The stock options represented hereby and the common stock underlying such
options have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), nor under any other state securities law or regulation
and are subject to substantial restrictions on transferability by operation of
the Securities Act, and other applicable state securities laws and regulations.
CYNTECH TECHNOLOGIES, INC.
STOCK OPTION AGREEMENT
(NON-STATUTORY STOCK OPTION)
CYNTECH TECHNOLOGIES, INC., a Utah corporation (the "Company"), is
pleased to grant to the Optionee named below, the following Options to purchase
shares of its common stock, par value $0.001 per share ("Common Stock"), subject
to the following terms and conditions:
Name of Optionee: _________________________________
Address: _________________________________
Type of Option: Non-Statutory Option (not an ISO)
Date of Grant: _________________________________
Number of Shares of Common Stock
Purchasable Under This Option: ______________ shares
Exercise Price: $___________ per share
Expiration Date: _________________________________
Vesting Schedule: _________________________________
TERMS AND CONDITIONS
References herein to "you" or "your" shall refer to Optionee.
1. Options. The Company hereby grants to Optionee the right and option
to purchase up to the number of shares of Common Stock specified above, at the
Exercise Price specified above, subject to the conditions and limitations set
forth herein (the "Options").
2. Vesting Dates. The Options shall not be exercisable until on or
after their respective Vesting Dates. The Options shall partially vest in
periodic installments on the Vesting Dates; provided, as a condition of vesting,
that the Optionee shall have been in the Continuous Service of the Company at
all times after the Date of Grant through and including each such Vesting Date.
3. Number of Shares and Exercise Price. The number of shares, which
Optionee may purchase upon exercise of the Option (the "Option Shares"), and the
Exercise Price may be adjusted from time to time for Capitalization Adjustments.
4. Method of Payment. Payment of the Exercise Price is due in full upon
exercise of all or any part of the Options. Optionee may elect to make payment
of the Exercise Price in cash or by check or in any other manner permitted by
the Company. As soon as practicable after receipt by the Company of such notice
and of payment in full of the option price of all the shares of Common Stock
with respect to which the Option has been exercised, a certificate or
certificates representing such shares of Common Stock having been paid for shall
be issued in the name of the Optionee, or, if the Optionee shall so request in
the notice exercising the Option, in the name of the Optionee and another person
jointly, with right of survivorship, and shall be delivered to the Optionee. If
this Option is not exercised with respect to all shares of Common Stock subject
hereto, Optionee shall be entitled to receive a similar Option of like tenor
covering the number of shares of Common Stock with respect to which this Option
shall not have been exercised.
5. Whole Shares. The Options may only be exercised for whole shares of
Common Stock. Fractional shares of Common Stock shall not be issued.
6. Securities Law Compliance; Limitation of Exercise; Extension of
Exercise Period. If the Board of Directors of the Company, in its sole
discretion, shall determine that it is necessary or desirable to list, register,
or qualify the Option Shares under any state or federal law, these Options may
not be exercised, in whole or part, until such listing, registration, or
qualification shall have been obtained free of any conditions not acceptable to
the Board of Directors. If no registration statement is effective on the date of
exercise of these Options, the Option Shares will not be issued unless and until
there is evidence available to the Company, including representations from the
Optionee that such shares are being acquired for investment and not for resale,
on which the Company may reasonably rely as to the availability of an exemption
from registration in issuing such shares. The Company shall utilize its best
efforts to comply with the requirements of each regulatory commission or agency
having jurisdiction in order to issue and sell the shares to satisfy these
Options. Such compliance will be a condition precedent to the right to exercise
these Options. The inability of the Company to effect such compliance with any
such regulatory commission or agency that counsel for the Company deems
necessary for the lawful issuance and sale of the shares to satisfy these
Options shall relieve the Company from any liability for failure to issue and
sell the shares to satisfy these Options for such time as such compliance is not
effectuated.
2
If at any time you deliver a Notice of Exercise in accordance with
paragraph 8 below and the Options are not exercisable solely because of the
condition set forth in this paragraph 6, the Exercise Period (as defined in
paragraph 7) shall be correspondingly extended until the Company determines that
the Options can be exercised in compliance with this paragraph 6, at which point
the Optionee shall have the remainder of the applicable Exercise Period, as
delineated in paragraph 7, within which to exercise such Options.
If the issuance of the Option Shares is not covered by an effective
registration statement under the Securities Act, in order to enforce the
restrictions imposed upon the Option Shares, the Company shall cause a legend or
legends to be placed upon any certificates representing such Option Shares,
which legend or legends shall be substantially as follows:
The shares represented hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), nor under any
applicable state securities laws and may not be transferred without
registration under the Act and under such state securities laws, or
pursuant to an available exemption from the Act and such laws.
7. Exercise Period. The vested portions of Options shall be exercisable
during the period (the "Exercise Period") commencing upon their respective
Vesting Dates and terminating upon the earliest of the following dates:
(a) on the date of the termination of your Continuous Service
at any time "for cause" as defined in your separate written employment
agreement, if any, or in the absence of a written employment agreement,
by a good faith determination by the Board of Directors that you (i)
have been grossly negligent in the performance of your duties; (ii)
have engaged in material willful or gross misconduct in the performance
of your duties; (iii) have committed an act of personal dishonesty or
breach of fiduciary duty involving personal profit in connection with
your employment by the Company; or (iv) have committed, as determined
by the Board of Directors of the Company, or have been convicted of
fraud, embezzlement, theft, or dishonesty or other criminal conduct,
unless the board waives the provisions of this subparagraph;
(b) three months after the termination of your Continuous
Service for any other reason;
(c) twelve months after the termination of your Continuous
Service due to disability;
(d) eighteen months after your death if you die either during
your Continuous Service or within three months after your Continuous
Service terminates; or
(e) the Expiration Date.
8. Exercise.
(a) You may exercise the vested portion of the Options during
their Exercise Period by delivering a Notice of Exercise (in a form
designated by the Company), together with the Exercise Price to the
Secretary of the Company, or to such other person as the Company may
designate, during regular business hours, together with such additional
documents as the Company may then require.
(b) By exercising the Options you agree that, as a condition
to any exercise of the Options, the Company may require you to enter an
arrangement providing for the payment by
3
you to the Company of any tax withholding obligation of the Company
arising by reason of: (i) the exercise of the Options; (ii) the lapse
of any substantial risk of forfeiture to which the Option Shares are
subject at the time of exercise; or (iii) the disposition of Option
Shares acquired upon such exercise.
(c) By exercising the Options you (and any other person or
entity to which any Option Shares are transferred or assigned) agree
that the Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of
any securities of the Company under the Securities Act, require that
you not sell, dispose of, transfer, make any short sale of, grant any
option for the purchase of, or enter into any hedging or similar
transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company, including Option
Shares or other securities held by you, for a period of time specified
by the underwriter(s) (not to exceed one hundred eighty days) following
the effective date of the registration statement of the Company filed
under the Securities Act. The Option Shares shall be subject to the
foregoing restrictions and any assignee, transferee, or other holder of
the Option Shares shall be bound by the foregoing provisions. You
further agree to execute and deliver such other agreements as may be
reasonably requested by the Company and/or the underwriter(s) which are
consistent with the foregoing or which are necessary to give further
effect thereto. In order to enforce the foregoing covenant, the Company
may impose stop transfer instructions with respect to your Option
Shares or other securities until the end of such period. Further, you
hereby constitute and appoint the Company and any of its officers as
your agent and attorney-in-fact with full power of substitution to act
in your place and in your stead, and to make, execute, and deliver any
agreements or instruments consistent with the foregoing. The foregoing
power of attorney is, and shall be, irrevocable, and you agree that the
foregoing power of attorney is coupled with the Company's interest in
and to the Option Shares.
(d) The Option Shares may not be sold, transferred or
assigned, pledged or otherwise alienated or hypothecated, except in
compliance with this Agreement, including paragraph 10 below.
(e) In order to enforce the restrictions imposed upon the
Option Shares, the Company shall cause a legend or legends to be placed
upon any certificates representing such Option Shares, which legend or
legends shall be substantially as follows:
The shares represented hereby are subject to restrictions on
transferability and related repurchase rights under the
applicable Stock Option Agreements or other agreements
executed in connection therewith, copies of which are
available at the principal business offices of the Company.
(f) Upon issuance, the Option Shares shall be considered to be
fully-paid, non-assessable, issued, and outstanding shares of the
Company, and Optionee shall be entitled to vote the Option Shares and
receive all cash dividends and other distributions with respect
thereto.
9. Transferability. Options are exercisable only (a) by you during your
life, (b) by the executors, administrators, or beneficiaries of your estate, (c)
by a family member (as defined herein) who receives the Options as a gift or
pursuant to a domestic relations order, or (d) by a transferee for value. For
purposes of this paragraph, a family member includes any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, sister-in-law, including adoptive relationships, any person
sharing your household (other than a tenant or employee), a trust in which these
persons have more than
4
50% of the beneficial interests, a foundation in which these persons (or the
Optionee) control the management of assets, and other entity in which these
persons (or the employee) own more than 50% of the voting interests. In the
event of any alienation, assignment, pledge, hypothecation, or other transfer of
this Option or any right hereunder in violation of the terms hereof or in the
event of any levy, attachment, execution, or similar process, this Option and
all rights granted hereunder shall be immediately null and void.
10. Right of First Refusal. The Company shall have a Right of First
Refusal, prior to the Listing Date, as to all or any part of the Option Shares
on the following terms and conditions:
(a) Should you propose to sell or transfer any Option Shares
in one or more related transactions, you shall promptly deliver a
written notice (the "Transfer Notice") to the Company prior to the
closing of such sale or transfer. The Transfer Notice shall describe in
reasonable detail the proposed sale or transfer including, without
limitation, the number of shares to be sold or transferred, the nature
of such sale or transfer, the consideration to be paid, and the name
and address of each prospective purchaser or transferee. Upon the
request of the Company, you shall promptly furnish to the Company such
other information as may be reasonably requested to establish that the
offer and prospective purchaser or transferee is bona fide.
(b) For thirty days following the receipt of the Transfer
Notice, the Company shall have the option to purchase all or any
portion of the shares specified in the Transfer Notice at the price and
upon the terms set forth in the Transfer Notice. In the event the
Company does not elect to acquire the shares proposed for sale in the
Transfer Notice, the Secretary of the Company shall give written notice
thereof to you (the "Refusal Notice"). If the Company fails or refuses
to furnish a Refusal Notice within such thirty-day period, the Company
shall be deemed to have refused its right and option to purchase the
shares specified in the Transfer Notice.
(c) In the event the Company elects to acquire the shares as
specified in the Transfer Notice, the Secretary of the Company shall so
notify you (the "Acceptance Notice"), and settlement thereof shall be
made in cash within thirty days from the date of the Acceptance Notice.
At such time, you shall deliver to the Company the certificates
representing the shares to be purchased, each certificate to be
properly endorsed for transfer.
(d) Should the purchase price specified in the Transfer Notice
be payable in property other than cash or evidence of indebtedness, the
Company shall have the right to pay the purchase price in the form of
cash equal in amount to the value of such property. If you and the
Company cannot agree on such cash value within ten days after your
receipt of the Acceptance Notice, the valuation shall be made by an
appraiser of recognized standing selected by you and the Company (or
its assignees) or, if you cannot agree on an appraiser within twenty
days after your receipt of the Acceptance Notice, each shall select an
appraiser of recognized standing and the two appraisers shall designate
a third appraiser of recognized standing, whose appraisal shall be
determinative of such value. You and the Company shall equally share
the cost of such appraisal. The closing shall then be held on the fifth
business day after such cash valuation has been made.
(e) The exercise or non-exercise of the rights of the Company
hereunder to elect to exercise the Right of First Refusal in one or
more sales or transfers of the shares shall not adversely affect the
Company's rights to exercise the Right of First Refusal in subsequent
sales or transfers of Option Shares.
5
(f) The Company's Right of First Refusal shall terminate upon
the effective date of a registration statement pertaining to the
Company's initial registered firm commitment underwritten public
offering.
(g) If, from time to time, there is any change in the
character or amount of any of the outstanding shares of the Common
Stock of the Company, then in such event any and all new, substituted,
or additional shares to which you are entitled by reason of your
ownership of the Option Shares shall be immediately subject to the
Right of First Refusal with the same force and effect as the Option
Shares subject to the Right of First Refusal immediately before such
event.
11. Right of Repurchase. To the extent provided in the Company's
bylaws, as amended from time to time, or as noted in paragraph 10 above, the
Company shall have the right to repurchase all or any part of the Option Shares.
12. Change in Control. Following a "Change in Control" (as defined
herein), if the Optionee's Continuous Service is terminated for any reason other
than "for cause" as defined in subparagraph 7(a) above, the Optionee shall have
the right to demand payment after the date of the termination of Optionee's
Continuous Service. Such demand shall be in writing to the Company within ninety
days after the occurrence of such termination, in which case the Company shall
pay, within ten days after receipt of such notice, the Optionee the full amount
due against cancellation of the Options. The amount due shall be defined as a
cash amount equal to the number of shares of Common Stock, excluding any portion
of these Options previously exercised, terminated, canceled, or expired, but
disregarding whether such Options are then exercisable pursuant to paragraph 2
or any other provision respecting any vesting schedule, times the amount by
which the "Fair Market Value" (as defined herein) exceeds the Exercise Price of
such Options.
(a) A "Change in Control" shall be deemed to have occurred if
(i) the Company shall be merged or consolidated into another
corporation and as a result of such merger or consolidation less than
seventy-five percent (75%) of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by
the former shareholders of the Company as the same shall have existed
prior to such merger or consolidation, (ii) the Company shall sell,
lease, exchange, or otherwise transfer (in one transaction or a series
of transactions) all or substantially all of the assets of the Company
to an entity that is not a wholly owned subsidiary of the Company or to
a group of associated purchasers, (iii) a person, within the meaning of
Section 3(a)(9) or Section 13(d)(3) (as in effect on the date hereof)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), shall become the beneficial owner (within the meaning of rule
13d-3 of the Exchange Act as in effect on the date hereof) of fifty
percent (50%) or more of the outstanding voting securities of the
Company, or (iv) if as a result of a merger, consolidation, sale of all
or substantially all of the Company's assets, a contested election, or
any combination of the foregoing, the persons who were directors of the
Company immediately prior thereto shall cease to constitute a majority
of the Board of Directors of the Company or any successor to the
Company.
(b) "Fair Market Value" shall be the closing price for such
stock on the close of business on the day last preceding the occurrence
of the Change of Control as quoted on a registered national securities
exchange or, if not listed on such an exchange, the Nasdaq Stock Market
or, if not listed on such an exchange or included on the Nasdaq Stock
Market, the closing price (or, if no closing price is available from
sources deemed reliable by the Company, the closing bid quotation) for
such stock as determined by the Company through any other reliable
means of determination available on the close of business on the day
last preceding the date of such Change of Control.
6
13. Options Not a Service Contract. The Options are not an employment,
service, or consulting contract, and nothing in the Options shall be deemed to
create in any way whatsoever any right or obligation on your part to continue in
the employ of the Company or an affiliate, or of the Company or an affiliate to
continue your employment. In addition, nothing in the Options shall obligate the
Company or an affiliate, their respective shareholders, boards of directors,
officers, or employees to continue any relationship that you might have as a
director or consultant for the Company or an affiliate.
14. Withholding Obligations.
(a) At the time the Options are exercised, in whole or in
part, or at any time thereafter as requested by the Company, you hereby
authorize withholding from payroll and any other amounts payable to
you, and otherwise agree to make adequate provision for (including by
means of a "cashless exercise" pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board to the extent
permitted by the Company), any sums required to satisfy the federal,
state, local, and foreign tax withholding obligations of the Company or
an affiliate, if any, which arise in connection with the Options.
(b) Upon your request and subject to approval by the Company,
in its sole discretion, and compliance with any applicable conditions
or restrictions of law, the Company may withhold from fully vested
shares of Common Stock otherwise issuable to you upon the exercise of
the Options a number of whole shares having a Fair Market Value,
determined by the Company as of the date of exercise, not in excess of
the minimum amount of tax required to be withheld by law. If the date
of determination of any tax withholding obligation is deferred to a
date later than the date of exercise of the Options, share withholding
pursuant to the preceding sentence shall not be permitted unless you
make a proper and timely election under Section 83(b) of the Internal
Revenue Code covering the aggregate number of shares of Common Stock
acquired upon such exercise with respect to which such determination is
otherwise deferred, to accelerate the determination of such tax
withholding obligation to the date of exercise of the Options.
Notwithstanding the filing of such election, shares shall be withheld
solely from fully vested shares of Common Stock determined as of the
date of exercise of the Options that are otherwise issuable to you upon
such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole
responsibility.
(c) The Options are not exercisable unless the tax withholding
obligations of the Company and/or any affiliate are satisfied.
Accordingly, you may not be able to exercise the Options when desired
even though the Options are vested, and the Company shall have no
obligation to issue a certificate for such shares or release such
shares from any escrow provided for herein.
15. Notices. Any notices provided for in the Options shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five days after deposit in the United
States mail, postage prepaid, addressed to you at the last address you provided
to the Company.
IN WITNESS WHEREOF, the Company has made, executed, and delivered this
Stock Option Agreement to and for the benefit of the Optionee, the same having
been duly authorized and approved by the Board.
7
CYNTECH TECHNOLOGIES, INC.
By: ___________________________________
(print name)
8
CYNTECH TECHNOLOGIES, INC.
STOCK OPTION
NOTICE OF EXERCISE
Cyntech Technologies, Inc. Date of Exercise:_______________
0000 Xxxxxxxxxx Xxxxx, XX
Xxxxxxx, XX 00000
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
Type of option (check one): [ ] Incentive [ ] Non-Statutory
Stock option dated: ______________________________________
Number of shares as to
which option is exercised: ______________________________________
Certificates to be issued
in name of: ______________________________________
Total Exercise Price: $_____________________________________
Cash payment delivered
herewith: $______________________________________
By this exercise, I agree (i) to provide such additional documents as
you may require, (ii) to provide for the payment by me to you (in the manner
designated by you) of your withholding obligation, if any, relating to the
exercise of this option, and (iii) if this exercise relates to an incentive
stock option, to notify you in writing thirty days before the date of any
disposition of any shares of Common Stock issued upon exercise of this option
that will occur within two years after the Date of Grant of this option or
within one year after such shares of Common Stock are issued upon exercise of
this option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of my
stock option as set forth above:
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and are deemed to
constitute "restricted securities" under Rule 144 promulgated under the
Securities Act. I warrant and represent to the Company that I have no present
intention of distributing or selling said Shares, except as permitted under the
Securities Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for
least ninety days after the stock of the Company becomes publicly traded (i.e.,
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934) under Rule 701 and that more restrictive conditions that
apply to affiliates of the Company under Rule 144.
9
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws, and/or applicable securities laws.
I further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten registration of
the offering of securities of the Company under the Securities Act, I will not
sell or otherwise transfer or dispose of any Shares or other securities of the
Company held by me as provided by the terms of my Stock Option Agreement.
Very truly yours,
_______________________________
(signature)
_______________________________
(print name)
10
Schedule of Stock Options
Through April 30, 2001, Cyntech Technologies, Inc., has issued and
outstanding the following options to purchase shares of common stock on the
terms indicated:
Number
Name Price Exercise Vesting Date Expiration Date
---- ----- -------- ------------ ---------------
R. Xxxxx Xxxxx............... 1,423,242 $0.20 Vested 12/31/07
R. Xxxxx Xxxxx............... 61,544 0.25 Vested 05/02/01
R. Xxxxx Xxxxx............... 53,851 0.25 Vested 01/31/02(1)
R. Xxxxx Xxxxx............... 92,316 0.25 Vested 08/31/02(1)
R. Xxxxx Xxxxx............... 69,237 0.25 Vested 08/31/03(1)
Xxxxx & Associates, Inc...... 1,000,000 0.20 10/01/01(2) 12/31/07
X.X. Xxxxxx.................. 225,000 0.001 Vested 12/31/01
Xxxxx Xxxx................... 92,316 0.25 Vested 05/02/01
Xxxxx Xxxx................... 53,851 0.25 Vested 01/31/02(1)
Xxxxx Xxxx................... 92,316 0.25 Vested 08/31/02(1)
Xxxxx Xxxx................... 23,079 0.25 Vested 08/31/03(1)
Xxxxxxx Xxxxxx............... 15,386 0.25 Vested 03/31/04(3)
Xxxxxxx X. Xxxxx............. 61,544 0.25 Vested 05/02/01
Xxxxxxx X. Xxxxx............. 53,851 0.25 Vested 01/31/02(1)
Xxxxxxx X. Xxxxx............. 92,316 0.25 Vested 08/31/02(1)
Xxxxxxx X. Xxxxx............. 69,237 0.25 Vested 08/31/03(1)
-------------
Total.................... 3,479,086
--------------------
(1) The options were awarded at the rate of 7,693 per month for each month
of service on the board of directors beginning with January 1999 and
are good for three years. Accordingly, they will expire at the same
rate per month beginning on January 31, 2002.
(2) 250,000 will vest on each of this dates; the first 750,000 have already
vested.
(3) The options were awarded at the rate of 7,693 per month for each month
of service on the board of directors beginning with March 2001 and are
good for three years. Accordingly, they will expire at the same rate
per month beginning on March 31, 2004.
11
