect to any
resale or other disposition of such securities. Unless subsequently registered
under the Securities Act and under applicable state securities laws, any shares
issuable upon exercise of this Option shall bear a restrictive legend reflecting
the foregoing restrictions on sale or transfer.
 

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9.           Notices.  Any notices, consents, waivers, or other communications
required or permitted to be given hereunder must be in writing and will be
deemed to have been delivered personally: (a) upon receipt, when delivered
personally; (b) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, postage prepaid and return receipt requested; (c) three
(3) days after being sent by U.S. certified mail, postage prepaid and return
receipt requested; or (d) one (1) day after deposit with a nationally recognized
overnight delivery service, postage prepaid, in each such case properly
addressed to the party to receive the same.  The addresses and facsimile numbers
for such communications shall be: if to the Holder, at the address and facsimile
number of the Holder as shown on the registry books maintained by the Company;
and if to the Company, to TX Holdings, Inc., 12080 Virginia Boulevard, Ashland,
Kentucky  41102, attention: CFO, facsimile number (606) 929-5727.
 
10.        Amendments. The Company may, in its sole discretion, by supplemental
agreement or pursuant to an amended option agreement issued in exchange for this
Option Agreement make any changes or corrections to the terms and conditions
hereof which it deems appropriate in order to (a) reduce the Exercise Price; (b)
extend the Expiration Date; or (c) modify such other terms and conditions hereof
which modification, in the judgment of the Board of Directors of the Company,
provides, when considered under the totality of the circumstances, a net benefit
to or which, in the exercise of such judgment, the Board of Directors reasonably
determines would not be contrary to the interests of the Holder; provided,
however, that no adverse change in the number or nature of the securities
purchasable upon the exercise of this Option, or the Exercise Price, or
acceleration of the Option Expiration Date, shall be made without the consent in
writing of the Holder.
 
11.        Agreement of Option Holder.  The Holder, by his acceptance thereof,
acknowledges that:
 
  (a)           The Company may deem and treat the person or entity in whose
name this Option Agreement is registered as the Holder and as the absolute, true
and lawful owner of the Option for all purposes, and the Company shall not be
affected by any notice or knowledge to the contrary; and
 
  (b)           Holder shall execute all such further instruments and documents
and take such further action as the Company may reasonably require in order to
effectuate the terms and purposes of this Option Agreement.
 
12.        Severability.  The provisions of this Option Agreement shall be
considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise
unenforceable.  Such invalid, void or otherwise unenforceable provisions shall
be automatically replaced by other provisions which are valid and enforceable
and which are as similar as possible in term and intent to those provisions
deemed to be invalid, void or otherwise unenforceable.  Notwithstanding the
foregoing, the remaining provisions hereof shall remain enforceable to the
fullest extent permitted by law.
 
13.        Governing Law.  The validity and construction of this Option
Agreement and all matters pertaining hereto are to be determined in accordance
with the laws of the State of Georgia without reference to the conflict of law
principles of that state.
 

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14.        Entire Agreement.     This Option Agreement is intended to and does
contain and embody the entire understanding and agreement of the Company and the
Holder with respect to the subject matter hereof and there exists no oral
agreement or understanding, express or implied, whereby the absolute, final and
unconditional character and nature of this Option Agreement shall be in any way
invalidated, unempowered or affected.
 
15.        Headings.    The headings in this Option Agreement are for
convenience of reference only and are not part of this Option Agreement.
 
16.        Assignment.       Except pursuant to the laws of descent and
distribution, this Option Agreement may not be assigned by Holder without the
prior written consent of the Company.
 
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IN WITNESS WHEREOF, the Company has caused this Option Agreement to be signed in
its name and on its behalf and its corporate seal to be affixed hereon by its
duly authorized officers as of the date of issuance first above written.
 
 

  TX HOLDINGS, INC.         

  By: /s/ Jose Fuentes     Name:  Jose Fuentes       Chief Financial Officer  

 
 

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Annex A to Option Agreement
 
FORM OF SUBSCRIPTION
 
(Complete and sign only upon exercise of the Option Agreement in whole or in
part.)
 
To:          TX Holdings, Inc.
 
The undersigned, the holder of the attached Option Agreement to which this Form
of Subscription applies, hereby irrevocably elects to exercise the purchase
rights represented by such Options for and to purchase thereunder
_______________ shares of common stock, no par value per share (the "Common
Stock"), from TX Holdings, Inc. (or such other securities issuable pursuant to
the terms of the Option Agreement) and herewith makes payment of
$____________________________ therefor in cash or by certified or official bank
check. The undersigned hereby requests that the certificate(s) representing such
securities be issued in the name(s) and delivered to the address(es) as follows:
 
Name:
_______________________________________________________________________________
Address:
_____________________________________________________________________________
Social Security or Taxpayer Identification Number:
__________________________________________
Deliver to:
___________________________________________________________________________
Address:
_____________________________________________________________________________
 
If the foregoing subscription evidences an exercise of the Options to purchase
fewer than all of the shares of Common Stock (or other securities issuable
pursuant to the terms of the Option Agreement) to which the undersigned is
entitled under such Option, please issue a new Option, of like tenor, relating
to the remaining portion of the securities issuable upon exercise of such Option
Agreement (or other securities issuable pursuant to the terms of such Option) in
the name(s), and deliver the same to the address(es), as follows:
 
Name:
_______________________________________________________________________________        
Address:
_____________________________________________________________________________
Dated:
_______________________________________________________________________________

               
(Name of Holder)
 
(Social Security or Taxpayer Identification
Number of Holder, if applicable)
                 
(Signature of Holder or Authorized Signatory)
             
Signature Guaranteed:
 
 
 
 

 

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