NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement ("Agreement") is effective as of
the _____________ day of _____________ ("Effective Date") between Protalex,
Inc., a New Mexico corporation, with its principal place of business in
Albuquerque, New Mexico ("Company"), and _____________ ("Optionee"), and is made
with reference to the following facts:
A. The Company desires to provide an incentive to and to encourage stock
ownership by Optionee, so that Optionee may acquire a proprietary interest in
the success of the Company, and to encourage (a) Optionee to remain a member of
the Board of Directors of the Company (the "Board")/ (b) (Employee) to expand
and improve the profits and prosperity of the Company.
B. Optionee is a (a) member of the Board (b)employee.
C. This Agreement shall be administered by the Board.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises contained herein, the Company and Optionee agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right, privilege
and option ("Option") to purchase ____________(#)_shares of the Company's common
stock ("Shares") at ___________($)__per Share ("Exercise Price"), in the manner
and subject to the conditions provided in this Agreement.
2. Vesting and Time of Exercise of Option. Subject to the provisions of Section
6, the Option shall vest in Optionee, and may be exercised by Optionee as to any
or all of the Shares, as follows: (%) of the Shares shall vest immediately on
the date hereof.
3. Method of Exercise.
3.1. Exercise Notice. The Option shall be exercised, in whole or in part by
written notice to the Company (in the form attached hereto as Exhibit A, the
"Exercise Notice") by Optionee or successor (except in the event of death),
stating the number of Shares with respect to which the Option is being exercised
and designating a time for the delivery thereof ("Exercise Date"), which time
shall be at least thirty (30) days after the giving of such notice, unless an
earlier date shall have been mutually agreed upon. In the event the Option shall
be exercisable by any person other than Optionee, the required notice under this
Section 3.1 shall be accompanied by appropriate proof of the right of such
person to exercise the Option.
3.2. Delivery of Shares. Subject to the terms of this Agreement, on the Exercise
Date and against delivery to the Company of the Exercise Price as set forth in
Section 3.3, the Company shall deliver to Optionee at the principal office of
the Company, or such other appropriate place as may be mutually agreed upon, a
certificate or certificates for such Shares (out of previously authorized but
unissued Shares or acquired or reacquired Shares, as the Company may elect).
Notwithstanding the foregoing, the Company may postpone delivery of any
certificate or certificates after notice of exercise for such reasonable period
as may be required to comply with any applicable listing requirements of any
securities exchange. In no event, however, shall the Company be required to
issue fractional Shares.
3.3. Medium and Time of Payment. The Exercise Price shall be payable in full
upon any exercise of the Option by certified or bank cashier's check, or such
other form of payment the Company agrees to accept.
4. Relationship with the Company and Investment Intent. The Optionee hereby
makes the following representations and warranties with the understanding that
the Company will rely upon them in order to grant the Option pursuant to certain
exemptions provided under the New Mexico Statutes and the Securities Act of
1933, as amended (the "Act"):
4.1. he Optionee either:
(a) has a preexisting personal or business relationship with the Company or any
of its officers, directors or controlling persons of a nature and duration as
would allow the Optionee to be aware of the character, business acumen, general
business and financial circumstances of the Company or of the person with whom
such relationship exists; or
(b) by reason of the Optionee's business or financial experience, or the
business or financial experience of the Optionee's professional advisor(s) who
is (are) unaffiliated with and is (are) not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, has the
capacity to protect the Optionee's interests in connection with the purchase of
the Options of the Company and Shares issuable upon the exercise thereof.
(c) Under either of the above two cases (either a (a) or (b)), the Optionee has
such knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the prospective investment.
4.2. The Optionee acknowledges that the Optionee has had the opportunity to
obtain and review all information from the Company necessary to make a
reasonably informed investment decision and that the Optionee has had all
questions asked of the Company answered to the reasonable satisfaction of the
Optionee.
4.3. The Optionee acknowledges that an investment in the Company represents a
speculative investment and a high degree of risk. The Optionee is able to bear
the economic risk of his or her investment in the Options and the Shares
issuable upon exercise thereof.
4.4. The Option and the Shares issuable upon exercise thereof will be acquired
by the Optionee for investment only, for the Optionee's own account, and not
with a view to or for sale in connection with any distribution of the Option or
Shares issuable upon exercise thereof.
4.5. The Optionee understands and acknowledges that the Shares have not been,
and will not be, registered under the Act, or qualified under the New Mexico
Securities Act of 1986. The Optionee understands and acknowledges that the
Shares may not be sold without compliance with the registration and
qualification requirements of federal and applicable state securities laws
unless exemptions from such laws are available. The Optionee understands that
the certificate representing the Shares shall bear the legends set forth in
Section 9 of this Agreement.
4.6. The grant of Options for Shares and the exercise of the Options have not
been accompanied by the publication of any advertisement or general
solicitation.
4.7. The Optionee will not take, or cause to be taken, any action that would
cause the Optionee, or any entity or person affiliated with the Optionee, to be
deemed an underwriter with respect to the Option or the Shares.
4.8. The Optionee is a resident of the State of ______________.
4.9. The Optionee understands and agrees that, at the time of exercise of any
part of the Option for Shares, the Optionee may be required to provide the
Company with additional representations, warranties and/or covenants similar to
those contained in this Agreement. The Optionee will notify the Company
immediately of any change in the representations made in this Section 4 that
occurs before the Option is exercised in full by the Optionee.
4.10. No person will be entitled to commission or other remuneration for the
solicitation or sale of the Options.
5. Restrictions on Exercise and Delivery. Any exercise of the Option shall be
subject to the condition that, if at any time the Company shall determine, in
its discretion,
5.1. the satisfaction of any withholding tax or other withholding liabilities is
necessary or desirable as a condition of, or in connection with, such exercise
or the delivery or purchase of Shares pursuant thereto,
5.2. the listing, registration, or qualification of any Shares deliverable upon
such exercise is desirable or necessary, under any state or federal law, as a
condition of, or in connection with, such exercise or the delivery or purchase
of Shares pursuant thereto, or
5.3. the consent or approval of any regulatory body is necessary or desirable as
a condition of, or in connection with, such exercise or the delivery or purchase
of Shares pursuant thereto, then in any such event, such exercise shall not be
effective unless such withholding, listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company. Optionee shall make arrangements satisfactory to the
Company to enable the Company to effect or obtain such withholding, listing,
registration, qualification, consent or approval. Neither the Company nor any
officer or director, or member of the Board, shall have any liability with
respect to the non-issuance or failure to sell Shares as the result of any
suspensions of exercisability imposed pursuant to this Section.
6. Termination of Option. Except as otherwise provided in this Agreement, the
Option granted under this Agreement, to the extent not previously exercised,
shall terminate forthwith upon the first to occur of any of the following
events:
6.1. the dissolution or liquidation of the Company;
6.2.______(#) years from the Effective Date;
6.3.the breach by Optionee of any provision of this Agreement;
6.4. immediately upon the occurrence of any event giving rise to Optionee's
cessation of providing services to the Company for "cause" ("cause" shall mean
Optionee's personal dishonesty, misconduct, breach of fiduciary duty,
incompetence, intentional failure to perform stated obligations, willful
violation of any law, rule, regulation or final cease and desist order, or any
material breach of any provision of this Agreement or any other agreement
between Optionee and the Company); or
6.5. six (6) months after Optionee's death, in which event the person or persons
to whom the rights of Optionee hereunder shall pass may exercise such Option to
the extent that Optionee, had Optionee lived, would have been entitled to
exercise such Option on the date of Optionee's death.
7. Nontransferability of Option. The Option shall not be sold, pledged, assigned
or transferred in any manner other than by will or by the laws of descent and
distribution, and may be exercised during the lifetime of Optionee only by
Optionee. Any transfer by Optionee of any Option granted under this Agreement
shall void such Option, and the Company shall have no further obligation with
respect to such Option. No Option shall be pledged or hypothecated in any way,
nor shall any Option be subject to execution, attachment or similar process.
8. Restrictions on Transfer of Shares. Optionee represents and warrants to the
Company that Optionee understands that, as of the date of this Agreement, the
Shares have not been registered under the Act or qualified under any applicable
state securities or "blue sky" laws, and the Shares must be held indefinitely
unless subsequently registered and qualified thereunder or exemptions from such
registration and qualification are available. Optionee further represents and
warrants to the Company that Optionee will not transfer any of the Shares
acquired hereunder in violation of the provisions of any applicable securities
statute or regulation or the provisions of this Agreement. Optionee acknowledges
that the Company has made no agreements, covenants or undertakings whatsoever
(i) to register or qualify any of the Shares under the Act or any applicable
state securities laws or (ii) about the availability of any exemption under the
Act (including the availability of Rule 144 promulgated thereunder) or
applicable state securities laws. Optionee also acknowledges that currently
there is no public market for the Shares and that such a market may never
develop.
9. Restrictive Legends. Certificates representing Shares shall bear the
following legends giving notice of restrictions on transfer as follows:
9.1. THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED OR TRANSFERRED
IN A TRANSACTION WHICH WAS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXEMPTION AFFORDED BY SUCH ACT. NO SALE OR TRANSFER
OF THESE SHARES SHALL BE MADE, NO ATTEMPTED SALE OR TRANSFER SHALL BE VALID, AND
THE ISSUER SHALL NOT BE REQUIRED TO GIVE ANY EFFECT TO ANY SUCH TRANSACTION
UNLESS (A) SUCH TRANSACTION SHALL HAVE BEEN DULY REGISTERED UNDER THE ACT OR (B)
THE ISSUER SHALL HAVE FIRST RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT
THAT SUCH REGISTRATION IS NOT REQUIRED.
9.2. THE SALE, TRANSFER, HYPOTHECATION, OR ENCUMBRANCE OF THE SHARES REPRESENTED
BY THIS CERTIFICATE IS RESTRICTED BY THE PROVISIONS OF A NON-QUALIFIED STOCK
OPTION AGREEMENT DATED THE ______________, A COPY OF WHICH MAY BE INSPECTED AT
THE COMPANY'S PRINCIPAL OFFICE.
9.3. Any other legends required by applicable state securities laws, as
determined by the Company and its counsel.
10. Rights as Shareholder. Neither Optionee nor Optionee's executor,
administrator, heirs or legatees shall be, or have any rights or privileges of,
a shareholder of the Company in respect of the Shares, unless and until
certificates representing such Shares shall have been issued pursuant to the
terms of this Agreement.
11. Repurchase Option. The Company shall have the right to purchase all Shares
held by Optionee or any unexercised Option held by Optionee, which have been
obtained pursuant to this Agreement, together with any rights, securities or
additional stock that has been received pursuant to a stock dividend, stock
split, reorganization or other similar transaction that has been received as a
result of Optionee's Option or Shares acquired pursuant thereto in the event (i)
Optionee terminates his or her membership on the Board, or (ii) the Company so
elects, in the event of a Capital Transaction (as defined in Section 13). The
price paid for any unexercised option or Shares shall be the value of such
Option or Shares as determined under this Section 11. The value assigned to any
Option shall be the fair market value (as determined under this Section 11) of
the Shares as to which it is exercisable reduced by the exercise price. The
parties shall first negotiate in good faith to reach an agreement as to the
value of the Option or Shares. Absent an agreement within thirty (30) days, the
parties shall select one appraiser to determine the value of the Option or
Shares. In the event the parties cannot agree as to an appraiser, then each
party shall appoint one appraiser and the two appraisers shall jointly determine
a third appraiser. In the event the two appraisers cannot determine a third
appraiser, such third appraiser shall be appointed by a Judge of the District
Court of the County of Bernalillo, New Mexico. Such appraisers shall make their
determination of the Fair Market Value of the Shares, and the average of the two
appraisers whose valuations are closest to each other shall control. Any
appraiser selected by any party shall be an appraiser experienced in the area of
valuing similar stock. The Company and Optionee, or successor, shall each pay
for one-half of the cost of any such appraisal. If the Company desires to
purchase the Shares or Options held by Optionee as set forth in this Section,
then the Company shall provide written notice to Optionee at Optionee's last
known address within one hundred twenty (120) days after the termination of such
Optionee's membership on the Board, or at least thirty (30) days prior to a
Capital Transaction. The Board may assign the Company's repurchase option under
this Section to any person selected by the Board including one or more of the
shareholders of the Company.
11.1. The repurchase option set forth in this Section shall terminate upon the
consummation of an underwritten public offering of the Company's Shares
registered under the Act.
12.Right of First Refusal.
12.1. Shares issued pursuant to this Agreement together with any rights,
securities or additional stock that have been received pursuant to a stock
dividend, stock split, reorganization or other transaction that has been
received as a result of the Option or stock acquired pursuant thereto shall be
subject to a right of first refusal by the Company in the event the holder of
such Shares proposes to sell, pledge or otherwise transfer said shares or any
interest in said shares to any person or entity. Any holder of Shares (or other
securities) acquired under this Agreement desiring to transfer such Shares (or
other securities) or any interest therein shall give written notice to the
Company describing the proposed transfer, including the price of Shares proposed
to be transferred, the proposed transfer price and terms, and the name and
address of the proposed transferee. Unless otherwise agreed by the Company and
the holder of such Shares, repurchases by the Company under this Section shall
be at the proposed price and terms specified in the notice to the Company. The
Company's rights under this Section shall be freely assignable.
12.2. If the Company fails to exercise its right of first refusal within thirty
(30) days from the date upon which the Company received the Optionee's written
notice, Optionee may, within the next ninety (90) days, conclude a transfer of
the exact number of Shares covered by said notice on terms not more favorable to
the transferee than those described in the notice. Any subsequent proposed
transfer by such transferee shall again be subject to the Company's right of
first refusal. If the Company exercises its right of first refusal, the holder
shall endorse and deliver to the Company the stock certificates representing the
Shares being repurchased, and the Company shall promptly pay the shareholder the
total repurchase price as set forth in the terms of this Agreement. The holders
of Shares being repurchased pursuant to this Section shall cease to have any
rights with respect to such Shares immediately upon repurchase.
12.3. No written notice of a proposed transfer shall be required under this
Section and no right of first refusal shall exist with respect to transfers by
will or the laws of descent and distribution.
12.4. The right of first refusal set forth in this Section shall terminate upon
the consummation of an underwritten public offering of the Company's Shares
registered under the Act.
12.5. Any attempted transfer of any Shares or securities subject to this right
of first refusal which is not made in compliance with this Section shall be null
and void.
12.6. The Board may assign the Company's repurchase option under this Section to
any person selected by the Board including one or more or the shareholders of
the Company.
13. Adjustments Upon Changes In Capitalization.
13.1. Subdivision or Consolidation. Subject to any required action by
shareholders of the Company, the number of Shares covered by each outstanding
Option, and the exercise price thereof, shall be proportionately adjusted for
any increase or decrease in the number of issued Shares of the Company resulting
from a subdivision or consolidation of Shares, including, but not limited to, a
stock split, reverse stock split, recapitalization, continuation or
reclassification, or the payment of a stock dividend (but only on all
outstanding Shares) or any other increase or decrease in the number of such
Shares effected without receipt of consideration by the Company. Any fraction of
a Share subject to Option that would otherwise result from an adjustment
pursuant to this Section shall be rounded downward to the next full number of
Shares without other compensation or consideration to the holder of such option.
13.2. Capital Transactions. Upon a sale or exchange of all or substantially all
of the assets of the Company, a merger or consolidation in which the Company is
not the surviving corporation, a merger, reorganization or consolidation in
which the Company is the surviving corporation and shareholders of the Company
exchange their stock for securities or property, a liquidation of the Company or
similar transaction ("Capital Transaction"), this Agreement and the Option
issued under this Agreement, whether vested or unvested, shall terminate, unless
such Option is assumed by a successor corporation in a merger or consolidation,
immediately prior to such Capital Transaction; provided, however, that unless
the outstanding Option is assumed by a successor corporation in a merger or
consolidation, subject to terms approved by the Board, or the Options are
repurchased pursuant to Section 12, the Optionee will have the right, during the
thirty (30) days prior to such Capital Transaction, to exercise his vested
Option.
13.3. Xxxxxxxxxxx.Xx the extent that the foregoing adjustments relate to Shares
or securities of the Company, such adjustments shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
13.4. Ability to Adjust. The grant of an Option pursuant to the Agreement shall
not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or
any part of its business or assets.
13.5. Notice of Adjustment. Whenever the Company shall take any action resulting
in any adjustment provided for in this Section, the Company shall forthwith
deliver notice of such action to Optionee, which notice shall set forth the
number of Shares subject to the Option and the exercise price thereof resulting
from such adjustment.
14. No Right to Membership on the Board of Directors of the Company. Neither the
grant nor exercise of any portion of the Option shall impose upon the Company or
any other corporation any obligation to maintain Optionee's status as a member
of the Board or to grant Optionee a position in the Company in any other
capacity; the right of the Company and any other corporation to retain or
continue to retain Optionee in any capacity shall not be diminished or affected
as a result of the Option.
15. Dispute Resolution Procedure.
15.1. Sole and Exclusive Method. The provisions of this Section 15 contain the
sole and exclusive method, means and procedure to resolve any controversy or
claim arising out of or relating to this Agreement or its making, performance or
interpretation ("Dispute"), and the parties hereby irrevocably waive any and all
rights to the contrary and shall at all times conduct themselves in strict,
full, complete and timely accordance with the provisions of this Section 15. Any
and all attempts to circumvent the provisions of this Section 15 shall be
absolutely null and void and of no force or effect whatsoever.
15.2. Negotiated Settlement and Arbitration. Any Dispute shall be settled within
twenty (20) days of receipt by all parties of a notice of the Dispute by
negotiations between representatives of the parties with authority to settle
such Dispute. In the absence of such a negotiated settlement, then the Dispute
shall be resolved by arbitration before a single arbitrator (except as provided
below) in Albuquerque, New Mexico, in accordance with the Rules of the American
Arbitration Association then existing, and judgment on the arbitration award may
be entered in any court having jurisdiction over the subject matter of the
controversy. The arbitrator shall be a person experienced in the subject matter
of the circumstance or circumstances to be arbitrated and shall be selected by
mutual agreement of the parties. If the parties are unable to agree on the
arbitrator within a period of fifteen (15) days after arbitration is demanded by
either party, then each party shall select an arbitrator and the two arbitrators
so selected shall select a third and the three so chosen shall constitute the
board of arbitrators. The arbitrator(s) shall render a decision as soon as
possible, but in any event within thirty (30) days of selection. The parties
agree to abide by and perform any directions and awards made by the
arbitrator(s) whose decision shall be final and binding for all purposes.
15.3. Arbitration Costs. The costs, including reasonable attorneys' fees, of an
arbitration or any litigation, whether the same shall arise either in connection
with or apart from the arbitration, shall be borne by the party against which
the award is granted unless the award otherwise directs. The foregoing
entitlement also shall include attorneys' fees (including in-house or outside
counsel fees) and costs of the prevailing party on any appeal of a judgment and
for any action to enforce a judgment. The arbitrator(s) may direct either party
to pay any sum of money, or to do or subject itself to any act or execute any
instrument, for the purpose of carrying the award of the arbitrator(s) into
effect.
15.4. Discovery. Each party shall be entitled to pre-hearing discovery as
provided in New Mexico Statutes 44-7A-18. If any question is submitted to a
court of law for resolution, then the District Court of the County of
Bernalillo, New Mexico, or the United States District Court having jurisdiction
in the County of Bernalillo, shall be the exclusive court of competent
jurisdiction for the resolution of such question.
16. Fair Market Value. The fair market value of Shares on any relevant date for
valuation purposes under this Agreement (except for Section 12) shall be
determined in accordance with the following provisions:
16.1. Over-the-Counter Shares. If the Shares are not at the time listed or
admitted to trading on any stock exchange, but are traded in the
over-the-counter market, the fair market value shall be the mean between the
highest bid and lowest asked prices (or, if such information is available, the
closing selling price) of one Share on the date in question in the
over-the-counter market, as such prices are reported by the National Association
of Securities Dealers through its NASDAQ system, or any successor system. If
there are no reported bid and asked prices (or closing selling price) for the
Shares on the date in question, then the mean between the highest bid price and
lowest asked price (or the closing selling price) on the last preceding date for
which such quotations exist shall be determinative of fair market value.
16.2. Stock Exchange Traded Shares. If the Shares are at the time listed or
admitted to trading on any stock exchange, then the fair market value shall be
the closing selling price of one Share on the date in question on the stock
exchange determined by the Board to be the primary market for the Shares, as
such price is officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of Shares on such exchange on the date in
question, then the fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
16.3. Non-Traded Shares. If the Shares at the time are neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, then the fair market value shall be determined by the Board after taking
into account such factors as the Board shall deem appropriate, including one or
more independent professional appraisals.
17. Withholding Taxes. Notwithstanding anything else to the contrary in this
Agreement, the exercise of the Option shall be conditioned upon payment by
Optionee in cash, or other provisions satisfactory to the Board, of all local,
state, federal or other withholding taxes applicable, in the Board's judgment,
to the exercise or to later disposition of Shares acquired upon exercise of the
Option (including any repurchase of the Option or the Stock).
18. No Right of Employment. Neither the grant nor exercise of any portion of the
Option shall impose upon the Company or any other corporation any obligation to
employ or continue to employ Optionee; the right of the Company and any other
corporation to terminate Optionee shall not be diminished or affected as a
result of the Option.
19. Notices. Any notice to be given under the terms of this Agreement shall be
addressed to the Company in care of its Secretary at the principal office of the
Company, and any notice to be given to Optionee shall be addressed to Optionee
at the address given below; the parties may substitute for the foregoing such
other address(es) as either party may hereafter designate in writing to the
other.
20. Governing Law. This Agreement shall be governed by the laws of the State of
New Mexico as applied to contracts entered into among residents of New Mexico
and to be performed wholly within New Mexico.
21. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Optionee, his heirs and successors, and of Company, its successors
and assigns.
22. Descriptive Headings. Titles to sections and subsections are solely for
information purposes and shall not be construed in interpreting this Agreement.
IN WITNESS WHEREOF, this Agreement is entered into and effective as of the date
first above written.
THE COMPANY:
PROTALEX, INC., a New Mexico corporation
By:
Xxxxxx X. Xxxx, its President
OPTIONEE:
name
Address:
EXHIBIT "A"
(Optionee name)
Address: ____________________________
____________________________
Date: ____________________________
____________________________
Protalex, Inc.
_____________________
_____________________
_____________________
Ladies and Gentlemen:
I (the "Undersigned") hereby exercise my right to purchase _____________
shares ("Shares") of Common Shares of Protalex, Inc., a New Mexico corporation
("Company"), pursuant to, and in accordance with, that Non-Qualified Stock
Option Agreement ("Agreement") between the Undersigned and the Company dated
effective the ______________. As provided in the Agreement, I deliver herewith
the following amount as the purchase price for the Shares:
______________________________. Please deliver to me at my address as set forth
above stock certificates representing the Shares registered in the following
name(s): ______________________________. I further request that the certificates
be registered in the following form of ownership (for example, as individual
property, community property, separate property, etc.):
______________________________.
The representations made by the Undersigned in the Agreement remain
accurate in all respects as of the date of this notice, and the Undersigned is
not aware of any breach of such representations or any breach of the covenants
or other provisions of the Agreement.
Very truly yours,
_________________________________
optionee
