EXHIBIT 10.57
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, made this 9th day of July, 2003, by and between GELSTAT
CORPORATION, a Minnesota corporation (the "Company"), and XXXXXXX XXXXXXX
("Optionee").
1. Grant of Option.
Pursuant to its 2003 Incentive Plan (the "Plan"), the Company hereby
grants to Optionee, on the date set forth above, the right and option
(hereinafter called "the option") to purchase all or any part of an aggregate of
120,000 shares of Common Stock, par value $0.01 per share (the "Stock"), at the
price of $2.75 per share on the terms and conditions set forth herein. This
option is intended to be an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Duration and Exercisability.
(a) This option shall be exercisable on and after the dates set forth
below for the number of shares of Stock indicated.
Date No. of Shares (Cumulative)
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July 9, 2004 40,000
July 9, 2005 80,000
July 9, 2006 120,000
(b) This option shall in all events terminate on July 8, 2008.
(c) During the lifetime of Optionee, the option shall be exercisable only
by Optionee and shall not be assignable or transferable by Optionee, other than
by will or the laws of descent and distribution.
3. Effect of Termination of Employment.
(a) In the event that Optionee shall cease to be employed by the Company
or its subsidiaries, if any, for any reason other than "for cause," optionee's
death or optionee's "permanent and total disability" (as such term is defined in
Section 22(e)(3) of the Code), Optionee shall have the right to exercise the
option, to the extent of the full number of shares Optionee was entitled to
purchase under the option at the date of termination, at any time up to the
earlier of three (3) months following the date of termination of employment or
the date in paragraph 2(a). For purposes of this section (a) the term "for
cause" shall mean:
(i) a willful refusal to or failure to follow lawful directives of
the Board of Directors, which refusal or failure is not cured within five
(5) days after written notice from the Company or;
(ii) conviction or plea of nolo contendere to (a) a felony or (b) a
crime involving moral turpitude which could result in substantial damage
or embarrassment to the Company.
(b) In the event that Optionee's employment with the Company or its
subsidiaries is terminated "for cause" this option shall terminate immediately.
(c) If Optionee's employment terminates as a result of Optionee's death or
permanent and total disability (as defined in Section 22(e)(3) of the Code), and
Optionee shall not have fully exercised the option, such option may be exercised
at any time within twelve (12) months thereafter by Optionee or the personal
representatives or administrators, or guardians of Optionee, as applicable, or
by any person or persons to whom the option is transferred by will or the
applicable laws of descent and distribution, to the extent of the full number of
shares Optionee was entitled to purchase under the option on the date of
termination of employment, provided that no option shall be exercisable after
the expiration of the term of the option as set forth in paragraph 2(b).
4. Manner of Exercise.
(a) The option can be exercised only by Optionee or other proper party by
delivering within the option period written notice to the Company at its
principal office. The notice shall state the number of shares as to which the
option is being exercised and be accompanied by payment in full of the option
price for all shares designated in the notice. The original Option Agreement and
the number of shares issued to optionee shall be noted on the original
certificate prior to its return to Optionee.
(b) Optionee may pay the option price in cash, by check (bank check,
certified check or personal check), or by money order or as otherwise provided
in the Plan.
5. Miscellaneous.
(a) This option is issued pursuant to the Company's 2003 Incentive Plan
and is subject to its terms which are incorporated by reference herein. The
terms of the Plan are available for inspection during business hours at the
principal office of the Company.
(b) This Agreement shall not confer on Optionee any right with respect to
continuance of employment by the Company or any of its subsidiaries, nor will it
interfere in any way with the night of the Company to terminate such employment
at any time. Optionee shall have none of the rights of a shareholder with
respect to shares subject to this option until such shares shall have been
issued to Optionee upon exercise of this option.
(c) The exercise of all or any parts of this option shall only be
effective at such time that the sale of Stock pursuant to such exercise will not
violate any state or federal securities laws.
(d) If there shall be any change in the Stock of the Company through
merger, consolidation, reorganization, recapitalization, dividend in the form of
Stock (of whatever amount), stock split or other change in the corporate
structure of the Company, and all or any portion of the option shall then be
unexercised and not yet expired, then equitable adjustments in the outstanding
option shall be made by the Company in order to prevent dilution or enlargement
of option rights. Such adjustments shall include, where appropriate, changes in
the number of shares of Stock and the price per share subject to the outstanding
option. This paragraph is intended to ensure equitable adjustments to the option
to reflect changes in the authorized and/or outstanding capital stock of the
Company which affect all shareholders and which arise from reorganization of the
capital structure of the Company. No adjustments shall be made for issuance of
capital stock by the Company for value.
(e) The Company shall at all times during the term of the option reserve
and keep available such number of shares as will be sufficient to satisfy the
requirements of this option.
(f) If Optionee shall dispose of any of the Stock acquired by Optionee
pursuant to the exercise of the option within two (2) years from the date this
option was granted or within one (1) year after the transfer of any such shares
to Optionee upon exercise of this option, then, in order to provide the Company
with the opportunity to claim the benefit of any income tax deduction which may
be available to it under the circumstances, Optionee shall promptly notify the
Company of the dates of acquisition and disposition of such shares, the number
of shares so disposed of, and the consideration, if any, received for such
shares. In order to comply with all applicable federal or state income tax laws
or regulations, the Company may take such action as it deems appropriate to
insure (i) notice to the Company of any disposition of the Stock of the Company
within time periods described above and (ii) that, if necessary, all applicable
federal or state payroll, withholding, income or other taxes are withheld or
collected from Optionee. If the Company is unable to withhold such federal and
state taxes, for whatever reason, Optionee hereby agrees to pay to the Company
an amount equal to the amount the Company would otherwise be required to
withhold under federal or state law. Optionee may, subject to the approval and
discretion of the Board of Directors of the Company, elect to have all or a
portion of such tax withholding obligations satisfied by delivering shares of
the Company's Stock having a fair market value determined on the date of
exercise equal to such obligations.
(g) Optionee agrees that if (i) the Company advises Optionee that it plans
an underwritten public offering of its common stock in compliance with the
Securities Act of 1933, as amended, and that the underwriters have requested
that certain shareholders, including Optionee, refrain from selling, entering
into any contract to sell, or granting any option to buy or otherwise dispose of
part or all of their common stock or common stock purchase rights, then (ii) for
a period not to exceed 180 days from the prospectus, Optionee shall not sell or
contract to sell, or grant an option to buy or otherwise dispose of this option
or any of the underlying Stock without the prior written consent of the
underwriters. This section shall not prohibit any exercise of this option.
(h) Notwithstanding anything in this Agreement to the contrary, in the
event the Company makes any public offering of its securities and determines in
its sole discretion that it is necessary to reduce the number of issued but
unexercised stock purchase rights so as to comply with any state securities or
Blue Sky law limitations with respect thereto, the Board of Directors of the
Company shall have the right (i) to accelerate the exercisability of this option
and the date on which this option must be exercised, provided that the Company
gives optionee 15 days' prior written notice of such acceleration, and (ii) to
cancel any portion of this option or any other option granted to Optionee
pursuant to this option which is not exercised prior to or contemporaneously
with such public offering. To the extent the option is cancelled pursuant to
this Section, the Company will grant Optionee stock appreciation right or other
equivalent compensation which provides the same benefits as the option so
cancelled. Notice shall be deemed given when delivered personally or when
deposited in the United States mail, first class postage prepaid and addressed
to Optionee at the address of Optionee on file with the Company.
(i) Optionee agrees that the Company may require as a condition precedent
to exercisability of this option, Optionee's execution of an agreement
("Buy-Sell Agreement") whereby the Company may repurchase the Stock in certain
circumstances. If the Company has not made demand for execution of a Buy-Sell
Agreement within six months after execution of this Agreement, this condition
shall be irrevocably waived.
(j) The certificates for any Stock acquired pursuant to this option shall
bear an appropriate legend to reflect the restrictions imposed by this
Agreement.
(k) Any dispute arising out of or relating to this Agreement or the
alleged breach of it, or the making of this Agreement, including claims of fraud
and inducement, shall be discussed between the disputing parties in a good faith
effort to arrive at a mutual settlement of any such controversy. If such dispute
cannot be resolved, such dispute shall be settled by binding arbitration.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The arbitrator shall be a retired state or federal
judge or an attorney who has practiced securities or business litigation for at
least ten (10) years. If the parties cannot agree on an arbitrator within twenty
(20) days, any party may request that the chief judge of the District Court of
Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted
pursuant to the provisions of this Agreement and the commercial arbitration
rules of the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement. Limited civil discovery
shall be permitted for the production of documents and taking of depositions.
Unresolved discovery disputes may be brought to the attention of the arbitrator
who may dispose of such disputes. The arbitrator shall have the authority to
award any remedy or relief that a court of this state could order or grant;
provided, however, that punitive or exemplary damages shall not be awarded. The
arbitrator may award to the prevailing party, if any, as determined by the
arbitrator, all of its costs and fees, including the arbitrator's fee,
administrative fees, travel expenses, out-of-pocket expenses and reasonable
attorney's fees. Unless otherwise agreed by the parties, the place of any
arbitration proceedings shall be Hennepin County, Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
GELSTAT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
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Its: Chief Executive Officer
ACCEPTED:
Optionee: /s/ Xxxxxxx Xxxxxxx
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