STOCK OPTION AGREEMENT
EXHIBIT 10.3
THIS STOCK OPTION AGREEMENT (this “Agreement”), is made and effective as of the
10th day of July, 2006 (the “Grant Date”), by and between Catalyst Pharmaceutical
Partners, Inc., a Florida corporation (“Catalyst”), and M. Xxxxxxx Xxxxxxx (the “Optionee”).
WITNESSETH:
NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, Catalyst hereby grants the Optionee options to purchase shares of Common Stock of
Catalyst, upon the following terms and conditions:
| 1. | GRANT OF OPTION |
Subject to the terms and conditions of this Agreement, Catalyst hereby grants to the Optionee
an option (the “Option”) to purchase an aggregate of one hundred thousand (100,000) shares (the
“Option Shares”) of Catalyst’s common stock, with $0.01 par value per share (“Common Stock”). This
Option is a non-qualified stock option which is not intended to meet the requirements of an
“incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”).
| 2. | EXERCISE PRICE |
The exercise price (“Option Price”) of this Option shall be $4.35 per Option Share. The
Option Price of this Option shall be subject to adjustment in the event of changes in the
capitalization of Catalyst, as set forth in Section 9 hereto.
| 3. | TERM AND VESTING OF OPTION |
(a) Option Period. Subject to the provisions of this Section 3 and Section 6 hereof,
this Option shall terminate and all rights to purchase shares hereunder shall cease five years
after the date they become exercisable and are granted pursuant to section 3(b) hereof.
(b) Vesting and Exercisability. Subject to the provisions of Section 6 hereof, this
Option shall become vested upon the dates (the “Vesting Date”) described in the following schedule:
| Incremental Number of | Cumulative Number of | |||||||
| Date | Vested Option Shares | Vested Option Shares | ||||||
July 10, 2007
|
25 | % | 25 | % | ||||
July 10, 2008
|
25 | % | 50 | % | ||||
July 10, 2009
|
25 | % | 75 | % | ||||
July 10, 2010
|
25 | % | 100 | % | ||||
Notwithstanding the foregoing, the Board of Directors of Catalyst (the “Board”) may in its
discretion provide that any vesting requirement or other such limitation on the exercise of this
Option may be rescinded, modified or waived by the Board, in its sole discretion, at any time and
from time to time after the Grant Date, so as to accelerate the time at which this Option may be
exercised.
| 4. | MANNER OF EXERCISE AND PAYMENT |
(a) Exercise. This Option may be exercised to the extent vested as provided in
Section 3 by delivery to Catalyst on any business day, at its principal office, addressed to the
attention of the President, of written notice of exercise, which notice shall specify the number of
shares with respect to which this Option is being exercised, and shall be accompanied by payment in
full of the Option Price of the shares for which this Option is being exercised, in accordance with
Section 4(b) below. The minimum number of shares of Common Stock with respect to which this Option
may be exercised, in whole or in part, at any time shall be the lesser of one hundred (100) shares
or the maximum number of shares available for purchase under this Option at the time of exercise.
(b) Payment. Payment of the Option Price for the shares of Common Stock purchased
pursuant to the exercise of this Option shall be made in cash or in cash equivalents. An attempt
to exercise any Option granted hereunder other than as set forth above shall be invalid and of no
force and effect.
(c) Issuance of Certificates. Promptly after the exercise of this Option, Optionee
shall be entitled to the issuance of a certificate or certificates evidencing his ownership of such
shares of Common Stock. An individual holding or exercising an Option shall have none of the
rights of a stockholder until the shares of Common Stock covered thereby are fully paid and issued
to him and, except as provided in Section 9 below, no adjustment shall be made for dividends or
other rights for which the record date is prior to the date of such issuance.
| 5. | TRANSFERABILITY OF OPTION |
2
Unless otherwise permitted by the Board in its sole and absolute discretion, this Option shall
not be assignable or transferable by the Optionee, other than by will or the laws of descent and
distribution.
| 6. | TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY |
(a) General. Upon the termination of the employment or other service of the Optionee
with Catalyst, other than by reason of Cause (as defined below), death or “permanent and total
disability” (within the meaning of Section 22(e)(3) of the Code) of the Optionee, this Option shall
expire thirty (30) days following the last day of the Optionee’s employment with Catalyst, or, if
earlier, the date specified in this Agreement. Options will be exercisable only to the extent they
are exercisable on the date the Optionee’s employment or service terminates. Notwithstanding the
foregoing provisions of this Section 6, the Board may provide, in its discretion, that following
the termination of employment or service of Optionee with Catalyst, Optionee may exercise this
Option, in whole or in part, at any time subsequent to such termination of employment or service
and prior to termination of this Option pursuant to Section 3(a) above, either subject to or
without regard to any vesting or other limitation on exercise imposed pursuant to Section 3(b)
above. Unless otherwise determined by the Board, temporary absence from employment or service
because of illness, vacation, approved leaves of absence, military service and transfer of
employment shall not constitute a termination of employment or service with Catalyst.
(b) Cause. If Catalyst terminates the Optionee’s employment for Cause (as defined
below), all Options granted to Optionee shall terminate upon the date of such termination of
employment or service and Optionee shall have no further right to purchase Common Stock pursuant to
such Options. For purposes of this Agreement, “Cause” means (i) failure or refusal of the Optionee
to perform the duties and responsibilities that Catalyst requires to be performed by him, (ii)
gross negligence or willful misconduct by the Optionee in the performance of his duties, (iii)
commission by the Optionee of an act of dishonesty affecting Catalyst , or the commission of an act
constituting common law fraud or a felony, or (iv) the Optionee’s commission of an act (other than
the good faith exercise of his business judgment in the exercise of his responsibilities) resulting
in material damages to Catalyst. Notwithstanding the above, if Optionee and Catalyst have entered
into an employment or other agreement which defines the term Cause for purposes of such agreement,
“Cause” shall be defined pursuant to the definition in such agreement with respect to such
Optionee’s Options. The Board shall determine whether Cause exists for purposes of this Agreement
and such determination shall be final, conclusive and binding on the Optionee.
(c) Death or Disability. If Optionee’s employment with Catalyst terminates by reason
of death or “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code),
Optionee, Optionee’s estate or the devisee named in Optionee’s valid last will and testament or
Optionee’s heir at law who inherits the Option (whichever is applicable) has the right, at any time
within a period not to exceed three (3) months after the date of such termination and prior to the
termination of this Option pursuant to Section 3(a) above, to exercise, in whole or in part, any
vested portion of this Option (in accordance with Section 3(b) above) held by Optionee upon such
3
termination. Any unvested portion of this Option shall terminate upon Optionee’s termination of
employment or service with Catalyst by reason of death or “permanent and total disability.”
| 7. | FORFEITURE OF GAIN IF TERMINATED FOR CAUSE OR FOR BREACH OF NON-COMPETE AGREEMENT OR CONFIDENTIALITY AGREEMENT |
If Optionee’s employment or service with Catalyst is terminated for Cause, or if Optionee
violates the terms of any non-compete agreement or any confidentiality agreement entered into by
the Optionee and Catalyst, then the Optionee shall pay to Catalyst any “gains” related to any
Common Stock issued pursuant to the exercise of this Option (“Option Stock”). For purposes of this
Agreement, “gains” shall mean the amount realized on the sale of any Option Stock that was sold
during the one-year period immediately preceding Optionee’s termination of employment or service,
minus the Option Price paid for the Option Stock.
| 8. | REQUIREMENTS OF LAW |
(a) Violations of Law. Catalyst shall not be required to sell or issue any shares of
Common Stock under this Option if the sale or issuance of such shares would constitute a violation
by the individual exercising this Option or Catalyst of any provisions of any law or regulation of
any governmental authority, including without limitation, any federal or state securities laws or
regulations. Any determination in this connection by the Board shall be final, binding, and
conclusive. Catalyst shall not be obligated to take any affirmative action in order to cause the
exercise of this Option or the issuance of shares pursuant thereto to comply with any law or
regulation of any governmental authority.
(b) Registration. At the time of any exercise of this Option, Catalyst may, if it
shall determine it necessary or desirable for any reason, require the Optionee (or his or her
heirs, legatees or legal representative, as the case may be), as a condition to the exercise
thereof, to deliver to Catalyst a written representation of present intention to purchase the
shares for their own account as an investment and not with a view to, or for sale in connection
with, the distribution of such shares, except in compliance with applicable federal and state
securities laws with respect thereto. In the event such representation is required to be
delivered, an appropriate legend may be placed upon each certificate delivered to the Optionee (or
his or her heirs, legatees or legal representative, as the case may be) upon his or her exercise of
part or all of this Option and a stop transfer order may be placed with the transfer agent. This
Option shall also be subject to the requirement that, if at any time Catalyst determines, in its
discretion, that the listing, registration or qualification of the shares subject to this Option
upon any securities exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of or in connection with, the
issuance or purchase of the shares thereunder, this Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to Catalyst in its sole discretion. Optionee agrees
to execute any “lock-up” or similar agreement required by Catalyst’s underwriters in connection
with Catalyst’s initial public offering. Catalyst shall not be obligated to take any
4
affirmative action in order to cause the exercisability or vesting of this Option or to cause the exercise of
this Option or the issuance of shares pursuant thereto to comply with any law or regulation of any
governmental authority.
(c) Withholding. The Board may make such provisions and take such steps as it may
deem necessary or appropriate for the withholding of any taxes that Catalyst is required by any law
or regulation of any governmental authority, whether federal, state or local, domestic or foreign,
to withhold in connection with the exercise of this Option, including, but not limited to, (i)
the withholding of delivery of shares of Common Stock upon exercise of this Option until the holder
reimburses Catalyst for the amount Catalyst is required to withhold with respect to such taxes,
(ii) the canceling of any number of shares of Common Stock issuable upon exercise of this Option in
an amount sufficient to reimburse Catalyst for the amount it is required to so withhold, (iii)
withholding the amount due from Optionee’s wages or compensation due such person, or (iv) requiring
the Optionee to pay Catalyst cash in the amount Catalyst is required to withhold with respect to
such taxes.
| 9. | EFFECT OF CHANGES IN CAPITALIZATION |
(a) Recapitalization. If the outstanding shares of Common Stock of Catalyst are
increased or decreased or changed into or exchanged for a different number or kind of shares or
other securities of Catalyst by reason of any recapitalization, reclassification, reorganization
(other than as described in 9(b) below), stock split, reverse split, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital stock of Catalyst, or
other increase or decrease in such shares effected without receipt of consideration by Catalyst, an
appropriate and proportionate adjustment shall be made by the Board in the number and kind of
shares of Common Stock issuable upon exercise of this Option, and in the Option Price per share of
this Option.
(b) Reorganization or Change in Control. In the event of a Reorganization (as defined
below) of Catalyst or a Change in Control (as defined below) of Catalyst, the Board may in its sole
and absolute discretion, provide that (i) this Option is immediately exercisable or vested, without
regard to any limitation imposed pursuant to this Agreement and/or (ii) that this Option
terminates, provided however, that Optionee shall have the right, immediately prior to the
occurrence of such Reorganization or Change in Control and during such reasonable period as the
Board in its sole discretion shall determine and designate, to exercise any vested portion of this
Option in whole or in part. In the event that the Board does not terminate this Option upon a
Reorganization of Catalyst then this Option shall upon exercise thereafter entitle the Optionee to
such number of shares of Common Stock or other securities or property to which a holder of shares
of Common Stock would have been entitled to upon such Reorganization. For purposes of this
Agreement a “Reorganization” of an entity shall be deemed to occur if such entity is a party to a
merger, consolidation, reorganization, or other business combination with one or more entities in
which said entity is not the surviving entity, if such entity disposes of substantially all of its
assets, or if such entity is a party to a spin-off, split-off, split-up or similar transaction;
provided, however, that the transaction shall not be a Reorganization if Catalyst, any Parent or
any Subsidiary is the surviving entity. For purposes of
5
this Agreement, a “Change in Control” shall be deemed to occur if any person or group of persons shall acquire direct or indirect
beneficial ownership (whether as a result of stock ownership, revocable or irrevocable proxies or
otherwise) of securities of an entity, pursuant to one or more transactions, such that after
consummation and as a result of such transaction, such person has direct or indirect beneficial
ownership of 50% or more of the total combined voting power of the Common Stock. For purposes of
this Agreement, a “person” shall mean any person, corporation, partnership, joint venture or other
entity or any group (as such term is defined for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), other than a Parent or Subsidiary, and “beneficial ownership” shall be determined in accordance with Rule 13d-3 under
the Exchange Act.
(c) Dissolution or Liquidation. Upon the dissolution or liquidation of Catalyst, this
Option shall terminate. In the event of any termination of this Option under this Section 9(c),
Optionee shall have the right, immediately prior to the occurrence of such termination and during
such reasonable period as the Board in its sole discretion shall determine and designate, to
exercise this Option in whole or in part, whether or not this Option was otherwise exercisable at
the time such termination occurs and without regard to any vesting or other limitation on exercise
imposed pursuant to Section 3 above.
(d) Adjustments. Adjustments under this Section 9 related to stock or securities of
Catalyst shall be made by the Board, whose determination in that respect shall be final, binding,
and conclusive. No fractional shares of Common Stock or units of other securities shall be issued
pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be
eliminated in each case by rounding downward to the nearest whole share or unit.
(e) No Limitations. The grant of this Option hereunder shall not affect or limit in
any way the right or power of Catalyst to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to
sell or transfer all or any part of its business or assets.
| 10. | DISCLAIMER OF RIGHTS |
No provision of this Agreement shall be construed to confer upon any individual, including
Optionee, the right to remain in the employ of or to continue in any other contractual relationship
with Catalyst or to interfere in any way with the right and authority of Catalyst either to
increase or decrease the compensation of any individual, including Optionee, at any time, or to
terminate any employment or other relationship between any individual, including Optionee, and
Catalyst.
| 11. | NONEXCLUSIVITY OF THIS AGREEMENT |
This Agreement shall not be construed as creating any limitations upon the right and authority
of the Board to adopt such other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or specifically to
6
a particular individual or individuals) as the Board in its discretion determines desirable, including, without
limitation, the granting of stock options or stock appreciation rights.
| 12. | MISCELLANEOUS |
(a) Indulgences, Etc. Neither the failure nor any delay on the part of either party
to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No
waiver shall be effective unless it is in writing and is signed by the party asserted to have
granted such waiver.
(b) Controlling Law. This Agreement and all questions relating to its validity,
interpretation, performance and enforcement (including, without limitation, provisions concerning
limitations of actions), shall be governed by and construed in accordance with the laws of the
State of Florida, without application to the principles of conflict of laws.
(c) Notices. All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have been duly given,
made and received only when personally delivered, one day following the day when deposited with an
overnight courier service for overnight priority service, such as Federal Express, for delivery to
the intended addressee or three days following the day when deposited in the United States mails,
first class postage prepaid, certified or registered mail, and addressed, in the case of Catalyst,
its principal place of business, and, in the case of Optionee, as set forth below Optionee’s
signature on the last page hereof. Any person may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity with the provisions
of this Section for the giving of notice.
(d) Binding Nature of Agreement; Transferability. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall not be assignable or transferable by
the Optionee other than by will or the laws of descent and distribution.
(e) Severability. The provisions of this Agreement are independent of and separable
from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue
of the fact that for any reason any other or others of them may be invalid or unenforceable in
whole or in part.
(f) Section Headings. The section headings in this Agreement are for convenience
only; they form no part of this Agreement and shall not affect its interpretation.
7
(g) Number of Days. In computing the number of days for purposes of this Agreement,
all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if
the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are
or may elect to be closed, then the final day shall be deemed to be the next day which is not a
Saturday, Sunday or such holiday.
(h) No Third-Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any person other than the parties and their respective successors and permitted
assigns.
(i) Entire Agreement; Amendments. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any prior understandings,
agreements, or representations by or among the parties, written or oral, that may have related in any way to the subject matter hereof. This Agreement may not be amended,
supplemented or modified in whole or in part except by an instrument in writing signed by the party
or parties against whom enforcement of any such amendment, supplement or modification is sought.
(j) Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and therefore strict construction
shall be applied against any party. Any reference to any federal, state, local or foreign statute
or law shall be deemed also to refer to the rules and regulations promulgated thereunder, unless
the context requires otherwise. The parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has breached any
representation, warranty, or covenant contained herein in any respect, the fact that there exists
another representation, warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or covenant.
(k) Counterparts. This Agreement may be executed in one or more counterparts, each of
which will be deemed an original and all of which together will constitute one and the same
instrument.
(l) Pronouns. The use of any gender in this Agreement shall be deemed to include all
genders, and the use of the singular shall be deemed to include the plural and vice versa, wherever
it appears appropriate from the context.
[SIGNATURES ON FOLLOWING PAGE]
8
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
above written.
CATALYST PHARMACEUTICAL PARTNERS, INC. |
|||||
| By: | /s/ Xxxxxxx X. XxXxxxx | ||||
| Xxxxxxx X. XxXxxxx | |||||
| President | |||||
| OPTIONEE: |
|||||
| /s/ M. Xxxxxxx Xxxxxxx | |||||
| Name: M. Xxxxxxx Xxxxxxx | |||||
| Address: | |||||
9
