1
Exhibit 4.6
SCHEDULE
Pursuant to Rule 12b-31 of the Securities Exchange Act of 1934, the
following documents, which are substantially identical in all material respects,
except as to the parties thereto, and, in one case, the date of execution, have
been omitted from this Exhibit 4.6:
1. Stock Option Agreement between Connectics Corporation and Xxxxxx
Xxxxx, dated as of March 28, 1996.
2. Stock Option Agreement between Connectics Corporation and Xxxxxxx
Xxxxxxxx, dated as of March 28, 1996.
3. Stock Option Agreement between Connectics Corporation and Xxxxxx
Xxxxx, dated as of March 28, 1996.
4. Stock Option Agreement between Connectics Corporation and X. Xxxx
Xxxx, dated as of January 28, 1997.
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CONNECTIVE THERAPEUTICS, INC.
STOCK OPTION AGREEMENT
1. Grant of Option. Connective Therapeutics, Inc., a Delaware
corporation (the "Company"), hereby grants to the Optionee (the "Optionee")
named in the attached Notice of Stock Option Grant (the "Notice"), an option
(the "Option") to purchase a total number of shares of Common Stock (the
"Shares") set forth in the Notice, at the Exercise Price Per Share set forth in
the Notice subject to the terms, definitions and provisions of this agreement
and to the extent necessary or appropriate or necessary for the interpretation
of this Agreement the Company's 1994 Stock Plan (the "Plan") adopted by the
Company, which is incorporated herein by reference notwithstanding that this
Option is not granted under the Plan. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings as applied to this
Option.
If designated an Incentive Stock Option, this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Internal Revenue Code (the "Code").
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the Vesting Schedule set out in the Notice and with the
provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a share.
(b) In the event of Optionee's death or disability, or other
termination of Optionee's consulting relationship or employment ("Continuous
Status"), the exercisability of the Option is governed by Sections 6, 7 and 8
below, subject to the limitation contained in subsection 2(i)(c).
(c) In no event may this Option be exercised after the date of
expiration of the Term of this Option as set forth in the Notice.
(ii) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of shares of Common Stock in respect of which
the Option is being exercised (the "Shares Exercised"), and such other
representations and agreements as to the Optionee's investment intent with
respect to such Shares Exercised as may be required by the Company pursuant to
the provisions of the Plan. Such written notice shall be signed by the Optionee
and shall be delivered in person or by certified mail to the Secretary or
Assistant Secretary of the Company. The written notice shall be accompanied by
payment in the amount of the Shares Exercised times the Exercise Price Per Share
(the "Exercise Price"). Exercise of this Option shall be deemed to
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be effective (the "Effective Date") upon receipt by the Company of such written
notice accompanied by the Exercise Price.
No stock certificate will be issued pursuant to the exercise of
an Option unless such issuance and such exercise shall be required to comply
with all relevant provisions of law and the requirements of any stock exchange
upon which the Shares may then be listed. Assuming such compliance, for income
tax purposes the Shares Exercised shall be considered issued to the Optionee on
the Effective Date on which the Option is exercised with respect thereto.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
have read the applicable rules of the Commissioner of Corporations attached to
such Investment Representation Statement.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Administrator of the Plan and any broker
assisting in such exercise, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's Continuous Status, Optionee may, to the extent otherwise so entitled
at the date of such
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termination (the "Termination Date"), exercise this Option during the
Termination Period set out in the Notice of Grant. To the extent that Optionee
was not entitled to exercise this Option at the date of such termination, or if
Optionee does not exercise this Option within the time specified herein, the
Option shall terminate.
7. Disability of Optionee.
(a) Notwithstanding the provisions of Section 6 above, in the event
of termination of Optionee's Continuous Status as a result of his or her total
and permanent disability (within the meaning of Section 22(e)(3) of the Code),
Optionee may, but only within twelve (12) months from the date of such
termination (but in no event later than the Expiration Date of the Term of such
Option as set forth in Section 10 below), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the extent
that Optionee was not entitled to exercise the Option at such date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(b) In the event of termination of an Optionee's Continuous Status
as a result of a disability which does not fall within the meaning of total and
permanent disability (as set forth in Section 22(e)(3) of the Code), Optionee
may, but only within six (6) months from the date of such termination (but in no
event later than the Expiration Date of the Term of such Option as set forth in
Section 10 below), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. However, to the extent that such
Optionee fails to exercise an Option which is an Incentive Stock Option ("ISO")
(within the meaning of Section 422 of the Code) within three (3) months of such
date of termination, the Option will not qualify for ISO treatment under the
Code. To the extent that Optionee was not entitled to exercise the Option at
such date of termination, or if Optionee does not exercise such Option to the
extent so entitled within six months (6) from such date of termination, the
Option shall terminate.
8. Death of Optionee. In the event of the death of Optionee, the Option
may be exercised at any time within twelve (12) months following the date of
death (but in no event later than the Expiration Date of the Term of this Option
as set forth in Section 10 below), by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the Term
set out in the Notice, and may be exercised during such term only in accordance
with the Plan and the terms of this Option. The limitations set out in Section 7
of the Plan regarding Options designated as Incentive Stock Options and Options
granted to more than ten percent (10%) stockholders shall apply to this Option.
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11. Taxation Upon Exercise of Option. Optionee understands that, upon
exercising a nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option by one or some combination
of the following methods: (i) by cash payment, or (ii) out of Optionee's current
compensation, or (iii) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares which (a) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (b) have a fair market value on the date of
surrender equal to or less than Optionee's marginal tax rate times the ordinary
income recognized, (iv) by electing to have the Company withhold from the Shares
to be issued upon exercise of the Option that number of Shares having a fair
market value equal to the amount required to be withheld. For this purpose, the
fair market value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3") and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(1) the election must be made on or prior to the applicable Tax
Date;
(2) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(3) all elections shall be subject to the consent or disapproval of
the Administrator;
(4) if the Optionee is an Insider, the election must comply with
the applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
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12. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(ii) Exercise of Nonstatutory Stock Option. If this Option does not
qualify as an ISO, there may be a regular federal income tax liability and a
California income tax liability upon the exercise of the Option. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(iii) Disposition of Shares. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and the
lesser of (1) the fair market value of the Shares on the date of exercise, or
(2) the sale price of the Shares.
(iv) Notice of Disqualifying Disposition of ISO Shares. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee from the early disposition by payment in cash or out
of the current earnings paid to the Optionee or as otherwise provided in Section
11.
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13. Entire Agreement. The Plan and Notice are incorporated herein by
reference. This Agreement, the Plan and the Notice constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof, and is governed by California law except for its or any other
jurisdiction's body of law pertaining to choice of laws.
OPTIONEE REPRESENTS THAT HE OR SHE IS ACQUIRING THIS OPTION FOR HIS OR HER OWN
ACCOUNT FOR INVESTMENT PURPOSES ONLY AND NOT WITH THE VIEW TO OR IN CONNECTION
WITH THE RESALE OR DISTRIBUTION THEREOF. OPTIONEE FURTHER ACKNOWLEDGES THAT ANY
TRANSFER OR SALE OF THIS OPTION OR ANY SECURITY HEREUNDER MUST BE MADE IN
COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
CONNECTIVE THERAPEUTICS, INC.
a Delaware corporation
By: _____________________________________
Xxxxxx X. Xxxxxxx
President & CEO
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE HIS OR HER EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that Optionee
is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option.
_______________________ _________________________ _____________________
Optionee's Signature Optionee's Printed Name Date
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EXHIBIT A
EXERCISE NOTICE
Connective Therapeutics, Inc.
0000 Xxxx Xxxxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: _________________
1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares" or the "Shares Exercised") of
Connective Therapeutics, Inc. (the "Company") under and pursuant to the Notice
of Stock Option Grant and the Stock Option Agreement dated _____________ (the
"Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Company's 1994 Stock Plan, as amended (the
"Plan") and the Option Agreement and agrees to abide by and be bound by their
terms and conditions. Optionee represents that Optionee is purchasing the Shares
Exercised for Optionee's own account for investment and not with a view to, or
for sale in connection with, a distribution of any of such Shares.
3. Compliance with Securities Laws. Optionee understands and
acknowledges that the Shares Exercised have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and, notwithstanding any
other provision of the Option Agreement to the contrary, the exercise of any
rights to purchase any such Shares is expressly conditioned upon compliance with
the 1933 Act, all applicable state securities laws and all applicable
requirements of any stock exchange or over the counter market on which the
Company's Common Stock may be listed or traded at the time of exercise and
transfer. Optionee agrees to cooperate with the Company to ensure compliance
with such laws.
4. Federal Restrictions on Transfer. Optionee understands that the
Shares Exercised have not been registered under the 1933 Act and therefore
cannot be resold and must be held indefinitely unless they are registered under
the 1933 Act or unless an exemption from such registration is available and that
the certificate(s) representing the Shares Exercised may bear a legend to that
effect. Optionee understands that the Company is under no obligation to register
the Shares Exercised and that an exemption may not be available or may not
permit Optionee to transfer such Shares in the amounts or at the times proposed
by Optionee. Specifically, Optionee has been advised that Rule 144 promulgated
under the 1933 Act, which permits certain resales of unregistered securities, is
not presently available with respect to the Shares Exercised and, in any event
requires that the Shares Exercised be paid for and then be held for at least two
years (and in some cases three years) before they may be resold under Rule 144.
5. Rights as Shareholder. Until the stock certificate evidencing such
Shares Exercised is issued (as evidenced by the appropriate entry on the books
of the Company or of a
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duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
optioned Stock, notwithstanding the exercise of the Option. The Company, in
accordance with Section 2(ii) of the Option Agreement, shall issue (or cause to
be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Optionee shall enjoy rights as a stockholder until such time
as Optionee disposes of the Shares Exercised or the Company and/or its
assignee(s) exercises the Right of First Refusal hereunder and delivers payment
for such Shares. Upon such exercise, Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation upon delivery of payment thereafter, after
which transfer or cancellation, Optionee shall have no further rights as a
holder of the Shares.
6. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
THEREWITH.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote
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or pay dividends to any purchaser or other transferee to whom such Shares shall
have been so transferred.
8. Market Standoff Agreement. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters; provided, however, that the Optionee
need not so agree unless a majority of the Company's officers and directors and
a majority of the holders of at least 5% of the Company's outstanding securities
also agree to be similarly bound.
9. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
10. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
11. Governing Law; Severability. This Agreement shall be governed by
and construed in accordance with the laws of the State of California excluding
its or any other jurisdiction's body of law pertaining to choice of law. Should
any provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
12. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
13. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
14. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
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15. Entire Agreement. The Plan, the Notice and the Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Notice and the
Option Agreement constitute the entire agreement of the parties and supersede in
their entirety all prior undertakings and agreements of the Company and Optionee
with respect to the subject matter hereof.
Submitted by: Accepted by:
OPTIONEE: CONNECTIVE THERAPEUTICS, INC.
__________________________________ By: _____________________________________
Signature
Its: ____________________________________
__________________________________
Social Security or Tax ID No.
Address: _________________________ Address: 0000 Xxxx Xxxxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
__________________________________
__________________________________
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : CONNECTIVE THERAPEUTICS, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, I, the Optionee,
represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act").
(b) I understand that the Securities have not been registered under
the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that, in
the view of the Securities and Exchange Commission (the "SEC"), the statutory
basis for such exemption may be unavailable if my representation was predicated
solely upon a present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(c) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In addition,
I understand that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
(d) I am familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof, in a non-public
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offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of issuance of the
Securities, such issuance will be exempt from registration under the Securities
Act. In the event the Company later becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including among other things: (1) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, and the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), if
applicable. Notwithstanding this paragraph (d), I acknowledge and agree to the
restrictions set forth in paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at
the time of issuance of the Securities, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires among other things: (1) the availability of certain public information
about the Company, (2) the resale occurring not less than two years after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than three years, (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 and
Rule 701 are not exclusive, the Staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 or Rule 701 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk.
(f) I understand that the certificate evidencing the Securities may
be imprinted with a legend which prohibits the transfer of the Securities
without the consent of the Commissioner of Corporations of California. I have
read the applicable Commissioner's Rules with respect to such restriction, a
copy of which is attached.
Signature of Optionee:
_____________________________________
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