EXHIBIT 10.3
NONSTATUTORY STOCK OPTION
____________________________, Optionee:
Xxxxxx-Xxxx, Inc. (the "Company") has this day granted to you, the optionee
named above, an option to purchase shares of the common stock of the Company
("Common Stock"). This option is not intended to qualify as and will not be
treated as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the Company's
compensatory benefit plan for participation of the Company's employees
(including officers, directors and consultants) and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. Number of Option Shares and Vesting. The total number of shares of Common
Stock subject to this option is ______________. Subject to the limitations
contained herein, this option shall vest with respect to each installment shown
below on or after the date of vesting applicable to such installment, as
follows:
DATE OF EARLIEST EXERCISE NUMBER OF SHARES
(VESTING) (INSTALLMENT)
___________ (Commencement Date) ______________
The ___ day of each of the 36 months _____________ shares
following Commencement Date
2. (a) Exercise Price. The exercise price of this option is $__________
per share.
(b) Method of Payment. Payment of the exercise price per share is due
in full upon exercise of all or any part of each installment which has accrued
to you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash
(or check) by the Company or the receipt of irrevocable
instructions to pay the aggregate exercise price to the Company
from the sales proceeds;
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(iii) Provided that at the time of exercise the Company's
Common Stock is publicly traded and quoted regularly in the
Wall Street Journal, payment by delivery of already-owned
shared of Common Stock, held for the period required to avoid
a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security
interests, which Common Stock shall be valued at its fair
market value on the date of exercise;
(iv) Provided that the option exercise price for the
installment, or portion thereof, being purchased is at least
one thousand dollars ($1,000), payment pursuant to the
deferred payment alternative as described in paragraph 2(c)
hereof; or
(v) Payment by a combination of the methods of payment
permitted by subparagraph 2(b)(i) through 2(b)(iv) above.
(c) Conditions Deferred Payment. In the event that you elect to
make payment of the exercise price pursuant to the deferred payment alternative:
(i) Not less than twenty-five percent (25%) of the aggregate
exercise price shall be due at the time of exercise, not less
than twenty-five percent (25%) of said exercise price, plus
accrued interest, shall be due each year after the date of
exercise, and final payment of the remainder of the exercise
price, plus accrued interest, shall be due three (3) years
from the date of exercise or, at the Company's election, upon
termination of your employment with the Company or an
affiliate;
(ii) Interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the
Code, of any portion of any amounts other than amounts stated
to be interest under the deferred payment arrangement; and
(iii) In order to elect the deferred payment alternative, you
must, as a part of your written notice of exercise, give
notice of the election of this payment alternative and, in
order to secure the payment of the deferred exercise price to
the Company hereunder, if the Company so requests, you must
tender to the Company a promissory note and a security
agreement covering the purchased shares, both in form and
substance satisfactory to the Company, or such other or
additional documentation as the Company may request.
3. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Act or, if such
shares are not then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the Act.
4. Exercise Prior to Vesting. (a) Subject to the provisions of this option
you may elect at any time during your employment with the Company or an
affiliate thereof, to exercise the option as to any part or all of the shares
subject to this option at any time during the term hereof, including without
limitation, a time prior to the date of earliest exercise ("vesting") stated in
paragraph 1 hereof; provided, however, that:
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(i) a partial exercise of this option shall be deemed to cover
first vested shares and then the earliest vesting installment of
uninvested shares;
(ii) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the
purchase option in favor of the Company as described in the Early
Exercise Stock Purchase Agreement attached hereto; and
(iii) you shall enter into an Early Exercise Stock Purchase
Agreement in the form attached hereto with a vesting schedule
that will result in the same vesting as if no early exercise had
occurred.
(b) The election provided in this paragraph 4 to purchase shares upon
the exercise of this option prior to the vesting dates shall cease upon
you "Termination Date" and may not be exercised after the date thereof.
Your Termination Date shall be the earlier of (i) the termination of
your services as a director of the Company, or (ii) the termination of
your service as chairman of the Scientific Advisory Board of the
Company.
5. Minimum Exercise. The minimum number of shares with respect to which
this option may be exercised at any one time is one hundred (100), except (a) as
to an installment subject to exercise, as set forth in paragraph 1, which
amounts to fewer than one hundred (100) shares, in which case, as to the
exercise of that installment, the number of shares in such installment shall be
the minimum number of shares, and (b) with respect to the final exercise of this
option this minimum shall not apply. In no event may this option be exercised
for any number of shares which would require the issuance of anything other than
whole shares.
6. Term. The term of this option commences on _____, 199_ (the date of
grant) and, unless sooner terminated as set forth below, terminated on _______
(the "Expiration Date" which date shall be no more than ten (10) years from the
date this option is granted). In no event may this option be exercised on or
after the date on which it terminates. This option shall terminate prior to the
expiration of its term as follows: three (3) months after your Termination Date
for any reason or for no reason unless:
(a) such termination of service is due to your permanent and total
disability (within the meaning of Section 422(c)(6) of the Code), in
which event the option shall terminate on the earlier of the Expiration
Date set forth above or twelve (12) months following such termination
of service; or
(b) such termination of service is due to your death, in which event
the option shall terminate on the earlier of the Expiration Date set
forth above or eighteen (18) months after your death; or
(c) during any part of such three (3) month period the option is not
exercisable solely because of the conditioned set forth in paragraph 3
above, in which event the option shall not terminate until the earlier
of the Expiration Date set forth above or until it shall have been
exercisable for an aggregate period of three (3) months after the
termination of service; or
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(d) exercise of the option within three (3) months after your
Termination Date would result in liability under section 16(b) of the
Securities Exchange Act of 1934, in which case the option will
terminate on the earlier of (i) the Expiration Date set forth above,
(ii) the tenth (10th) day after the last date upon which exercise would
result in such liability or (iii) six (6) months and ten (10) days
after your Termination Date with the Company or an affiliate.
However, this option may be exercised following your Termination Date
only as to that number of shares as to which it was exercisable on the
date of termination of service under the provisions of paragraph 1 of
this option.
7. Exercise. (a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then reasonably
require.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of
this option, the Company may require you to enter an
arrangement providing for the cash payment by you to the
Company of any tax withholding obligation of the Company
arising by reason of: (1) the exercise of this option; (2) the
lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise; and
(ii) the Company (or representative of the underwriters) may,
in connection with the first underwritten registration of the
offering of any securities of the Company under the Act,
require that you not sell or otherwise transfer or dispose of
any shares of Common Stock or other securities of the Company
during such period (not to exceed one hundred eighty (180)
days) following the effective date (the Effective Date") of
the registration statement of the Company filed under the Act
as may be requested by the Company or the representative of
the underwriters. You further agree that the Company may
impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such
period.
8. Covenant of Company. During the term of this option, the Company shall
keep available at all times the number of shares of stock required to satisfy
the exercise of such option.
9. Adjustment Upon Changes in Stock. (a) If any change is made in the
stock subject to this option (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), this option will be appropriately adjusted in the
types(s) and number of securities and price per share of stock subject to the
option. Such adjustments shall be made by the Board of Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company
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shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (i) a merger or consolidation in which the Company
is not the surviving corporation; or (ii) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted
by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (iii) a sale of all or substantially
all of the assets of the Company, then, to the extent permitted by
applicable law: (1) any surviving corporation shall assume this option
or shall substitute a similar option (including an option to acquire
the same consideration paid to stockholders in the transaction
described in this subparagraph 9(b), if this option is still
outstanding, or (2) in the event any surviving corporation refuses to
assume or continue this option, or to substitute a similar option for
this option (if still outstanding), then this option shall become fully
vested and exercisable for a period of 30 days, following which it
shall be terminated if not exercised during such 30 day period.
Following any assumption or substitution of this option under this
subparagraph 9(b), if your service to the Company or its successor is
terminated other than upon your voluntary resignation, this option
shall become fully vested and exercisable and shall remain exercisable
until otherwise terminated in accordance with the provisions of this
option. In the event of a dissolution or liquidation of the Company,
this option (if still outstanding) shall terminate if not exercised
prior to such event.
10. Transferability. This option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. By delivering written notice to the Company, in a form satisfactory to
the Company, you may designate a third party who, in the event of your death,
shall thereafter be entitled to exercise this option.
11. Option Not a Service Contract. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In the event
that this option is granted to you in connection with the performance of
services as a consultant or director, or in the event that this option is
granted to you in connection with the performance of services as an employee and
you subsequently perform services as a consultant or director, references to
employment, employee and similar terms shall be deemed to include the
performance of services as a consultant or a director, as the case may be,
provided, however, that no rights as an employee shall arise by reason of the
use of such terms.
12. Notices. Any notices provided for in this option shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
13. Amendment. This option may be amended by the Board of Directors (the
"Board") of the Company at any time; provided, however, that any change that
would adversely affect your rights in this option must first be approved by you
in writing before becoming effective.
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14. Administration. This option is subject to all interpretations, amendments,
rules and regulations which may form time to time be promulgated and adopted by
the Company. This authority shall be exercised by the Board, or by a committee
of one or more members of the Board in the event that the Board delegated its
authority to a committee. The Board, in exercise of this authority, may correct
any defect, omission or inconsistency in this option in a manner and to the
extent the Board shall deem necessary or desirable to make this option fully
effective. References to the Board shall mean the committee if a committee has
been appointed by the Board. Any interpretations, amendments, rules and
regulations promulgated by the Board shall be final and binding upon the Company
and its successors in interest as well as you and your heirs, assigns, and other
successors in interest.
15. Rights as Stockholder. Neither you nor any person to whom this option is
transferred under paragraph 10 of this option shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to this option unless and until such person has satisfied all requirements for
exercise of this option pursuant to its terms.
Dated the ________ day of ________, 199_ .
Very truly your,
Xxxxxx-Xxxx Pharmaceuticals, Inc.
By:_________________________________________
Duly authorized on behalf of
the Board of Directors
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The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with
respect to this option are set forth in the option; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the
Company and its affiliates regarding the acquisition of stock in the
Company and supersedes all prior oral and written agreements on that
subject with the exception of (i) the options previously granted and
delivered to the undersigned under stock option plans of the Company,
and (ii) the following agreements only:
NONE _________________
(Initial)
OTHER _________________________
_________________________
_________________________
________________________________
Address: ____________________
____________________
____________________
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Annex 1
Schedule of Officers and Directors Options
Name Quantity Exercise Price Grant Date
---- -------- -------------- ----------
Xxxx Xxxxxx 25,000 $2.25 April 1, 1996
Xxxxxx Xxxxxxx 125,000 2.25 April 1, 1996
Xxxxxxx XxXxxxxxx 25,000 2.25 April 1, 1996
Xxxxxxx Xxxxxx 200,000 2.25 April 1, 1996
Xxxxxx Xxxxxxxx 10,000 2.25 April 1, 1996
Xxxxxxx Xxxxxxxxxxx 50,000 2.25 April 1, 1996
Xxxxxx Xxxxx 40,000 2.25 April 1, 1996
Xxxxxx Xxxxx 25,000 2.25 April 1, 1996
