XXXXXX STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 17th day of April, 1996,
between XXXXXXXXX LABORATORIES, INC., a Delaware corporation, (hereinafter
called "Xxxxxxxxx") and Xxxx X. Xxxxxx (hereinafter called the "Optionee").
However, for purposes of determining vesting of the option granted hereunder,
the effective date shall be April 1, 1996 (the "Vesting Effective Date").
RECITALS
WHEREAS, Xxxxxxxxx has engaged Optionee to perform certain services
pursuant to the terms of that certain Fee Agreement between the parties of even
date (the "Fee Agreement");
WHEREAS, in partial consideration for the performance of the services
required under the Fee Agreement, Xxxxxxxxx has agreed to issue Xxxxxx an option
to purchase from the Company 24,000 shares of its common stock, pursuant to the
terms and conditions of this Agreement.
NOW THEREFORE, in consideration of these Recitals and the mutual promises
and obligations hereinafter set forth, the parties hereto agree as follows:
1. GRANT OF OPTION. Xxxxxxxxx hereby grants to Optionee the option (the
"Option") to purchase 24,000 shares of its voting, $0.01 par value common stock
(hereinafter called the "Option Ed Shares"), at a price of $1.06 per share (the
"Option Price"), in accordance with and subject to the terms and conditions of
this Agreement.
2. VEST IN OF OPTION. Subject to the terms of this Agreement, the Option
granted hereunder shall vest and be exercisable as to one-twenty fourth (1/24)
of the twenty four thousand option Ed shares (one thousand (1,000) of the option
Ed shares) for each full calendar month, commencing on April 1, 1996, for which
Xxxxxx Law Corporation PC ("Xxxxxx Law Corporation") provides a discount of at
least one thousand four hundred eighty five dollars ($1,485) of services, valued
under Xxxxxx Law Corporation's then current standard fee schedule. Therefore,
for example, if Xxxxxx Law Corporation shall perform services for Xxxxxxxxx
pursuant to the Fee Agreement through and including October 31, 1996 but not
thereafter at the minimum level described above, then, subject to the terms of
this Agreement, Optionee shall have the right to exercise the option granted
hereunder with respect to seven thousand (7,000) shares.
3. ACCELERATION OF VESTING. Notwithstanding the foregoing, if at any
time prior to the date two years from the effective date of this Agreement and
during a period in which Xxxxxx Law Corporation is performing services pursuant
to the terms of the Fee Agreement there is a "change of control" at Xxxxxxxxx,
then, subject to the terms of this Agreement, the Option granted hereunder shall
on the date of the change of control vest and be fully exercisable as to all of
the twenty four thousand option Ed shares or such lesser number of shares as
were not otherwise vested. For purposes of this Agreement, a "change of
control" shall be deemed to occur when and only when any of the following events
first occurs: (i) any person or entity becomes the beneficial owner, directly or
indirectly, of securities of Xxxxxxxxx representing more than fifty percent of
the combined voting power of Xxxxxxxxx'x then outstanding voting securities, or
(ii) three or more directors, whose election or nomination for election is not
approved by a majority of the members of the Xxxxxxxxx'x board of directors on
the effective date of this Agreement, are elected within any twelve month period
to serve on Xxxxxxxxx'x board of directors, or (iii) the members of Xxx
xxxxxx'x board of directors on the effective date of this Agreement cease to
constitute a majority of its board of directors without the approval of the
remaining members of that board, or (iv) any merger (other than a merger where
Xxxxxxxxx is the survivor and there is no change of control pursuant to (i),
(ii) or (iii) of this sentence), consolidation, liquidation or dissolution of
Xxxxxxxxx or the sale of all or substantially all of its assets.
4. MANNER OF EXERCISE. The Option may only be exercised with respect to
that number of shares as to which Optionee is then vested and only as to that
portion not previously exercised. The Option shall be exercised by giving
Xxxxxxxxx written notice as to its exercise, identifying the number of shares as
to which the Option is exercised, and by tendering payment in full, in certified
or guaranteed funds, for the number of purchased shares. Upon receipt of such
written notice and payment of the purchase price as required above, Xxxxxxxxx
will cause certificates for the shares purchased thereunder to be issued and
delivered to Optionee.
5. CONDITIONS TO EXERCISE. Exercise of the Option as hereinabove
provided shall be subject to the following express conditions:
1
a. The Optionee may only exercise the Option to the extent it has vested
in him.
b. From and after the date on which Optionee ceases to perform services
for Xxxxxxxxx pursuant to the terms of the Fee Agreement for any reason other
than the expiration of its two year term, Optionee may exercise the Option, to
the extent it has vested in him, for a period of twenty-four months.
c. This Option shall not be exercisable if, or at any time when, such
exercise would cause a violation of any applicable law or regulation.
d. This Option shall expire on March 31, 2000, at 5:00 p.m. mountain
time, with respect to any portion of the Option which has not been exercised
prior to that date and time.
6. OPTION NON-TRANSFERABLE. This Option may not be transferred by the
Optionee otherwise than by Will or by the laws of the descent and distribution
and may be exercised during the lifetime of the Optionee only by him or a
pension plan maintained for his benefit.
7. CONTINUATION OF ENGAGEMENT. This Agreement shall not be construed as
giving Xxxxxx Law Corporation any right to continue to perform services pursuant
to the terms of the Fee Agreement or to affect or limit in any way Xxxxxxxxx'x
right to terminate its engagement under the Fee Agreement at any time, with or
without cause.
8. ADJUSTMENT OF OPTION PRICE AND NUMBER OF OPTIONED SHARES. In the
event of any reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation or other similar change in the
corporate structure or capitalization of Xxxxxxxxx or respecting its common
stock, the number of Optioned Shares and the Option and the Option Price per
share shall be appropriately adjusted; but no such adjustment in the Option
Price shall be made which would reduce the Option Price per share to less than
the par value thereof.
9. INVESTMENT UNDERTAKING. The parties acknowledge that the Optioned
Shares are unregistered. Unless the shares issued upon exercise of all or any
part of this Option have been registered for sale under the Securities Act of
1933 (the "Act") and applicable state securities law, which Xxxxxxxxx may, but
need not, do as it determines in the exercise of its sole discretion, Xxxxxxxxx
will require the Optionee to represent that he is taking the Optioned Shares for
investment purposes only with no view to the distribution thereof and Xxxxxxxxx
will place a legend on each certificate representing such shares restricting the
transfer thereof. Optionee agrees that Xxxxxxxxx may place with its transfer
agent a stop transfer order with respect to the certificates representing such
shares to effect compliance with the Act and with other applicable laws and
regulations. If, however, the Optioned Shares have been registered by
Xxxxxxxxx, then Xxxxxxxxx shall issue registered shares to Optionee upon
Optionee's exercise of the Option in the manner provided by this Agreement.
10. RESTRICTIONS ON TRANSFERABILITY. Optionee acknowledges that he has
been advised that he must hold the shares acquired upon the exercise of the
Option granted hereunder for such period as is required by the Act unless they
are subsequently registered under the Act or an exemption from such registration
is available. Optionee has been advised that any routine sales of securities
made in reliance upon Rule 144 of the General Rules and Regulations under the
Act can be made only after the requisite holding period in limited amounts in
accordance with the terms and conditions of that Rule and that, in the case of
securities to which that Rule is not applicable, compliance with some other
disclosure exemption will be required. Optionee understands that Xxxxxxxxx is
under no obligation to register any such shares for resale by Optionee or to
comply with any exemption form the registration provisions of the Act. Optionee
hereby agrees to indemnify Xxxxxxxxx against all liability, costs or expenses
arising as a result of a sale of or a distribution by Optionee of any of such
shares in violation of the Act.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the day and year first above written.
XXXXXXXXX LABORATORIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Xxxxxx X. Xxxxxx, Chief Executive Officer
/s/ Xxxx X. Xxxxxx
----------------------------------
Xxxx X. Xxxxxx
2
