EXHIBIT 10.7
BIOMUNE SYSTEMS, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Biomune Systems, Inc., a Nevada corporation (the "Company"), hereby grants
this 1st day of January, 1993, to Xxxxxxx X. Xxxxxx, an individual (the
"Optionee"), an option to purchase a maximum of thirty thousand (30,000) shares
of the Company's Common Stock, $0.0001 par value per share, at the price of Two
Dollars and No/100 ($2.00) per share, on the terms and conditions set forth
hereinbelow.
1. Grant Under 1992 Stock Incentive Plan. This option is granted pursuant
to and is governed by the Company's 1992 Stock Incentive Plan (the "Plan") and,
unless the context requires otherwise, terms used herein shall have the same
meanings as set forth in the Plan. Determinations made in connection with this
option pursuant to the Plan shall be governed by the Plan as it exists on the
date hereof.
2. Grant as Non-Qualified Option; Other Options. This option shall be
treated for federal income tax purposes as a Non-Qualified Option (rather than
as an ISO), and the Committee (as that term is defined in the Plan) or the Board
(as that term is defined in the Plan) will take appropriate action, if
necessary, to achieve this result. This option is in addition to any other
options heretofore or hereafter granted to the Optionee by the Company. A
duplicate original of this instrument shall not effect the grant of another
option to the Optionee.
3. Extent of Option if Business Relationship Continues. If the Optionee
continues to serve the Company or any Related Corporation (as defined in the
Plan) in the capacity of an employee, officer, director or consultant (such
service is described herein as maintaining or being involved in a "Business
Relationship" with the Company), the Optionee may exercise this option for a
maximum of thirty thousand (30,000) shares of the Company's Common Stock, which
option may be exercised up to and including the date that is five (5) years from
the date this option is granted. The foregoing rights are cumulative and, while
the Optionee continues to maintain a Business Relationship with the Company, may
be exercised up to and including the date that is five (5) years from the date
this option is granted. All of the foregoing rights are subject to Sections 4
and 5 below, as appropriate, if the Optionee ceases to maintain a Business
Relationship with the Company or dies, becomes disabled or undergoes dissolution
while involved in a Business Relationship with the Company.
4. Termination of Business Relationship. If the Optionee ceases to maintain
a Business Relationship with the Company, other than by reason of death or
disability (as those terms are defined in Section 5 below), no further
installments of this option shall become exercisable and this option shall
terminate upon the passage of ninety (90) days from the date the Business
Relationship ceases, but in no event later than the scheduled expiration date of
this option. In such a case, the Optionee's only rights hereunder shall be those
that are properly exercised before the termination of this option.
5. Death; Disability; Dissolution. If the Optionee is a natural person who
dies while involved in a Business Relationship with the Company, this option may
be exercised, to the extent of the number of shares with respect to which the
Optionee could have exercised on the date of the Optionee's death, by the
Optionee's estate, personal representative or beneficiary to whom this option
has been assigned pursuant to Section 10 below, at any time within one (1) year
after the date of death, but not later than the scheduled expiration date of
this option. If the Optionee is a natural person whose Business Relationship
with the Company is terminated by reason of Optionee's disability (as that term
is defined in the Plan), this option may be exercised, to the extent of the
number of shares with respect to which the Optionee could have exercised on the
date the Business Relationship was terminated, at any time within one (1) year
after the date of such termination, but not later than the scheduled expiration
date of this option. At the expiration of such one year period or the scheduled
expiration date of this option, whichever is the earlier, this option shall
terminate and the only rights hereunder shall be those as to which the option
was properly exercised before such termination. If the Optionee is a
corporation, partnership, trust or other entity that is dissolved, liquidated,
becomes insolvent or enters into a merger or acquisition with respect to which
such Optionee is not the surviving entity at the time when such entity is
involved in a Business Relationship with the Company, this option shall
immediately terminate as of the date of such event, and the only rights
hereunder shall be those as to which this option was properly exercised before
such dissolution or other event.
6. Partial Exercise. Exercise of this option up to the extent above stated
may be made in part at any time and from time-to-time within the above limits,
except that this option may not be exercised for a fraction of a share unless
such exercise is with respect to the final installment of stock subject to this
option and a fractional share (or cash in lieu thereof) must be issued to permit
the Optionee to exercise completely such final installment. Any fractional share
with respect to which an installment of this option cannot be exercised because
of the limitation contained in the preceding sentence shall remain subject to
this option and shall be available for later purchase by the Optionee in
accordance with the terms hereof.
7. Payment of Option Price. The option price is payable as follows:
(a) In United States dollars in cash or by check, or any combination
of the foregoing, equal in amount to the option price, or (b) in the discretion
of the Committee or the Board in cash, by check, by delivery of shares of the
Company's Common Stock (as provided in Section 7(b) below), or by any
combination of the foregoing, equal in amount to the option price or (c) in the
discretion of the Committee or the Board, by delivery of the Optionee's personal
recourse promissory note bearing interest payable not less than annually at no
less than one hundred percent (100%) of the lowest applicable Federal rate (as
defined in Section 1274(d) of the Code), or by any combination of the foregoing,
equal in amount to the option price.
(b) As provided in Section 7(a) above, payment of such purchase price
or any portion thereof may be made with shares of stock of the same class as the
shares then subject to this option, if shares of that class are then Publicly
Traded (as that term is defined below), such shares to be credited toward such
purchase price on the valuation basis set forth below, in which event the stock
certificates evidencing the shares to be so used shall accompany the notice of
exercise and shall be duly endorsed or accompanied by duly executed stock powers
to transfer the same to the Company; provided, however, that such payment in
stock instead of cash shall not be effective and shall be rejected by the
Company if (i) the Company is then prohibited from purchasing or acquiring
shares of the class of its stock tendered to it or (ii) the right or power of
the individual or entity exercising the option to deliver such shares in payment
of said purchase price is subject to the prior interests of any other individual
or entity (excepting the Company), as indicated by legends on the certificate(s)
or as known to the Company. For purposes of this Section 7(b): (a) "Publicly
Traded" shares are those shares that are listed or admitted to unlisted trading
privileges on a national securities exchange or as to which sales or bid and
offer quotations are reported in the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system operated by the National Association of
Securities Dealers, Inc. ("NASD") and (b) for credit toward the purchase price,
shares so surrendered shall be valued as of the day immediately preceding the
delivery to the Company of the certificate(s) evidencing such shares (or, if
such day is not a trading day in the United States securities markets, on the
nearest preceding trading day), on the basis of the closing price of stock of
that class as reported with respect to the market (or the composite of the
markets, if more than one exists) in which such shares are then traded, or if no
such closing prices are reported, the lowest independent offer quotation
reported therefor in Level 2 of NASDAQ, or if no such quotations are reported,
on the basis of the most nearly comparable valuation method acceptable to the
Company. If the Company rejects the payment in stock, the tendered notice of
exercise shall not be effective hereunder unless promptly after being notified
of such rejection the individual or entity exercising the option pays the
purchase price in acceptable form. If and while payment of the purchase price
with stock is permitted in accordance with the foregoing provisions, the
individual or entity then entitled to exercise this option may, in lieu of using
previously outstanding shares therefor, use some of the shares as to which this
option is then being exercised, in which case the notice of exercise need not be
accompanied by any stock certificate(s) but shall include a statement directing
the Company to withhold so many of the shares that would otherwise have been
delivered upon that exercise of this option as equals the number of shares that
would have been transferred to the Company if the purchase price had been paid
with previously issued stock.
If the Optionee delivers shares of Common Stock held by the Optionee ("Old
Stock") to the Company in full or partial payment of the option price, and the
Old Stock so delivered is subject to restrictions or limitations imposed by
agreement between the Optionee and the Company, the Common Stock received by the
Optionee upon the exercise of this option shall be subject to all restrictions
and limitations applicable to the Old Stock to the extent that the Optionee paid
for such shares of Common Stock by delivering Old Stock to the Company, in
addition to any restrictions or limitations imposed by this option.
No individual or entity shall be entitled to the privileges of stock
ownership in respect of any shares of Common Stock issuable upon exercise of
this option, unless and until such shares of Common Stock have been issued to
such individual or entity as fully paid shares.
No certificate(s) for shares of Common Stock purchased upon the exercise of
this option shall be issued and delivered prior to the admission of such shares
to listing on any stock exchange on which shares of that class are then listed,
nor unless and until, in the opinion of counsel for the Company, such securities
may be issued and delivered without causing the Company to be in violation of or
to incur any liability under any federal, state or other securities law, rule or
regulation, any requirement of any securities exchange listing agreement to
which the Company may be a party or any other requirement of law or of any
regulatory agency or body having jurisdiction over the Company or its
securities.
Notwithstanding the foregoing, the Optionee may not pay any part of the
exercise price hereof by transferring Common Stock to the Company if such Common
Stock is both (i) subject to a substantial risk of forfeiture and (ii) not
transferable within the meaning of Section 83 of the Code.
8. Agreement to Purchase for Investment. By acceptance of this option, the
Optionee agrees that a purchase of shares under this option will not be made
with a view to their distribution (as that term is used in the Securities Act of
1933, as amended (the "1933 Act")) unless in the opinion of counsel to the
Company such distribution is in compliance with or exempt from the registration
requirements of the 1933 Act, and the Optionee agrees to sign a certificate to
such effect at the time of exercising this option and agrees that the
certificate(s) for the shares of the Company's Common Stock so purchased may be
inscribed with a legend to ensure compliance with the requirements of the 1933
Act. The Optionee understands that the transferability of this option and the
underlying shares of the Company's Common Stock are restricted. The Optionee has
had access to all information required by the Optionee to make an investment
decision and the Optionee has had an opportunity to ask questions of and receive
answers from the Company pertaining to the Company, its business, this option
and the underlying shares of the Company's Common Stock.
9. Method of Exercising Option. Subject to the terms and conditions set
forth herein, this option may be exercised by written notice to the Company at
the principal executive office of the Company, or to such transfer agent as the
Company shall designate. Such notice shall state the election to exercise this
option and the number of shares of the Company's Common Stock in respect of
which this option is being exercised and shall be signed by the individual(s) so
exercising this option. Such notice shall be accompanied by payment of the full
purchase price of such shares of the Company's Common Stock, and the Company
shall deliver a certificate(s) representing such shares as soon as practicable
after the notice shall be received. The certificate(s) for the shares as to
which this option shall have been so exercised shall be registered in the name
of the individual(s) so exercising this option (or, if this option shall be
exercised by the Optionee and if the Optionee shall so request in the notice of
exercise, shall be registered in the name of the Optionee and another individual
jointly, with full rights of survivorship) and shall be delivered as provided
above to or upon the written order of the individual(s) exercising this option.
In the event this option shall be exercised, pursuant to Section 5 above, by any
individual(s) other than the Optionee, such notice of exercise shall be
accompanied by appropriate proof of the right of such individual(s) or persons
to exercise this option. All shares of the Company's Common Stock that shall be
purchased upon the exercise of this option as provided herein shall be fully
paid and non-assessable.
10. Option Not Transferable. This option is not transferable or assignable
except by will or by the law of descent and distribution or except as permitted
by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "1934 Act"). The Optionee can exercise this option only during the
Optionee's lifetime.
11. No Obligation to Exercise Option. The grant and acceptance of this
option imposes no obligation on the Optionee to exercise this option.
12. No Obligation to Continue Business Relationship. The Company and any
Related Corporation is not, pursuant to the Plan or this option, obligated to
continue to maintain a Business Relationship with the Optionee.
13. No Rights as Stockholder Until Option Exercised. The Optionee shall
have no rights as a stockholder with respect to shares of the Company's Common
Stock subject to this option until a stock certificate(s) therefor has been
issued to the Optionee and is fully paid for. Except as is expressly provided in
the Plan with respect to certain changes in the capitalization of the Company,
no adjustment shall be made for dividends or similar rights for which the record
date is prior to the date a stock certificate is issued.
14. Capital Changes and Business Successions. Subject to Section 19 below,
the Plan contains provisions regarding the treatment of options in a number of
contingencies such as stock splits and mergers. Provisions in the Plan for
adjustment with respect to shares of the Company's Common Stock subject to
options and the related provisions with respect to successors to the business of
the Company are hereby made applicable hereunder and are incorporated herein by
reference. In general, the Optionee should not assume that options necessarily
would survive the acquisition of the Company. In particular, without affecting
the generality of the foregoing, it is understood that for the purposes of
Sections 3 through 5 above, employment by the Company includes employment by a
Related Corporation.
15. Withholding Taxes. By accepting this option the Optionee agrees that
the Company may withhold from the Optionee's wages or other remuneration the
appropriate amount of federal, state and local taxes attributable to the
Optionee's exercise of any installment of this option. At the Company's
discretion, the amount required to be withheld may be withheld in cash from such
wages or other remuneration, or in kind from the Common Stock otherwise
deliverable to the Optionee upon the exercise of this option. The Optionee
further agrees that, if the Company does not withhold an amount from the
Optionee's wages or other remuneration sufficient to satisfy the Company's
withholding obligation, the Optionee will reimburse the Company upon demand, in
cash, for the amount underwithheld.
16. Company's Right of First Refusal.
(a) Exercise of Right. If the Optionee desires to sell all or any part
of the shares acquired under this option (including any securities received in
respect thereof pursuant to any stock dividend, stock split, reclassification,
reorganization, recapitalization or the like), and an offeror (the "Offeror")
has made an offer therefor, which offer the Optionee desires to accept, the
Optionee shall: (i) obtain in writing an irrevocable and unconditional bona fide
offer (a "Bona Fide Offer") for the purchase thereof from the Offeror and (ii)
give written notice (the "Option Notice") to the Company setting forth the
Optionee's desire to sell such shares, which Option Notice shall be accompanied
by a photocopy of the original executed Bona Fide Offer and shall set forth at
least the name and address of the Offeror and the price and terms of the Bona
Fide Offer. Upon receipt of the Option Notice, the Company shall have an
assignable option to purchase any or all of such shares (the "Option Shares")
specified in the Option Notice, such option to be exercisable by giving, within
thirty (30) days after receipt of the Option Notice, a written counter-notice to
the Optionee. If the Company elects to purchase any or all of such Option
Shares, it shall be obligated to purchase, and the Optionee shall be obligated
to sell to the Company, such Option Shares at the price and terms indicated in
the Bona Fide Offer within sixty (60) days from the date of receipt by the
Company of the Option Notice.
(b) Sale of Option Shares to Offeror. The Optionee may sell, pursuant
to the terms of the Bona Fide Offer, any or all of such Option Shares not
purchased or agreed to be purchased by the Company during the period that is
sixty (60) days after the expiration of the thirty (30) day period during which
the Company may give the aforesaid counter-notice; provided, however, that the
Optionee shall not sell such Option Shares to the Offeror if the Offeror is a
competitor of the Company and the Company gives written notice to the Optionee,
within thirty (30) days of its receipt of the Option Notice, stating that the
Optionee shall not sell the Option Shares to the Offeror; provided, further,
that prior to the sale of such Option Shares to the Offeror, the Offeror shall
execute an agreement with the Company pursuant to which the Offeror agrees to be
subject to the restrictions set forth in this Section 16. If any or all of such
Option Shares are not sold pursuant to a Bona Fide Offer within the time
permitted above, the unsold Option Shares shall remain subject to the terms of
this Section 16.
(c) Adjustments for Changes in Capital Structure. If there shall be
any change in the Company's Common Stock through merger, consolidation,
reorganization, recapitalization, stock dividend, split-up, combination or
exchange of shares or the like, the restrictions contained in this Section 16
shall apply with equal force to additional and/or substitute securities, if any,
received by the Optionee in exchange for, or by virtue of his or her ownership
of, Option Shares.
(d) Failure to Deliver Option Shares. In the event the Optionee fails
or refuses to deliver on a timely basis a duly endorsed certificate(s)
representing the Option Shares to be sold to the Company pursuant to this
Section 16, the Company shall have the right to deposit the purchase price for
the Option Shares in a special account with any bank or trust company in the
State of Utah, giving notice of such deposit to the Optionee, whereupon such
Option Shares shall be deemed to have been purchased by the Company. All such
monies shall be held by the bank or trust company for the benefit of the
Optionee. All monies deposited with the bank or trust company remaining
unclaimed for two (2) years after the date of deposit shall be repaid by the
bank or trust company to the Company upon demand and the Optionee shall
thereafter look only to the Company for payment. The Company may place a legend
on any stock certificate(s) delivered to the Optionee reflecting the
restrictions on transfer set forth in this Section 16.
17. No Exercise of Option if Business Relationship Terminated for
Misconduct. If the Business Relationship of the Optionee is terminated for
"Misconduct," this option shall terminate on the date of such termination of the
Business Relationship and all unvested or unexercised options shall thereupon no
longer be exercisable to any extent whatsoever. For purposes of this Section 17,
"Misconduct" is conduct, as determined by the Board, involving one or more of
the following: (i) the substantial and continuing failure of the Optionee to
render services to the Company in accordance with the terms or requirements of
the Business Relationship; (ii) a determination by two-thirds (2/3) of the
members of the Board that the Optionee has inadequately performed the
requirements of the Business Relationship; (iii) disloyalty, gross negligence,
dishonesty or breach of a fiduciary duty owed to the Company; (iv) the
commission of an act of embezzlement, fraud, disloyalty, dishonesty or
deliberate disregard of the rules or policies of the Company that results in
loss, damage or injury to the Company, whether directly or indirectly; (v) the
unauthorized disclosure of any trade secret or confidential information owned by
the Company; or (vi) the commission of an act that constitutes unfair
competition with the Company or that induces any customer or client of the
Company to break a contract or agreement with the Company. In making such
determination, the Board shall act fairly and in utmost good faith and shall
give the Optionee an opportunity to appear and be heard at a hearing before the
Board or the Committee and to present evidence on the Optionee's behalf. For
purposes of this Section 17, termination of the Business Relationship shall be
deemed to occur when the Optionee receives notice that the Business Relationship
is terminated.
18. Company's Right of Repurchase.
(a) Right of Repurchase. If any of the events specified in Section
18(b) below occur, then:
(i) with respect to shares acquired upon exercise of this option
prior to the occurrence of such event, within sixty (60) days after
the Company receives actual knowledge of the event, and
(ii) with respect to shares acquired upon exercise of this option
after the occurrence of such event, within sixty (60) days following
the later of the date of such exercise or the date the Company
receives actual knowledge of such event,
(in either case, the "Repurchase Period"), the Company shall have the option,
but not the obligation, to repurchase all, but not less then all, of the shares
from the Optionee or the Optionee's legal representatives, as the case may be
(the "Repurchase Option"). The Repurchase Option shall be exercised by the
Company by giving the Optionee, or the Optionee's legal representative, written
notice of its intention to exercise the Repurchase Option on or before the last
day of the Repurchase Period, and, together with such notice, tendering to the
Optionee or the Optionee's legal representative, an amount equal to the higher
of the option price or the fair market value of the shares. The Company may, in
exercising the Repurchase Option, designate one or more nominees to purchase the
shares either within or without the Company. Upon timely exercise of the
Repurchase Option in the manner provided in this Section 18(a), the Optionee or
the Optionee's legal representative shall deliver to the Company the stock
certificate(s) representing the shares being repurchased, duly endorsed and free
and clear of any and all liens, charges and encumbrances.
If shares are not purchased under the Repurchase Option, the Optionee and
the Optionee's successor in interest, if any, will hold any such shares in his
or her possession subject to all of the provisions of this option.
(b) Company's Right to Exercise Repurchase Option. The Company shall
have the Repurchase Option in the event any of the following event occurs:
(i) The termination of the Optionee's Business Relationship with
the Company or any Related Corporation, voluntarily or involuntarily,
for any reason whatsoever, including death or permanent disability,
prior to the time this option shall be fully vested as provided in
Section 3 above;
(ii) The receivership, bankruptcy or other creditors' proceeding
regarding the Optionee or the taking of any of the Optionee's shares
acquired upon exercise of this option by legal process, such as a levy
of execution;
(iii) Distribution of shares held by the Optionee to the
Optionee's spouse as such spouse's joint or community property
interest pursuant to a decree of dissolution, divorce, property
settlement agreement, operation of law or for any other reason, except
as may be otherwise permitted by the Company; or
(iv) The termination of the Optionee's Business Relationship by
the Company for Misconduct (as that term is defined in Section 17
above).
(c) Determination of Fair Market Value. The fair market value of the
shares subject to this option shall be, for purposes of this Section 18, an
amount per share determined on the basis of the price at which shares of the
Common Stock could reasonably be expected to be sold in an arms-length
transaction for cash, other than on an installment basis, to a person not
employed by, controlled by, in control of or under common control with the
Company. Fair market value shall be determined by the Board, giving due
consideration to recent grants of ISOs for shares of Common Stock, recent
transactions involving shares of the Common Stock, if any, earnings of the
Company to the date of such determination, projected earnings of the Company,
the effect of the transfer restrictions to which the shares are subject under
applicable law and this option, the existence or absence of a public market for
the Common Stock and such other matters as the Board deems pertinent. The
determination by the Board of the fair market value shall be conclusive and
binding. The fair market value of the shares shall be determined as of the day
on which the event occurs.
19. Changes in Control. Notwithstanding any other provision hereof, this
option shall accelerate so that the Optionee (if the Optionee is an employee of
the Company or any Related Corporation) shall have the right, at all times until
the expiration or earlier termination of the option, to exercise the unexercised
portions of this option, including the portions thereof that would, but for this
Section 19, not yet be exercisable, from and after any Involuntary Termination
(as that term is defined below) within twenty-four (24) months after a Change in
Control (as that term is defined below) that occurs while the Optionee is an
employee of the Company or any Related Corporation. For purposes of this Section
19: (a) an "Involuntary Termination" is any termination of the Optionee's
employment with the Company or any Related Corporation for reasons other than
(i) the Optionee's death, (ii) the Optionee's total disability (as that term is
defined in the Plan), (iii) the Optionee's retirement under circumstances that
entitle the Optionee to full benefits under one or another of his employer's
retirement or pension plans or programs generally applicable to salaried
employees or (iv) termination for Misconduct (as that term is defined in Section
17 above) and (b) a "Change in Control" means any of the following events if
they occur after the date of grant of this option and after the class of stock
then subject to this option becomes Publicly Traded (as that term is defined in
Section 7(b) above): the direct or indirect beneficial ownership (within the
meaning of Section 13(d) of the 1934 Act and Regulations 13D through G
thereunder) of thirty percent (30%) or more of the class of securities then
subject to this option is acquired or becomes held by any person or group of
persons (within the meaning of Section 13(d)(3) of the 1934 Act), or the sale,
mortgage, lease or other transfer in one or more transactions not in the
ordinary course of the Company's business or assets or earning power
constituting more than fifty percent (50%) of the assets or earning power of the
Company and its Related Corporations (taken as a whole) to any such person or
group of persons.
20. Governing Law. This option shall be governed by and interpreted in
accordance with the laws of the State of Utah.
21. Holding Period. By accepting this option, the Optionee acknowledges
that if the shares acquired upon exercise of this option are not held for at
least six (6) months following the date of grant, the grant of this option will
be deemed a purchase that may be matched against any sale of the Company's
securities occurring within six (6) months of the grant and may create liability
for the Optionee pursuant to Section 16(b) of the 1934 Act.
IN WITNESS WHEREOF, the Company executed this option on January 1, 1993
effective as of the date first set forth above.
THE COMPANY:
BIOMUNE SYSTEMS, INC.,
a Nevada corporation
By: /s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
Its: President
