PROTALEX, INC. New Hope, PA 18938 NONSTATUTORY STOCK OPTION AGREEMENT
PROTALEX,
INC.
000
Xxxxx
Xxxxxx Xxxxx
Xxx
Xxxx,
XX 00000
PROTALEX,
INC., a Delaware corporation (the “Corporation”), and Xxxxxx X. Xxxxx, M.D., an
employee of the Corporation (the “Optionee”), for good and valuable
consideration the receipt and adequacy of which are hereby acknowledged and
intending to be legally bound hereby, agree as follows:
| 1. |
Grant
of Option.
The Corporation hereby confirms the grant to the Optionee on
August 23, 2005 (the “Date of Grant”) of an option (the “Option”) to
purchase 50,000 shares of Common Stock of the Corporation (the “Common
Stock”) at an option price of $2.50 per share, under and subject to the
terms and conditions of this Agreement.
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The
Option confirmed hereby is a “nonstatutory stock option,” i.e., a stock option
which is not intended to qualify under section 422 of the Internal Revenue
Code
of 1986, as amended. Subject to the provisions of Section 3 of this Agreement
regarding the periods during which stock options may be exercised upon
termination of employment (including death of the Optionee), and Section 4
of
this Agreement regarding the exercise of stock options in connection with a
Capital Transaction, as hereinafter defined, the Option is exercisable in
accordance with the following schedule set forth below:
On
or
after the six month anniversary of the Date of Grant as to 6/48 of the shares
subject to the Option; and
On
or
after each monthly anniversary of the Date of Grant thereafter as to an
additional 1/48 of the shares subject to the Option such that the Option shall
be fully exercisable upon the four year anniversary of the Date of Grant;
and
will
expire at the close of business on August 22, 2015. For purposes of the
foregoing schedule, any fractional shares shall be rounded up to the next whole
share. Notwithstanding the foregoing, the Board of Directors of the Corporation
or a designated committee thereof may in its discretion authorize the
acceleration of the date on which the Option may be exercised.
| 2. |
Acceptance
of Grant of Option.
The Optionee accepts the grant of the Option confirmed by this Agreement,
and agrees to be bound by the terms and provisions of this Agreement,
as
this Agreement may be amended from time to time; provided, however,
that
no alteration, amendment, revocation or termination of this Agreement
will, without the written consent of the Optionee, adversely affect
the
rights of the Optionee with respect to the Option.
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| 3. |
Termination
of Eligibility.
If the Optionee ceases to be employed by the Corporation, or its parent
or
subsidiary, for any reason (other than for “cause,” as hereinafter
defined, or such Optionee’s death), any vested Option granted hereunder to
the Optionee shall expire three months after the date of the occurrence
giving rise to such termination of eligibility (or 1 year in the
event the Optionee is “disabled,” as defined in
Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended) or upon the date it expires by its terms, whichever is earlier.
Any Option that has not vested in the Optionee as of the date of such
termination shall immediately expire and shall be null and void. The
Board
of Directors or designated committee thereof shall, in its sole and
absolute discretion, decide, using the provisions set forth in Treasury
Regulations Section 1.421-7(h), whether an authorized leave of
absence or absence for military or governmental service, or absence
for
any other reason, shall constitute termination of eligibility for purposes
of this Section.
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If
the
Optionee ceases to be employed by the Corporation, or its parent or subsidiary,
and such termination is as a result of “cause,” as hereinafter defined, then all
Options granted hereunder to such Optionee shall expire on the date of the
occurrence giving rise to such termination of eligibility or upon the date
it
expires by its terms, whichever is earlier, and the Optionee shall have no
rights with respect to any unexercised Options. For purposes of this Agreement,
“cause” shall mean the Optionee’s personal dishonesty, misconduct, breach of
fiduciary duty, incompetence, intentional failure to perform stated obligations,
willful violation of any law, rule, regulation or final cease and desist order,
or any material breach of any provision of this Agreement or any employment
agreement. The Board of Directors shall have complete discretion and authority
to determine whether the termination of the Optionee is for cause.
In
the
event the Optionee shall die, the Option may be exercised (subject to the
condition that no Option shall be exercisable after its expiration and only
to
the extent that the Optionee’s right to exercise such Option had accrued at the
time of the Optionee’s death) at any time within six months after the Optionee’s
death by the executors or administrators of the Optionee or by any person or
persons who shall have acquired the Option directly from the Optionee by bequest
or inheritance. Any Option that has not vested in the Optionee as of the date
of
death or termination of employment, whichever is earlier, shall immediately
expire and shall be null and void.
| 4. |
Capital
Transactions.
Upon a sale or exchange of all or substantially all of the assets of
the
Corporation, a merger or consolidation in which the Corporation is
not the
surviving corporation, a merger, reorganization or consolidation in
which
the Corporation is the surviving corporation and shareholders of the
Corporation exchange their stock for securities or property, a liquidation
of the Corporation or similar transaction, as determined by the Board
of
Directors of the Corporation or a designated committee thereof (“Capital
Transaction”), the Options, whether vested or unvested, shall terminate,
unless the Options are assumed by a successor corporation in a merger
or
consolidation, immediately prior to such Capital Transaction; provided,
however, that if the outstanding Options will not be assumed by a
successor corporation in a merger or consolidation, subject to terms
approved by the Board of Directors of the Corporation or a designated
committee thereof, the Optionee will have the right, during the 15
days
prior to such Capital Transaction, to exercise all Options. For purposes
of this right of exercise prior to a Capital Transaction in which the
Options will not be assumed, all Options granted to the Optionee will
be
considered fully vested. The Corporation shall, subject to any
nondisclosure provisions, attempt to provide the Optionee at least
15 days
notice of the Option termination date. The Board of Directors of the
Corporation or a designated committee thereof may (but shall not be
obligated to) (i) accelerate the vesting of the Option or
(ii) apply the foregoing provisions, including but not limited to
termination of the Options granted pursuant to this Agreement, in the
event there is a sale of 51% or more of the stock of the Corporation
in
any two year period or a transaction similar to a Capital
Transaction.
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| 5. |
Option
Not Transferable.
The Option shall not be transferable otherwise than by Will or by the
laws
of descent and distribution of the state of domicile of the Optionee
at
the time of death, and the Option shall be exercisable during the lifetime
of the Optionee only by the Optionee.
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| 6. |
Procedure
for Exercise of Option.
The Option may be exercised only by execution and delivery by the Optionee
to the Corporation of an exercise form or forms prescribed by the
Committee. Each exercise form must set forth the number of whole shares
of
Common Stock as to which the Option is exercised and must be dated
and
signed by the person exercising the Option. The exercise is not effective
until the Corporation receives payment of the full option price for
the
number of shares of Common Stock as to which the Option is exercised.
The
option price may be paid by certified or bank cashier’s
check.
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If
a
person other than the Optionee exercises the Option, the exercise material
must
include proof satisfactory to the Corporation of the right of such person to
exercise the Option, and the signature on all certificates or Assignments
Separate from Certificate for shares delivered in payment of the option price
must be guaranteed by a commercial bank or trust company or by a firm having
membership in the New York Stock Exchange, Inc., the American Stock Exchange,
Inc., or the National Association of Securities Dealers, Inc.
The
date
of exercise of the Option is the date on which the exercise form or forms,
proof
of right to exercise (if required) and payment of the option price in cash
are
received by the Corporation at the address set forth on the cover page of this
Agreement, Attention: Corporate Secretary.
| 7. |
Issuance
of Certificates.
Subject to this Section 7, the Corporation will issue a certificate
or
certificates representing the number of shares of Common Stock for
which
the Option is exercised as soon as practicable after the date of exercise.
Unless the person exercising the Option otherwise directs the Corporation
in writing, the certificate or certificates will be registered in the
name
of the person exercising the Option and delivered to such person.
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The
obligation of the Corporation to issue shares on exercise of this Option is
subject to the effectiveness of a Registration Statement under the Securities
Act of 1933, as amended, (the “Act”) with respect to such shares, and all other
applicable state securities laws. The Corporation is not obligated to file
such
a Registration Statement. If at the time of exercise of the Option, no such
Registration Statement is in effect, the issuance of shares on exercise of
the
Option may also be made subject to such restrictions on the transfer of the
shares, including the placing of an appropriate legend on the certificates
restricting the transfer thereof, and to such other restrictions as the Board
of
Directors or designated committee thereof, on the advice of counsel, may deem
necessary or appropriate to prevent a violation of applicable securities laws.
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| 8. |
Adjustment.
Subject to any required action by shareholders of the Corporation,
the
number of shares of stock covered by the Option, and the exercise price
thereof, shall be proportionately adjusted for any increase or decrease
in
the number of issued shares of stock of the Corporation resulting from
a
subdivision or consolidation of shares, including, but not limited
to, a
stock split, reverse stock split, recapitalization, continuation or
reclassification, or the payment of a stock dividend (but only on the
stock) or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Corporation. Any fraction
of a share subject to the Option that would otherwise result from an
adjustment pursuant to this Section shall be rounded downward to the
next full number of shares without other compensation or consideration
to
the holder of the Option.
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| 9. |
Withholding
of Taxes.
Federal, state, local or foreign income or other taxes may be required
to
be withheld by the Corporation on any compensation income resulting
from
the Option, and the Optionee will pay any such taxes directly to the
Corporation upon request.
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If
the
Optionee does not pay any taxes required to be withheld directly to the
Corporation within 10 days after any request referred to in the preceding
paragraph, the Corporation may withhold such taxes from any other compensation
to which the Optionee is entitled from the Corporation. The Optionee shall
hold
the Corporation harmless in acting to satisfy the withholding obligation in
this
manner if it becomes necessary to do so.
| 10. |
Interpretation
of Agreement.
Any dispute or disagreement which arises under or in any way relates
to
the interpretation or construction of this Agreement will be resolved
by
the Board of Directors of the Corporation or a designated committee
thereof and the decision of the Board, or committee, will be final,
binding and conclusive for all purposes.
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| 11. |
Effect
of Agreement on Rights of Corporation and Optionee.
This Agreement does not confer any right on the Optionee to continue
in
the employment of the Corporation or any of its subsidiaries or interfere
in any way with the rights of the Corporation or any subsidiary to
terminate the employment of the Optionee.
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| 12. |
Binding
Effect.
This Agreement will be binding upon the successors and assigns of the
Corporation and upon the legal representatives, heirs and legatees
of the
Optionee.
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| 13. |
Entire
Agreement.
This Agreement constitutes the entire agreement between the Corporation
and the Optionee and supersedes all prior agreements and understandings,
oral or written, between the Corporation and the Optionee with respect
to
the subject matter of this Agreement.
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| 14. |
Amendment.
This Agreement may be amended only by a written instrument signed by
the
Corporation and the Optionee.
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| 15. |
Section
Headings.
The Section headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation
of any of the provisions of this Agreement.
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| 16. |
Governing
Law.
This Agreement will be governed by, and construed and enforced in
accordance with, the laws of the Commonwealth of Pennsylvania.
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IN
WITNESS WHEREOF, the Corporation and the Optionee have executed this Agreement
as of the Date of Grant.
| PROTALEX, INC. | ||
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| By: | /s/ Xxxxxx X. Xxxx | |
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Xxxxxx
X. Xxxx
Chief
Executive Officer
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| WITNESS: | OPTIONEE: | |
| /s/ Xxxxxx X. Xxxxx, M.D. | ||
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Xxxxxx
X. Xxxxx, M.D.
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