Exhibit 10.13.1
HEALTH SCIENCES GROUP, INC.
2003 STOCK OPTION, DEFERRED STOCK
AND RESTRICTED STOCK PLAN
STOCK OPTION AGREEMENT
NAME: Xxxxx Xxxxx
This AGREEMENT is made effective as of the 11th day of August,
2003 (the "Option Grant Date"), by and between HEALTH SCIENCES GROUP, INC., a
corporation (the "Company") and Xxxxx Xxxxx (the "Optionee").
RECITALS
WHEREAS, the Board of Directors of the Company has established
the 2003 Stock Option, Deferred Stock and Restricted Stock Plan (the "Plan")
effective as of August 7, 2003, and
WHEREAS, pursuant to the provisions of said Plan, the
Administrator of the Company, by action duly taken on August 7, 2003, granted to
the Optionee an option or options (the "Option(s)") to purchase shares of the
Common Stock of the Company on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. THE OPTION(S). The Optionee may, at his/her option, purchase all or
any part of an aggregate of 2,000,000 shares of Common Stock (the "Optioned
Shares"), at the prices of $1.25 to $2.75 per share (the "Option Price"), on the
terms and conditions set forth herein below.
2. OPTION TYPE; EXERCISE DATES AND EXERCISE. The Options are intended
to qualify as Incentive Stock Options to the extent allowable. The Option(s)
shall be exercisable I.E., vested, as set forth in the vesting formula below for
Option Shares which are not Restricted Stock, or, in Optionee's discretion,
immediately for Restricted Stock which shall be subject to forfeiture pursuant
to the same vesting formula as pertains to the exercise of the Options:
3. VESTING FORMULA. Subject to earlier acceleration as set forth in
Optionee's Employment Agreement dated August 11, 2003 ("Employment Agreement")
at paragraph 8(c) in the event of discharge without Cause or Resignation for
Good Reason (which provisions are incorporated herein by reference), the Options
granted hereunder shall be subject to vesting, if and when the following
Performance Benchmarks are achieved, assuming that Optionee has not been
terminated for Cause or resigned without Good Reason under his Employment
Agreement, as of the respective vesting dates:
(a) OPTIONS AT $1.25. Options for 500,000 Option Shares
shall be exercisable at a price of $1.25 per share,
and shall vest, i.e., become exercisable free of
forfeiture, after Optionee has continuously served in
his capacity as General Manager or Chief Operating
Officer under his Employment Agreement for a period
of 90 days from the date of his Employment Agreement
and provided an Operational Plan (as provided in the
Employment Agreement) for Quality Botanical
Ingredients, Inc. ("QBI") for the approval of the
Board, within 90 days of the date of his Employment
Agreement.
(b) OPTIONS AT $1.75. Options for 500,000 Option Shares
shall be exercisable at a price of $1.75 per share,
and shall vest to the extent of achievement of the
QBI operating income milestones for the quarter ended
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December 31, 2003, as follows: if QBI's operating
income for the quarter is at least $125,000, Options
for 125,000 Option Shares shall vest and thereafter,
for each increment of $25,000 of QBI operating income
for the quarter an additional 125,000 Options for
Option Shares shall vest until a maximum of 500,000
Options exercisable at $1.75 per Option Share shall
vest, if the QBI operating income reaches $200,000
for the quarter. Operating income increments of less
than $25,000 shall be rounded up or down to the
nearest $25,000 number.
(c) OPTIONS AT $2.25.
(i) Options for Option Shares shall vest and be
exercisable at $2.25 per share in amounts
which correspond to the applicable
percentage of revenue growth for the Company
on a consolidated basis for the year ended
December 31, 2004 over the prior year as
shown in the following table:
Percentage Year Over Year Revenue Growth for 2004
----------------------------------------------------------------------
7% 11% 15% 19% 23%
------------- ------------ ------------ ------------ --------------
Number of Vested Option Shares 20,000 30,000 40,000 50,000 60,000
Cumulative Vested Option Shares 20,000 50,000 90,000 140,000 200,000
Revenue growth percentages in between the
percentage numbers set forth in the table
shall be rounded up or down to the next
nearest number in the table.
(ii) Options for Option Shares shall vest and be
exercisable at $2.25 per share in amounts
which correspond to the applicable operating
income percentage of revenue ("Operating
Margin") on a consolidated basis for the
year ended 2004 for the Company, as shown in
the following table:
Percentage Operating Margin for 2004
----------------------------------------------------------------------
4% 5% 6% 7% 8%
------------- ------------ ------------ ------------ --------------
Number of Vested Option Shares 40,000 50,000 60,000 70,000 80,000
Cumulative Vested Option Shares 40,000 90,000 150,000 220,000 300,000
(d) OPTIONS AT $2.75.
(i) Options for Option Shares shall vest and be
exercisable at $2.75 per share in amounts
which correspond to the applicable
percentage of revenue growth for the Company
for the year ended December 31, 2005 over
the prior year as shown in the following
table:
Percentage Year Over Year Revenue Growth for 2005
----------------------------------------------------------------------
11% 14% 17% 20% 23%
------------- ------------ ------------ ------------ --------------
Number of Vested Option Shares 20,000 30,000 40,000 50,000 60,000
Cumulative Vested Option Shares 20,000 50,000 90,000 140,000 200,000
Revenue growth percentages in between the
percentage numbers set forth in the table
shall be rounded up or down to the next
nearest number in the table.
(ii) Options for shares shall vest and be
exercisable at $2.75 per share in amounts
which correspond to the applicable operating
income percentage of revenue ("Operating
Margin") for the year ended 2005 for the
Company, as shown in the following table:
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Percentage Operating Margin for 2005
----------------------------------------------------------------------
8% 9% 10% 11% 12%
------------- ------------ ------------ ------------ --------------
Number of Vested Option Shares 40,000 50,000 60,000 70,000 80,000
Cumulative Vested Option Shares 40,000 90,000 150,000 220,000 300,000
For purposes of the Performance Benchmarks set forth in this paragraph 3, salary
increases and bonuses to Xxxx Xxxxxxx and Xxxx Xxxxxx in amounts in excess of
current salary and the expensing of stock options shall not be deemed charges
against income in determining operating margin, nor shall non-recurring charges
such as inventory write-downs or corporate overhead charges from the Company to
QBI for the QBI 12/31/03 milestone set forth in (b) above.
4. METHOD OF EXERCISE; EXERCISE PERIOD. This Option shall be deemed
exercised as to the Option Shares to be purchased when written notice of such
exercise has been given to the Company at its principal business office by the
Optionee with respect to the Common Stock to be purchased. Such notice shall be
accompanied by full payment in cash or cash equivalents as determined by the
Administrator. Any such exercise must occur within 3 years from the vesting date
of the Option Shares to which the exercise relates or within such shorter time
as provided in Section 5(c) in the event of termination of the Optionees'
employment.
5. GOVERNING PLAN. This Agreement hereby incorporates by reference the
Plan and all of the terms and conditions of the Plan as heretofore amended and
as the same may be amended from time to time hereafter in accordance with the
terms thereof, but no such subsequent amendment shall adversely affect the
Optionee's rights under this Agreement and the Plan except as may be required by
applicable law. The Optionee expressly acknowledges and agrees that the
provisions of this Agreement are subject to the Plan; the terms of this
Agreement shall in no manner limit or modify the controlling provisions of the
Plan, and in case of any conflict between the provisions of the Plan and this
Agreement, the provisions of the Plan shall be controlling and binding upon the
parties hereto. The Optionee also hereby expressly acknowledges, represents and
agrees as follows:
(a) Acknowledges receipt of a copy of the Plan, a copy of
which is attached hereto and by reference incorporated herein, and represents
that he/she is familiar with the terms and provisions of said Plan, and hereby
accepts this Agreement subject to all the terms and provisions of said Plan.
(b) Agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan.
(c) Acknowledges that he/she is familiar with Sections of the
Plan regarding the exercise of the Option(s) and represents that he/she
understands that said Option(s) must be exercised on or before the earliest of
the following dates, whichever is applicable: (i) the day prior to the third
anniversary of the vesting date of the tranche of Options being exercised, (ii)
the date which is three months from the date of termination of employment for
any reason other than death or disability as provided under Subsection 5(h) of
the Plan; or (iii) the date that is six months following the Optionee's
termination of employment, by reason of his/her death, or the date that is six
months following his/her termination of employment, by reason of disability,
whichever is applicable, as provided in Subsection 5(g) of the Plan
(d) Acknowledges, understands and agrees that the existence of
the Plan and the execution of this Agreement are not sufficient by themselves to
cause any exercise of any Option(s) granted as an Incentive Stock Option to
qualify for favorable tax treatment through the application of Section 422 of
the Internal Revenue Code; that Optionee must, in order to so qualify,
individually meet by his own action all applicable requirements of Section 422,
including without limitation the following holding period and employment
requirements as to Incentive Stock Options:
(1) HOLDING PERIOD REQUIREMENT: no disposition of an
Optioned Share may be made by Optionee within two (2) years from the
date of the granting of the Option(s) nor within one (1) year after the
acquisition of the Optioned Shares through exercise of the Options, and
(2) EMPLOYMENT REQUIREMENT: at all times during the
period beginning on the date of the granting of the Option(s) and
ending on the day three (3) months before the date of exercise, the
Optionee must have been an employee of the Company, its Parent, or a
Subsidiary of the Company, or a corporation or a parent or subsidiary
of such corporation issuing or assuming the Option(s) in a transaction
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to which Section 425(a) of the Internal Revenue Code applies, except
where the termination of employment is by means of the employee's
disability, in which case said three (3) month period may be extended
to six months.
(e) STOCK SPLITS. All per share exercise prices set forth in
this Agreement shall be adjusted proportionally as follows: in the event of a
stock split the price shall be decreased proportionately and the number of
shares covered by the Option increased proportionately; in the event of a
reverse split, the price shall be increased proportionately and the number of
shares covered by the Option reduced proportionately.
6. REPRESENTATIONS AND WARRANTIES. As a condition to the exercise of
any portion of an Option, the Company may require the person exercising such
Option to make any representation and/or warranty to the Company as may, in the
judgment of counsel to the Company, be required under the Securities Act of 1933
or any other applicable law or regulation. Optionee hereby represents to the
Company that each of the Options evidenced hereby and the shares purchasable
upon exercise thereof are being acquired only for investment and without any
present intention to sell or distribute such securities, that Optionee will sign
a lock-up agreement similar to that signed by the principal shareholders at the
public offering ("PO") of the Company's stock as may be required by the
underwriters in such PO.
7. OPTIONS NOT TRANSFERABLE. No Stock Option shall be transferable by
the Optionee other than by will or by the laws of descent and distribution.
8. NO ENLARGEMENT OF EMPLOYEE RIGHTS. Nothing in this Agreement shall
be construed to confer upon the Optionee (if an employee) any right to continued
employment with the Company, any future Parent or any future Subsidiary, or to
restrict in any way the right of the Company, any future Subsidiary or any
future Parent, to terminate his/her employment. Optionee acknowledges that in
the absence of an express written employment agreement to the contrary,
Optionee's employment with the Company may be terminated by the Company at any
time, with or without cause.
9. WITHHOLDING OF TAXES. Optionee authorizes the Company to withhold,
in accordance with any applicable law, from any compensation payable to him any
taxes required to be withheld by federal, state or local law as a result of the
grant of the Option(s) or the issuance of stock pursuant to the exercise of such
Option(s).
10. LAWS APPLICABLE TO CONSTRUCTION. This Agreement shall be construed
and enforced in accordance with the laws of the State of California.
11. AGREEMENT BINDING ON SUCCESSORS. The terms of this Agreement shall
be binding upon the executors, administrators, heirs, successors, transferees
and assignees of the Optionee.
12. COSTS OF LITIGATION. In any action at law or in equity to enforce
any of the provisions or rights under this Agreement or the Plan, the
unsuccessful party to such litigation, as determined by the court in a final
judgment or decree, shall pay the successful party or parties all costs,
expenses and reasonable attorneys' fees incurred by the successful party or
parties (including without limitation costs, expenses end fees on any appeals),
and if the successful party recovers judgment in any such action or proceeding
such costs, expenses and attorneys' fees shall be included as part of the
judgment.
13. NECESSARY ACTS. The Optionee agrees to perform all acts and execute
and deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement, including but not limited to all acts and
documents related to compliance with federal and/or state securities laws.
Optionee shall be responsible for conferring with his or her own tax accountant
regarding the tax matters pertaining to the Options and the exercise of the
Options and shall be solely responsible as to all tax filings pertaining to
Optionee, including the filing of an 83(b) election, if any.
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14. COUNTERPARTS. For convenience this Agreement may be executed in any
number of identical counterparts, each of which shall be deemed a complete
original in itself and may be introduced in evidence or used for any other
purpose without the production of any other counterparts.
15. INVALID PROVISIONS. In the event that any provision of this
Agreement is found to be invalid or otherwise unenforceable under any applicable
law, such invalidity or unenforceability shall not be construed as rendering any
other provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though the
invalid and unenforceable provision was not contained herein.
16. LIMITATION ON VALUE OF OPTIONED SHARES. Optionee acknowledges that
the Plan provides that the aggregate fair market value (determined as of the
date hereof) of the shares of Common Stock for which Options granted as
Incentive Stock Options are exercisable for the first time by Optionee during
any calendar year under all incentive stock option plans of the Company and any
future Subsidiary shall not exceed $100,000. It is understood and agreed that
should it be determined that an Option if granted as an Incentive Stock Option
hereunder would exceed such maximum, such Option shall be considered granted as
a Non-Qualified Stock Option to the extent, but only to the extent of such
excess. This limitation shall not apply to any option granted as a Non-Qualified
Stock Option.
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IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement effective as of the date first written hereinabove.
HEALTH SCIENCES GROUP, INC. OPTIONEE
By:
----------------------------------------- ---------------------------------
Name:____________________________ (Signature)
Title:________________________
---------------------------------
(Print Name)
Address of Participant:
------------------------------------ ----------------------------------
(Social Security)
------------------------------------
------------------------------------
------------------------------------
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By his or her signature below, the spouse of the Optionee, if such
Optionee be legally married as of the date of his execution of this Agreement,
acknowledges that he or she has read this Agreement and the Plan and is familiar
with the terms and provisions thereof, and agrees to be bound by all the terms
and conditions of said Agreement and said Plan document and appoints Optionee as
attorney in fact with respect to any matter pertaining thereto.
---------------------------------------
Spouse
Dated: ________________________________
By his or her signature below the Optionee represents that he or she is
not legally married as of the date of execution of this Agreement.
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Optionee
Dated: ________________________________
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