EXHIBIT 99.3
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT MADE as of this ______ day of ____________,
19__ between TORVEC, INC., a New York business corporation (herein referred to
as the "Company"), and ______________________________ (herein referred to as the
"Optionee");
WITNESSETH:
1. The Company hereby grants to the Optionee an Option (hereinafter
referred to as "Option") to purchase an aggregate of ____________ shares of the
$.01 par value Common Stock of the Company (herein referred to as the "Shares")
at a price of $___________ per Share to be paid by the Optionee with cash, a
certified check or a bank cashier's check made payable to the order of the
Company. Alternatively, provided the Board of Directors shall approve the
specific transfer, the Optionee may pay for the Shares, either in whole or in
part, by the delivery of Common Stock of the Company already owned by him which
will be accepted as payment for the Shares, based upon such Common Stock's fair
market value on the date of exercise. In addition, provided the Board of
Directors shall approve the specific transfer, payment for the Shares, either in
whole or in part, may be made by delivery of Common Stock acquired by the
Optionee under any of the Company's stock option plans, provided, however, that
if this Option is exercised in part, Shares acquired by such partial exercise
may not be used as payment for additional Shares to be acquired under this
Agreement. In order for the Optionee to so use shares of Common Stock
previously acquired under any of the Company's stock option plans as payment for
the Shares either in whole or in part, the transfer of such previously acquired
Common Stock as payment for all or a portion of the exercise price under this
Agreement must occur more than two years from the date of the grant and one year
from the date of exercise of the prior option pursuant to which the Optionee
acquired such Common Stock.
2. The term during which the Option shall be exercisable shall commence
on _______________ and expire on the close of business _______________, subject
to earlier termination as provided in the Torvec, Inc. 1998 Stock Option Plan
(herein referred to as the "Plan"). The Option to purchase the number of Shares
granted under this Agreement may not be exercised by the Optionee for a period
of one year immediately following the date of grant (that is, until
_______________) and then may be exercised each year during the Option term
after such initial one year period only to the extent of the greater of 2,500
Shares or 25% of the number of Shares subject to this Option, provided, however,
that to the extent the Optionee shall fail to exercise or, due to the above
limitation, be prohibited from exercising his Option in any
year during the Option period, such annual right to exercise this Option shall
not expire, but shall be cumulative, and carry over into and be exercisable in
any subsequent year during which the Option is outstanding.
However, this Option may be exercised only if the Optionee is and has
been continuously an employee of the Company or its subsidiaries for a period
beginning on the date of grant and ending on the day three months before the
date of exercise. If the Optionee terminates employment due to permanent and
total disability, the three month period referred to in the preceding sentence
shall be one year.
3. The Option is not transferable by the Optionee other than by Will or
the laws of descent and distribution and is exercisable, during his lifetime,
only by the Optionee. In the event that the right to exercise the Option passes
to the Optionee's estate, or to a person to whom such right devolves by reason
of the Optionee's death, then the Option shall be non transferable in the hands
of the Optionee's Executor or Administrator or of such person, except that the
Option may be distributed by the Optionee's Executor or Administrator to the
distributees of the Optionee's estate as a part thereof.
4. In order for the Option to be exercised, in whole or in part, the
notice by the Optionee to the Company in the form attached hereto must be
accompanied by payment in full of the option price for the Shares being
purchased. In addition, the Optionee agrees to tender to the Company an
additional amount, in cash, certified check, cashier's check or bank draft,
equal to the amount of any taxes required to be collected or withheld by the
company in connection with the exercise of his Option.
5. The Company agrees that it will use its best efforts to register the
sale of the Shares to be issued upon the exercise of the Option with the
Securities and Exchange Commission under the Securities Act of 1933. Upon the
effectiveness of the Registration Statement covering the Shares, the Optionee
shall be able to sell the Shares in "open market transactions" free of Federal
Securities Law restrictions, provided that at the time of sale, or within the
three month period immediately prior to such sale, he is not nor has he been an
"affiliate" of the Company. The Optionee further understands that, in
accordance with applicable Commission rules governing controlling persons of
public companies, members of the board of directors of a public company, such as
the Company, are deemed to be "affiliates" during their term of office. The
Optionee, therefore, agrees that he will consult with the Company's counsel as
to any Securities Law restrictions, including a limitation on the number of
Shares which may be sold at any one time, on his ability to sell the Shares
prior to any sale thereof.
6. The Company agrees to provide the Optionee with a copy of the
Prospectus prepared by the Company in connection with the Registration Statement
filed to register the Shares, together with its exhibits, and the Company hereby
acknowledges its obligation to provide the Optionee with all proxy and other
shareholder communications, including the annual report to security holders, for
the most recently completed fiscal year of the Company and all updates thereof.
The Optionee agrees that prior to exercise, either in whole or in part of the
Option granted to him hereunder, he shall have read such materials, including
the most recent annual and quarterly reports to shareholders, and shall have
received, if requested, and read all the documents incorporated by reference in
the Prospectus and Registration Statement filed with the Securities and Exchange
Commission.
7. The Optionee understands that except as provided in Paragraph 5 above,
the Company has not agreed to register either the issuance or the resale of the
Shares in accordance with the provisions of the Securities Act of 1933 or to
register either the issuance or the resale of the Shares under any applicable
State Securities Laws. Hence, the Optionee agrees that by virtue of the
provision of certain rules respecting "restricted securities" promulgated under
such Federal and/or State Laws, unless the resale of the Shares is registered as
provided in Paragraph 5 above, and until the registration of such Shares in
accordance with Paragraph 5 above shall have been declared effective by order of
the Commission, the Shares which the Optionee shall purchase upon the exercise
of this Option must be held indefinitely and may not be sold, transferred,
pledged, hypothecated, or otherwise encumbered for value, unless and until a
secondary distribution and/or resale of such Shares is subsequently registered
under such Federal and/or State Securities Laws, or unless an exemption from
registration is available, in which case the Optionee still may be limited as to
the amount of the Shares that may be sold, transferred, pledged and/or
encumbered for value. The Optionee therefore agrees that, until the
registration of such Shares shall have been declared effective by order of the
Commission, the Company may affix upon any certificate representing the Shares,
a legend that such Shares may not be transferred in violation of Section 5 of
the Securities Act of 1933.
8. The Optionee understands and agrees that the Shares to be acquired
upon the exercise of the Option may not be sold, transferred, exchanged,
hypothecated, encumbered, pledged or otherwise disposed of for value for a
period of six (6) months from the date of the grant of this Option.
9. The Optionee understands that the Company has established certain
policies and procedures governing trading in the Company's securities, including
the Shares to be acquired upon the exercise of this Option, while in possession
of material, inside information regarding the Company and/or any of its
subsidiaries, receipt of which is hereby acknowledged. The Optionee agrees that
upon exercise of this Option, either in whole or in part, he will comply with
all of the terms and conditions of such policy, including the procedures and
guidelines established for its implementation. In particular, the Optionee
agrees that where required under such guidelines and procedures, he will obtain
permission of the Company's Clearinghouse Committee composed of senior
management prior to effectuating any sale or other transfer for value of the
Shares to be acquired by virtue of the exercise of this Option.
10. All the terms and provisions of the Plan, duly adopted at a meeting of
the Company's Board of Directors on _______________ and approved by a majority
vote of the Company's shareholders either in person or by proxy at a duly called
meeting of such shareholders held on _______________ and as amended to date, are
hereby expressly incorporated into this Stock Option Agreement and made a part
hereof as if printed herein and the Optionee, by the Optionee's signature
hereon, acknowledges receipt of a certified copy of said Plan. If there shall
be any conflict between this Agreement and the Plan, the provisions of the
Plan shall control.
11. In accordance with certain terms and conditions of the Plan, the
aggregate number and kind of shares that may be purchased pursuant to the grant
of the Option under this Agreement shall be proportionately adjusted for any
increase, decrease or change in the total number of the outstanding shares of
the Company resulting from a stock dividend, stock-split or other corporate
reorganization which would result in or have the effect of the Optionee being
treated differently (but for the adjustment) than he would be treated had
he been the beneficial owner of the Shares subject to the Option on the
record date for such dividend, split or reorganization, as the case may be.
12. The Optionee understands that the Option granted hereunder
constitutes a "nonqualified stock option" for federal, and if applicable, state
income tax purposes. Consequently, the Optionee understands that under current
provisions of federal tax law, for regular as well as for purposes to the
federal alternative minimum income tax, no gain or loss generally is
recognized to the Optionee upon the grant of the Option. In addition, the
Company will receive no business expense deduction as a result of the grant
of the Option.
For federal income tax purposes, upon the exercise of the Option, the
difference between the exercise price and the fair market value of the Shares on
the date of exercise constitutes ordinary income to the Optionee and is taxed to
the Optionee at normal, ordinary tax rates, except to the extent the Shares are
not transferable and are subject to a substantial risk of forfeiture. To the
extent such difference is required to be included as income by the Optionee, the
Company is entitled to a business expense deduction. Upon the later sale of the
Shares, long or short term capital gain or loss will be recognized by the
Optionee, depending upon the holding period (eighteen months for long term
capital gain or loss) and the extent to which the selling price exceeds
or is less than the Optionee's basis in the stock. The amount of gain will
be taxed at normal, ordinary tax rates, with a maximum rate of 20% if the
Shares are held for a period of at least eighteen months. If the Shares are
held for a period of at least twelve months, the maximum rate on any gain from
their sale will be taxed at 28%.
The Optionee also understands that the provisions of federal tax law
described herein are subject to change and, consequently, the Optionee agrees to
consult with his or her own tax advisor with respect to the tax treatment to be
accorded the grant of the Option herein, the exercise of such Option, and the
disposition of the Shares.
13. Consistent with the provisions of the Plan, this Agreement shall be
binding upon and inure to the benefit of any successor or assignee of the
Company and to any executor, administrator, legal representative, legatee,
or distributee entitled by law to the Optionee's right hereunder.
14. Except insofar as an interpretation of federal securities law
otherwise is required, or is controlling, this Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer and the Optionee has hereunto set his
hand, as of the day and year first above written.
TORVEC, INC.
By: ____________________________
____________________________
, Optionee
NOTICE OF EXERCISE OF STOCK OPTION
AND
RECORD OF STOCK TRANSFER
Torvec, Inc.
0000 Xxxxx 000
Xxxxxxxxxx, Xxx Xxxx 00000
Gentlemen:
I hereby exercise my Stock Option granted to me by Torvec, Inc. under a
Stock Option Agreement dated _______________, subject to all the terms and
provisions thereof and of the Torvec, Inc. 1998 Stock Option Plan referred to
therein and notify you of my desire to purchase Shares of the
$.01 par value Common Stock of the Company which were offered to me pursuant
to the Stock Option Agreement. Enclosed is my payment in the sum of
in full payment of such Shares.
I understand that a Registration Statement covering the Shares to be
issued to me pursuant to this exercise of the Option granted to me was filed
with the Securities and Exchange Commission on _______________. The
Registration Statement became effective on _______________. Consequently, I
understand that unless I am an "affiliate" of the Company, the Shares I am
acquiring are freely tradeable and may be sold by me in "open market"
transactions. If I am an "affiliate" of the Company, however, or have been
one during the three month period prior to sale, I recognize that I may not
sell freely on the open market and therefore agree that I will consult the
Company's counsel as to the securities law restrictions on my ability to sell
the Shares.
I also understand that under the Plan, and in accordance with the terms
of the Stock Option Agreement, I may not sell, assign, alienate, pledge,
encumber or otherwise transfer for value the Shares unless a period of six
(6) months has elapsed from the date of the grant of the Option to me.
I acknowledge that I am aware that the Company has established a policy
with respect to trading in its securities while in possession of material
inside information regarding the Company and/or its subsidiaries, and that,
in accordance with certain guidelines and procedures designed to implement
such policy, I may be required to obtain permission from a Clearinghouse
Committee, composed of Senior Management, prior to any sale or other transfer
for value of the Shares hereby acquired.
I also acknowledge that I have received and have read the Prospectus
dated _______________ prepared by the Company in connection with the grant of
the Option contained herein, together with its exhibits, and all proxy and
other shareholder communications, including the annual report to security
holders, for the most recently completed fiscal year and all quarterly and
current updates thereof. I acknowledge that I have received all documents
incorporated by reference in the Prospectus and the Registration Statement
filed with the Securities and Exchange Commission that I requested and have
read the same. I acknowledge that I have had the opportunity to ask
questions of and receive answers from the Company's management concerning the
information set forth in such Prospectus, reports and updates and have been
satisfied with the answers provided regarding the same.
Finally, I acknowledge that there are significant federal income tax
consequences resulting from my exercise of this Option, that I have consulted
with and received advice from qualified tax counsel both as to the nature of
such tax consequences and their impact upon my own personal income tax
situation as the result of such exercise, and that I fully understand such
impact and have planned accordingly.
DATED: _______________ ______________________________
Receipt is hereby acknowledged of the delivery to me by Torvec, Inc. on
____________, 19__ of stock certificates for __________ shares of $.01 par
value common stock purchased by me pursuant to the terms and conditions of
the Torvec, Inc. 1998 Stock Option Plan referred to above.
DATED: ________________ ______________________________
