COMPENSATION AGREEMENT
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Agreement dated as of the 25th day of June, 2001 by and between Xxxx X.
Xxxxxxxxxx ("Optionee") and Endocare, Inc., a Delaware corporation (the
"Corporation").
W I T N E S S E T H
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WHEREAS, Optionee is to provide services to the Corporation, and the
Corporation wishes to provide an equity incentive to Optionee to provide such
services.
NOW, THEREFORE, in consideration of the above promises, the parties hereto agree
as follows:
On June 25, 2001, Optionee was granted an option to acquire 300,000 shares of
the Corporation's Common Stock (the "Option") under the terms and conditions set
forth in the Stock Option Agreement, attached hereto as Exhibit A.
Corporation and Optionee acknowledge and agree that the Option is granted as
compensation for services and not for any capital-raising purposes or in
connection with any capital-raising activities.
This agreement is intended to constitute a written employee benefit plan within
the meaning of Rule 405 of the Securities Act of 1933, as amended.
Nothing herein or in the Stock Option Agreement shall confer upon Optionee any
right to continue in the Corporation's employ or service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Corporation or Optionee, which rights are hereby expressly reserved by
each party, to terminate Optionee's service at any time for any reason, with or
without cause.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date first above written.
ENDOCARE, INC.
OPTIONEE:
By:
Title:
ENDOCARE, INC.
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the capitalized terms used herein shall
have the defined meanings in the attached Appendix.
I. NOTICE OF STOCK OPTION XXXXX
Xxxx X. Xxxxxxxxxx
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of this Option Agreement and Compensation
Agreement attached hereto as Exhibit A, as follows:
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Grant Number
Date of Grant June 25, 2001
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Vesting Commencement Date June 25, 2001
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Exercise Price Per Share $13.75
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Total Number of Shares Granted 300,000
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Total Exercise Price $4,125,000
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Incentive Stock Option
Type of Option X Nonstatutory Stock Option
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Term/Expiration Date June 25, 2011
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Nonstatutory Stock Option. This Option is a nonstatutory stock option and is
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not intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code.
Vesting Schedule:
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This Option may be exercised, in whole or in part, in accordance with the
following schedule:
62,500 of the Shares subject to the Option shall vest upon Optionee's completion
of twelve (12) months of Service measured from the Vesting Commencement Date and
an additional one thirty-sixth (1/36) of 187,500 of the Shares subject to the
Option shall vest upon Optionee's completion of each additional month of Service
over the thirty-six (36) month period measured from the first anniversary of the
Vesting Commencement Date.
The remaining 50,000 of the Shares subject to the Option shall vest upon the
earlier of (i) June 25, 2006 or (ii) attainment of the performance based
objective to be mutually agreed upon between Optionee and the Company within
ninety (90) days of the Vesting Commencement Date and to be set forth on Exhibit
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B to this Option Agreement.
For purposes of this Option Agreement, "Service" shall mean the Optionee's
performance of services for the Company (or any Parent or Subsidiary) in the
capacity of an Employee, Director or Consultant.
Termination Period:
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To the extent vested, this Option may be exercised for ninety (90) days
after termination of the Optionee's Service for any reason other than death or
Disability. However, if the Optionee's Service terminates due to the death or
Disability of the Optionee, this Option may be exercised for the time periods
specified below. In no event shall this Option be exercised later than the
Term/Expiration Date specified above.
In the event that Optionee's Service as an Employee, Consultant or Director
terminates as a result of the Optionee's Disability, the Optionee may exercise
his Option at any time within twelve (12) months from the date of such
termination, but only to the extent that Optionee was entitled to exercise it at
the date of such termination (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant). If, at the date of
termination, the Optionee is not entitled to exercise the Option for all the
Shares, then the Option shall immediately terminate with respect to the Shares
covered by the unexercisable portion of such Option. If, after the date of
Optionee's termination, the Optionee does not, within the time specified in the
Option, exercise his or her Option for all the Shares for which that Option is
exercisable on such termination date, then the Option shall terminate with
respect to those remaining Shares.
In the event that Optionee's Service as an Employee, Consultant or Director
terminates as a result of the Optionee's death, 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 of the term of such Option as set forth in the Notice
of Grant), by the Optionee's estate nor by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Optionee was entitled to exercise the Option at the date of death. If, at the
time of death, the Optionee was not entitled to exercise the Option for all the
Shares, then the Option shall immediately terminate with respect to the Shares
covered by the unexercisable portion of such Option. If, after Optionee's death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not, within the time specified in the Option,
exercise the Option for all the Shares for which that Option is exercisable on
the date of Optionee' death, then the Option shall terminate with respect to
those remaining Shares.
AGREEMENT
Grant of Option. The Company hereby grants to the Optionee named in the
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Notice of Grant attached as Part I of this Option Agreement (the "Optionee") an
option (the "Option") to purchase the number of Shares, as set forth in the
Notice of Grant, at the exercise price per share set forth in the Notice of
Grant (the "Exercise Price").
Exercise of Option.
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Right to Exercise. This Option is exercisable during its term in
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accordance with the Vesting Schedule set out in the Notice of Grant and the
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other applicable provisions of this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's Service, the
exercisability of the Option is governed by the applicable provisions of this
Option Agreement.
Method of Exercise. This Option is exercisable by delivery of an exercise
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notice, in the form attached as Exhibit C (the "Exercise Notice"), which shall
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state the election to exercise the Option, the number of Shares in respect of
which the Option is being exercised (the "Exercised Shares"), and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price. The Option may not be exercised for a fraction of a Share.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange or quotation service upon which the Shares
are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
Rights as a Stockholder. Until the stock certificate evidencing such Shares
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is issued (as evidenced by the appropriate entry on the books of the
Company or of a 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 Exercised Shares, notwithstanding the exercise of the Option. The
Company 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.
Method of Payment. Payment of the aggregate Exercise Price shall be by any
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of the following, or a combination thereof, at the election of the Optionee:
cash; or
check; or
delivery of a properly executed exercise notice together with such other
documentation as the Company and the broker, 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; or
surrender of other Shares which (i) have been owned by the Optionee for
more than six (6) months on the date of surrender and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.
Limited Transferability of Option. This Option shall be neither
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transferable nor assignable by Optionee other than by will or by the laws of
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descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, this Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during Optionee's lifetime to one or more Family Members of the Optionee or to a
trust established for the exclusive benefit of one or more such Family Members.
The assigned portion shall be exercisable only by the person or persons who
acquire a proprietary interest in the Option pursuant to such assignment. The
terms applicable to the assigned portion shall be the same as those in effect
for this Option immediately prior to such assignment.
For purposes of this Section 5, a "Family Member" shall be limited to the
Optionee's children, stepchildren, grandchildren, parents, stepparents,
grandparents, spouse, former spouse, siblings, nieces, nephews, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, a trust in which any of the foregoing
individuals have more than a fifty percent (50%) beneficial interest, a
foundation in which any of the foregoing individuals (or the Optionee) control
the management of assets, and any other entity in which any of the foregoing
individuals (or Optionee) own more than fifty percent (50%) of the voting
interests.
Term of Option. This Option may be exercised only within the term set out
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in the Notice of Grant, and may be exercised during such term only in accordance
with the terms of this Option Agreement.
Tax Consequences. Some of the federal and Delaware tax consequences
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relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
Exercising the Option. The Optionee may incur regular federal tax
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liability upon 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 Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
Employee or a former Employee, the Company will be required to withhold from his
or her compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise.
Disposition of Shares. If the Optionee holds the Shares for at least one
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year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
1. Adjustment in Option Shares. Should any change be made to the Common
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Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this Option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
Extraordinary Events.
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The Option shall terminate upon the occurrence of any of the following
events ("Extraordinary Events"):
The dissolution, liquidation, or sale of all (or substantially all) of the
assets of the Company;
(i) Any reorganization, merger, or consolidation in which the Company does
not survive;
(ii) The acquisition by any person or group (as defined in Section 13D of
the Exchange Act) of beneficial ownership of more than fifty percent (50%) of
the Company Stock; or
(iii) Any reorganization, merger, or consolidation in which the Company does
survive but the Shares outstanding immediately preceding the transaction are
converted by virtue of the transaction into other property, whether in the form
of securities, cash, or otherwise. However, in no case will an Extraordinary
Event be deemed to have occurred as a result of a sale of stock to the Company
or to a holding company established by the Company.
If an Extraordinary Event occurs, the Option shall become fully exercisable
and Optionee shall have the right to exercise any unexpired portion of the
Option prior to the Extraordinary Event, however, the effectiveness of any such
exercise shall be:
(iv) Conditioned upon:
(A) The Extraordinary Event actually occurring; and
(B) The Company's receipt of the notice of exercise within the time period
established by the Company; and
(v) Delayed until immediately prior to the Extraordinary Event.
Entire Agreement; Governing Law. This Option Agreement and the
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Compensation Agreement attached hereto as Exhibit A constitute the entire
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agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee. This agreement is governed by Delaware law except for
that body of law pertaining to conflict of laws.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the this Option Agreement. Optionee has reviewed this
Option Agreement in its entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all
provisions of the Option Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Company
upon any questions relating to the Option Agreement. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
OPTIONEE:
ENDOCARE, INC,
Signature By:
Title: _________________________________
Date: ________________, 2001
Address:
Date:, 2001
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of this Option Agreement. In consideration of the Company's
granting his or her spouse the right to purchase Shares as set forth in this
Option Agreement, the undersigned hereby agrees to be irrevocably bound by the
terms and conditions of this Option Agreement and further agrees that any
community property interest shall be similarly bound. The undersigned hereby
appoints the undersigned's spouse as attorney-in-fact for the undersigned with
respect to any amendment or exercise of rights under this Option Agreement.
Spouse of Optionee
Date: __________________, 2001
EXHIBIT A
COMPENSATION AGREEMENT
EXHIBIT B
PERFORMANCE OBJECTIVE
EXHIBIT C
EXERCISE NOTICE
APPENDIX
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The following definitions shall be in effect under the Option Agreement:
A. "CODE" means the Internal Revenue Code of 1986, as amended.
B. "COMMON STOCK" means the common stock of the Company.
C. "COMPANY" means Endocare, Inc., a Delaware corporation.
D. "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services in a non-employee capacity
and who is compensated for such services.
E. "DIRECTOR" means a member of the Board.
F. "DISABILITY" means total and permanent disability as defined in Code
Section 22(e)(3).
G. "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Parent or Subsidiary of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
H. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
I. "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:
If the Common Stock is admitted to trading or listed on a national
securities exchange, Fair Market Value shall be the last reported sale price
regular way, or if no such reported sale takes place on that day, the average of
the last reported bid and ask prices regular way, in either case on the
principal national securities exchange on which the Common Stock is admitted to
trading or listed.
If not admitted to trading or listed on any national securities exchange,
Fair Market Value shall be the last sale price on that day of the Common Stock
reported on the Nasdaq National Market or the Nasdaq SmallCap Market ("Nasdaq
Stock Market") or, if no such reported sale takes place on that day, the average
of the closing bid and ask prices on that day.
If not included on the Nasdaq Stock Market, Fair Market Value shall be the
average of the closing bid and ask prices of the Common Stock on that day
reported by the Nasdaq electronic bulletin board, or any comparable system on
that day.
If the Common Stock is not included on the Nasdaq electronic bulletin board or
any comparable system, Fair Market Value shall be the closing bid and ask prices
on that day as furnished by any member of the National Association of Securities
Dealers, Inc. selected from time to time by the Company for that purpose.
J. "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
K. "OPTION AGREEMENT" means this Stock Option Agreement.
L. "PARENT" means a "parent corporation," whether now or hereafter existing,
as defined in Section 424(e) of the Code.
M. "SHARE" means a share of the Common Stock.
N. "SUBSIDIARY" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
