<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1999.
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
ONTRO, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 33-0638356
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13250 GREGG STREET, POWAY, CALIFORNIA 92064
(619) 486-7200
(Address of Principal Executive Offices)
ONTRO, INC. 1996 STOCK OPTION PLAN MONACO 1997 OPTION AGREEMENT
COSTON 1996 AND 1998 OPTION AGREEMENTS THOROGOOD 1996 OPTION AGREEMENT
MASON 1996 OPTION AGREEMENT WRIGHT 1996 OPTION AGREEMENT
HORSMAN 1996 OPTION AGREEMENT HANSON 1996 AND 1998 OPTION AGREEMENTS
PETTERSON 1996 OPTION AGREEMENT POTOMAC 1996 OPTION AGREEMENT
FISHER 1996 OPTION AGREEMENT HULL 1997 OPTION AGREEMENT
FITZPATRICK 1997 OPTION AGREEMENT JOHNSON 1997 OPTION AGREEMENT
MAURIELLO 1997 OPTION AGREEMENT LA BARBERA 1997 OPTION AGREEMENT
CANNON 1997 OPTION AGREEMENT MOUL 1998 OPTION AGREEMENTS
SCHWEGMAN 1997 OPTION AGREEMENT TAYLOR 1998 OPTION AGREEMENTS
NEWHALL 1997 OPTION AGREEMENT
CT CORPORATION SYSTEM
818 WEST SEVENTH STREET, LOS ANGELES, CA 90017, (213) 627-8252
(Name, address and telephone number of agent for service)
------------------------
COPIES TO:
FISHER THURBER, LLP
DAVID A. FISHER
TIMOTHY J. FITZPATRICK
4225 Executive Square, Suite 1600
La Jolla, CA 92037-1483
Tel. (619) 535-9400
Fax (619) 535-1616
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, no par value(3) 1,548,065 shares $ 2.75 $ 4,257,179 $ 1,183
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</TABLE>
<PAGE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Ontro, Inc. 1996 Stock Option
Plan or the various option agreements described above by reason of any
stock dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration which results in an increase
in the number of the Company's outstanding shares of Common Stock.
(2) Estimated solely for the purpose of computing the amount of the
registration fee under Rule 457(h) of the Securities Act of 1933, as
amended, based on the average of the high and low prices of the Company's
Common Stock as reported on the Nasdaq Stock Market on May 18, 1999.
(3) Consists of:
545,400 shares to be issued under the Ontro, Inc. 1996 Stock Option Plan;
70,000 shares to be issued under the Coston 1996 and 1998 Stock Option
Agreements;
20,000 shares to be issued under the Mason 1996 Stock Option Agreement;
20,000 shares to be issued under the Horsman 1996 Stock Option Agreement;
20,000 shares to be issued under the Petterson 1996 Stock Option
Agreement;
30,000 shares to be issued under the Fisher 1997 Stock Option Agreement;
10,000 shares to be issued under the Fitzpatrick 1997 Stock Option
Agreement;
5,000 shares to be issued under the Mauriello 1997 Stock Option
Agreement;
1,500 shares to be issued under the Cannon 1997 Stock Option Agreement;
1,500 shares to be issued under the Schwegman 1997 Stock Option
Agreement;
1,000 shares to be issued under the Newhall 1997 Stock Option Agreement;
1,000 shares to be issued under the Monaco 1997 Stock Option Agreement;
250,930 shares to be issued under the Thorogood 1996 Stock Option
Agreement;
34,335 shares to be issued under the Wright 1996 Stock Option Agreement;
298,000 shares to be issued under the Hanson 1996 and 1998 Stock Option
Agreements;
54,400 shares to be issued under the Potomac 1996 Stock Option Agreement;
20,000 shares to be issued under the Hull 1997 Stock Option Agreement;
5,000 shares to be issued under the Johnson 1997 Stock Option Agreement;
20,000 shares to be issued under the La Barbera 1997 Stock Option
Agreement;
70,000 shares to be issued under the Moul 1998 Stock Option Agreements;
and
70,000 shares to be issued under the Taylor 1998 Stock Option Agreements.
ii
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The Registrant hereby incorporates by reference into this Registration
Statement the following documents previously filed with the Commission:
(a) The Registrant's Registration Statement on Form SB-2 dated May 11,
1998.
(b) The Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1998.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of this registration statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Certain legal matters in connection with the issuance of the securities
offered hereby have been passed upon for the Company by Fisher Thurber LLP, La
Jolla, California 92037. Partners, associates and employees of Fisher Thurber
own options to purchase an aggregate of 50,000 shares of Common Stock
exercisable at $2.50 per share, all of which were acquired for services
rendered.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The statutes, charter provisions, Bylaws, Indemnification Agreements, or
other arrangements under which any controlling person, director or officer of
the Registrant is insured or indemnified in any manner against any liability
which he may incur in his capacity as such, are as follows:
The Company has adopted provisions in its Articles that eliminate to the
fullest extent permissible under California law the liability of its directors
to the Company for monetary damages. Such limitation of liability does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
The Company's Articles and Bylaws provide that the Company shall indemnify
its directors and officers to the fullest extent permitted under California law,
and the forms of indemnification include indemnification in circumstances in
which indemnification is otherwise discretionary under California law. The
Company has entered into indemnification agreements with its officers and
directors containing provisions that may require the Company, among other
things, to indemnify the officers and directors against certain liabilities that
may arise by reason of their status or service as directors or officers (other
than liabilities arising from intentional or knowing and culpable violations of
law)
<PAGE>
and to advance their expenses incurred as a result of any proceeding against
them as to which they could be indemnified. The Company has obtained an
insurance policy covering officers and directors for claims made that such
officers or directors may otherwise be required to pay or for which the
Company is required to indemnify them, subject to certain exclusions.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors of the Company pursuant to the foregoing
provision, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibits
_______ _______
<S> <C>
4.1 Ontro 1996 Stock Option Plan.(1)
4.2 Form of Incentive Stock Option Agreement under Ontro 1996 Stock Option
Plan.(2)
4.3 Form of Nonqualified Stock Option Agreement under Ontro 1996 Stock
Option Plan.(3)
4.4 Form of Stock Option Agreement between the registrant and Robert F.
Coston, James W. Mason, Robert B. Horsman, Tor Petterson, David A.
Fisher, Timothy J. Fitzpatrick, Nancy L. Mauriello, Merrill R. Cannon,
Angela M. Schwegman, Rachel A. Newhall, Nancy L. Monaco, D. Scott
Thorogood, Clifford Wright, C. Rowland Hanson, L. Lawrence Potomac,
Fred Hull, Suzanne Johnson and Sal La Barbera.(4)
4.5 Form of Stock Option Agreement between the registrant and Robert F.
Coston, Douglas W. Moul, Carroll E. Taylor and C. Rowland Hanson.(4)
5 Opinion and Consent of Fisher Thurber LLP.(4)
23.1 Consent of KPMG LLP dated May 17, 1999.(4)
23.2 Consent of Fisher Thurber LLP (contained in Exhibit 5).
24 Power of Attorney. Reference is made to the signature page of this
Registration Statement.
</TABLE>
____________________
(1) Incorporated by reference to Exhibit 10.17 to Registrant's Form SB-2 which
became effective on May 11, 1998.
(2) Incorporated by reference to Exhibit 10.18 to Registrant's Form SB-2 which
became effective on May 11, 1998.
(3) Incorporated by reference to Exhibit 10.19 to Registrant's Form SB-2 which
became effective on May 11, 1998.
(4) Filed herewith.
2
<PAGE>
ITEM 9. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement; PROVIDED, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) shall not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act") that are incorporated herein by reference;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the Registrant's 1996 Stock Option Plan.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of a
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference into this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be in the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8, and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Poway, State of California, on this 19th day of
May, 1999.
Ontro, Inc.
By: /s/ James A. Scudder
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James A. Scudder, President, Chief Executive Officer and Director
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James A. Scudder, as his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent, or
their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES
/s/ James A. Scudder /s/ James L. Berntsen
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James A. Scudder James L. Berntsen
President, Chief Executive Officer Executive Vice President and
and Director Director
May 19, 1999 May 19, 1999
/s/ Robert F. Coston /s/ Douglas W. Moul
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Robert F. Coston Douglas W. Moul
Director Director
May 19, 1999 May 19, 1999
/s/ Carroll E. Taylor
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Carroll E. Taylor
Director
May 19, 1999
4
<PAGE>
INDEX TO EXHIBITS TO FORM S-8
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
4.1 Ontro 1996 Stock Option Plan.(1)
4.2 Form of Incentive Stock Option Agreement under Ontro 1996 Stock
Option Plan.(2)
4.3 Form of Nonqualified Stock Option Agreement under Ontro 1996
Stock Option Plan.(3)
4.4 Form of Stock Option Agreement between the registrant and Robert
F. Coston, James W. Mason, Robert B. Horsman, Tor Petterson,
David A. Fisher, Timothy J. Fitzpatrick, Nancy L. Mauriello,
Merrill R. Cannon, Angela M. Schwegman, Rachel A. Newhall, Nancy
L. Monaco, D. Scott Thorogood, Clifford Wright, C. Rowland
Hanson, L. Lawrence Potomac, Fred Hull, Suzanne Johnson and Sal
La Barbera.(4)
4.5 Form of Stock Option Agreement between the registrant and Robert
F. Coston, Douglas W. Moul, Carroll E. Taylor and C. Rowland
Hanson.(4)
5 Opinion and Consent of Fisher Thurber LLP.(4)
23.1 Consent of KPMG LLP dated May 17, 1999.(4)
23.2 Consent of Fisher Thurber LLP (contained in Exhibit 5).
24 Power of Attorney. Reference is made to the signature page of
this Registration Statement.
</TABLE>
____________________
(1) Incorporated by reference to Exhibit 10.17 to Registrant's Form SB-2 which
became effective on May 11, 1998.
(2) Incorporated by reference to Exhibit 10.18 to Registrant's Form SB-2 which
became effective on May 11, 1998.
(3) Incorporated by reference to Exhibit 10.19 to Registrant's Form SB-2 which
became effective on May 11, 1998.
(4) Filed herewith.
5
<PAGE>
EXHIBIT 4.4
FORM OF STOCK OPTION AGREEMENT BETWEEN THE REGISTRANT AND ROBERT F.
COSTON, JAMES W. MASON, ROBERT B. HORSMAN, TOR PETTERSON, DAVID A.
FISHER, TIMOTHY J. FITZPATRICK, NANCY L. MAURIELLO, MERRILL R.
CANNON, ANGELA M. SCHWEGMAN, RACHEL A. NEWHALL, NANCY L.
MONACO, D. SCOTT THOROGOOD, CLIFFORD WRIGHT, C. ROWLAND
HANSON, L. LAWRENCE POTOMAC, FRED HULL, SUZANNE
JOHNSON AND SAL LA BARBERA
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE SECURITIES LAWS. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, PLEDGED, MORTGAGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED (1) WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR (2) UNLESS ONTRO, INC.
HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO ONTRO, INC. AND ITS COUNSEL
THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
NONQUALIFIED
STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement is made effective December 31,
1996 ("Effective Date") by and between ONTRO, INC., a California corporation
("Ontro" or "Corporation"), and L. LAWRENCE POTOMAC ("Optionee").
RECITALS
A. Optionee is a Consultant to the Corporation, and the Corporation
desires to afford Optionee the opportunity to obtain stock ownership in
Corporation so that Optionee may have a significant proprietary interest in
Corporation's success.
B. The Board of Directors of the Corporation ("Board") has granted to
Optionee a Non-Qualified Stock Option ("Option") upon the terms and subject to
the conditions of this Agreement.
AGREEMENT
In consideration of services rendered and to be rendered by Optionee to
Corporation and of the agreements set forth below the parties agree as follows:
1
<PAGE>
SECTION 1
GRANT OF OPTION
1.1 GRANT OF OPTION. The Corporation hereby grants to Optionee this
Non-Qualified Stock Option, subject to the terms and conditions of this
Agreement. The Option granted herein shall allow the Optionee to purchase up
to an aggregate of FIFTY-NINE THOUSAND FOUR HUNDRED (59,400) SHARES ("Option
Shares") of the Corporation's common stock.
1.2 TERM OF OPTION. Subject to the terms and conditions of this
Agreement, the Corporation hereby grants to Optionee an Option to purchase
shares of the Corporation's common stock from the Corporation, during the period
ending five (5) years from the Effective Date ("Expiration Date").
1.3 EXERCISE PRICE. The shares of common stock underlying this Option may
be purchased for ONE TENTH OF ONE CENT ($.001) per share ("Exercise Price").
For the purposes of this Agreement, "exercise" refers to the procedure by which
Optionee elects to purchase a designated number of shares of the Corporation's
common stock at the Exercise Price per share.
1.4 CONDITIONS OF OPTION. Optionee understands that he may only exercise
this Option and purchase the Option Shares subject to the terms and conditions
as set forth in this Agreement.
SECTION 2
EXERCISE OF OPTION
2.1 EXERCISE DATES. Subject to the limitations set forth in Section 2.2,
the Optionee may elect to purchase some or all of the Option Shares at one or
more times during the term of this Option.
2.2 VESTING CONDITIONS. The ability of the Optionee to exercise this
Option and purchase the Option shares is subject to certain vesting conditions.
Optionee shall accrue the right to exercise the Option and purchase all or any
portion of the Option Shares on the thirtieth day from the effective date of
this Agreement.
2.3 MANNER OF EXERCISE OF OPTION AND PAYMENT FOR COMMON STOCK. Optionee
may elect to purchase the number of Option Shares specified in Section 2.2
above, (or in the case of his death, by his or her legatee(s) under his last
will or by his executors, personal representatives or distributees) by giving
written notice to the Secretary of the Corporation, setting forth the number of
Option Shares he is electing to purchase. The Exercise Price shall be paid in
full (i) in cash, (ii) in shares of the Corporation's common stock valued at the
closing price for the common stock on the NASDAQ Stock Market on the date of
exercise (or the trading day last preceding the date of exercise), (iii) by
agreeing to surrender a portion of the Option Shares then owned and available
2
<PAGE>
to be purchased by him valued at the excess of (A) the closing price for the
common stock on the NASDAQ Stock Market on the date of Optionee's election to
purchase (or the trading day last preceding the date of Optionee's election to
purchase), over (B) the aggregate Exercise Price of the Option Shares subject to
such portion of this Option, or (iv) by such other medium of payment as the
Board, in its discretion, shall authorize, or by any combination of (i), (ii),
(iii) and (iv), at the discretion of the Board. As soon as reasonably possible
following such notice of election to purchase, a certificate representing the
Option Shares purchased, registered in the name of the Optionee, shall be
delivered to the Optionee.
2.4 RULE 16b-3. Options granted to individuals subject to Section 16 of
the Securities Exchange Act of 1934 ("34 Act") shall, to the extent practicable,
desirable, or as determined by the Board of Directors, comply with the
applicable provisions of Rule 16b-3 of the 34 Act and may, as determined by the
Board of Directors, contain such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
34 Act.
2.5 STOCK CERTIFICATES. Promptly after any exercise in whole or in part
of the Option by Optionee, the Corporation shall deliver to Optionee a
certificate or certificates for the number of Shares with respect to which the
Option was so exercised, registered in Optionee's name.
SECTION 3
DURATION OF OPTION
3.1 The Option, to the extent not previously exercised, shall terminate
upon the earliest of the following dates:
3.1.1 On the Expiration Date; or
3.1.2 In the event of Optionee's death, the Optionee's estate or a
person who acquired the right to purchase the deceased Optionee's Option Shares
by bequest or inheritance may elect to purchase the Option Shares, but only
within twelve (12) months following the date of death, and only to the extent
that the Optionee was entitled to purchase the Option Shares at the date of
death (but in no event later than the Expiration Date). To the extent that
Optionee was not entitled to purchase Option Shares at the date of death, and to
the extent the Optionee's estate or a person who acquired the right to purchase
such Option Shares does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.
3
<PAGE>
SECTION 4
NONTRANSFERABILITY
4.1 RESTRICTION. The Option is not transferable by Optionee otherwise
than by testamentary will or the laws of descent and distribution and, during
Optionee's lifetime, may be exercised only by Optionee or Optionee's guardian or
legal representative. No assignment, sale, pledge, hypothecation, disposition
or transfer of the Option, whether voluntary, involuntary, or by operation of
law or otherwise, except by testamentary will or the laws of descent and
distribution, shall vest in the assignee or transferee any interest or right,
but immediately upon any attempt to assign or transfer the Option, the Option
shall terminate and be of no force or effect. This Option shall not be made
subject to execution, attachment, or similar process.
4.2 EXERCISE IN EVENT OF DEATH OR DISABILITY. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances when
the provision should logically be construed to apply to the Optionee's guardian,
legal representative, executor, administrator, or the person or persons to whom
the Option may be transferred by testamentary will or by the laws of descent and
distribution, the word "Optionee" shall be deemed to include such person or
persons.
SECTION 5
NO RIGHTS AS SHAREHOLDER PRIOR TO EXERCISE
Optionee shall not be deemed for any purpose to be a shareholder of
Corporation with respect to any shares subject to the Option under this
Agreement to which the Optionee has not exercised his election to purchase.
SECTION 6
ADJUSTMENTS
6.1 NO EFFECT ON CHANGES IN CORPORATION'S CAPITAL STRUCTURE. The
existence of the Option shall not affect in any way the right or power of
Corporation or its shareholders to make or authorize any adjustments,
recapitalization, reorganization, or other changes in Corporation's capital
structure or its business, or any merger or consolidation of Corporation, or any
issue of bonds, debentures, preferred or preference stocks ahead of or affecting
the Option Shares, or the dissolution or liquidation of Corporation, or any sale
or transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
6.2 ADJUSTMENT TO OPTION SHARES. The Option Shares are subject to
adjustment upon changes in capitalization, dissolution, merger, asset sale or a
change in control as follows:
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Corporation, the number of Option Shares of any unexercised
portion of this Option, as well
4
<PAGE>
as the exercise price per share of said unexercised Option Shares, shall be
proportionately adjusted for any increase or decrease in the number of the
Corporation's issued and outstanding shares resulting from a stock split,
reverse stock split, combination or reclassification of the shares, or any
other increase or decrease in the number of issued shares effected without
receipt of consideration by the Corporation; provided, however, that
conversion of any convertible securities of the Corporation shall not be
deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board of Directors, whose determination in
that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Corporation of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Option Shares.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Corporation, to the extent that an Option has
not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board of Directors may, in the
exercise of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board of Directors and give each Optionee
the right to exercise his or her Option as to all or any part of the Option
Shares, including Shares as to which the Option would not otherwise be
exercisable.
(c) MERGER OR CONSOLIDATION. In the event of a merger of the
Corporation with or into another corporation, or the sale of substantially all
of the assets of the Corporation, outstanding Options shall be subject to the
agreement of merger or consolidation. Such agreement may provide for the
assumption of outstanding Options by the surviving corporation or its parent or
for their continuation by the Corporation (if the Corporation is the surviving
corporation). In the event the Corporation is not the surviving corporation and
the surviving corporation will not assume the outstanding Options, the agreement
of merger or consolidation may provide for payment of a cash settlement for
exercisable Options equal to the difference between the amount to be paid for
one share under such agreement and the Exercise Price and for purposes of such
payments all vesting conditions set forth in Section 2 hereof shall be deemed
satisfied or waived as of the date of merger or sale of substantially all of the
Corporation's assets.
In connection with any adjustment under this Section 6 resulting in a
fractional share interest, such interest may be rounded down to the nearest
whole share if such interest is less than 0.5 share; otherwise such fractional
share interest may be rounded up to the nearest whole share.
SECTION 7
COMPLIANCE WITH SECURITIES LAWS
7.1 NO EXERCISE UNTIL COMPLIANCE. If the Board of Directors at any time
determines that registration or qualification of the Option Shares or the Option
is required under state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable,
5
<PAGE>
then the Option may not be exercised, in whole or in part, until such
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Board of Directors, in
their absolute discretion.
7.2 INVESTMENT REPRESENTATIONS RE: FEDERAL SECURITIES LAWS. The Option
and the Option Shares as of the date hereof, have not been registered under the
Securities Act of 1933 (the "33 Act") and the Corporation has no plans to
register them. The Optionee represents that the grant of this Option, and if
this Option is exercised in whole or in part at a time when there is NOT in
effect, under the 33 Act, a registration statement applicable to the Option
Shares issuable upon exercise, the receipt of this Option, and the purchase of
any Option Shares is expressly conditioned upon the following representations,
warranties and covenants:
(a) Any Option Shares purchased upon exercise of this Option shall be
acquired for the Optionee's account for investment only, and not with a view to,
or for sale in connection with, any distribution of the Option Shares in
violation of the 33 Act, or any rule or regulation under the 33 Act. Further,
the Optionee either has a pre-existing personal or business relationship with
the Corporation or any of its officers, directors or controlling persons, or by
reason of Optionee's business or financial experience, or the business or
financial experience of their professional advisors who are unaffiliated with
and not compensated by the Corporation, they could reasonably be assumed to have
the capacity to protect their own interests in connection with the grant of this
Option and the exercise and sale of the Option Shares.
(b) The Optionee has had such opportunity as he or she has deemed
adequate to obtain from representatives of the Corporation such information as
is necessary to permit the Optionee to evaluate the merits and risks of his or
her investment in the Corporation.
(c) The Optionee is able to bear the economic risk of holding shares
acquired pursuant to the exercise of the Option for an indefinite period.
(d) The Optionee understands that:
(i) the shares acquired pursuant to the exercise of the
Option will not be registered under the 33 Act or under any state securities
laws and are "restricted securities" within the meaning of Rule 144 under the
33 Act;
(ii) such shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the 33 Act;
(iii) in any event, the exemption from registration under
Rule 144 will not be available for at least two (2) years, and even then will
not be available unless a public market then exists for the shares, adequate
information concerning the Corporation is then available to the public, and
other terms and conditions of Rule 144 are complied with; and
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(iv) there is currently no registration statement on file
with the Securities and Exchange Commission with respect to the Option Shares
and the Corporation has no obligation or current intention to register any
shares acquired pursuant to the exercise of this Option under the 33 Act.
Upon any exercise of this Option, the Optionee shall be deemed to have
reaffirmed, as of the date of such exercise, the representations made in this
Section 7.2.
SECTION 8
LEGEND ON STOCK CERTIFICATES
All stock certificates representing Option Shares issued to the Optionee
upon exercise of this Option shall have affixed thereto a legend substantially
in the following form, in addition to any other legends required by applicable
state law:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") OR UNDER ANY STATE SECURITIES LAWS. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND NOT
WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
SOLD, PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED (1) WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND UNDER ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) UNLESS ONTRO, INC. HAS RECEIVED
AN OPINION OF COUNSEL SATISFACTORY TO ONTRO, INC. AND
ITS COUNSEL THAT AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
SECTION 9
MISCELLANEOUS PROVISIONS
9.1 VIOLATION. Any provision of this Agreement to the contrary
notwithstanding, the Option shall not be exercisable at any time, in whole or in
part, if issuance and delivery of the Option Shares would violate any law or
regulation.
9.2 DISPUTES. Any dispute or disagreement that may arise under or as a
result of this Agreement, or any question as to the interpretation of this
Agreement, may be determined by the Board in its absolute and uncontrolled
discretion, and any such determination shall be final, binding, and conclusive
on all affected persons.
9.3 NOTICES. Any notice that a party may be required or permitted to give
to the other shall be in writing, and may be delivered personally or by
certified or registered mail, postage prepaid, addressed to the Corporation at
12675 Danielson Court, Suite 401, Poway, California 92064,
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and to the Optionee as such address is set forth on the Corporations books
and records or such other address as either party, by notice to the other,
may designate in writing from time to time;
9.4 TAX ELECTIONS. Optionee acknowledges that he has considered the
advisability of all tax elections in connection with the exercise of the
Option and purchase of the Option Shares hereunder, and the execution and
delivery of this Agreement, including the making of an election under Section
83(b) of the Internal Revenue Code of 1986, as amended, and any similar
elections under California or applicable state law, and that the Corporation
has no responsibility for the making of any such election. Optionee further
acknowledges he shall consult with his tax advisor, at his own expense,
regarding the tax consequences of the grant of the Option, the exercise of
the Option and the sale of the Option Shares prior to the signing of this
Agreement.
9.5 LAW GOVERNING. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
9.6 VENUE. Venue for any action arising out of this Agreement shall be in
the appropriate court located in San Diego County, California.
9.7 TITLES AND CAPTIONS. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor effect the interpretation of this Agreement.
9.8 ENTIRE AGREEMENT. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
9.9 AGREEMENT BINDING. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
9.10 COMPUTATION OF TIME. In computing any period of time pursuant to this
Agreement, the day of the act, event or default from which the designated period
of time begins to run shall be included, unless it is a Saturday, Sunday, or a
legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday, in which event the period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
9.11 PRONOUNS AND PLURALS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular, or plural as
the identity of the person or persons may require.
9.12 PRESUMPTION. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
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9.13 FURTHER ACTION. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
9.14 PARTIES IN INTEREST. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
9.15 SAVINGS CLAUSE. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
9.16 UNREGISTERED SHARES. Optionee represents that he/she understands that
the Option Shares are not now registered under the Securities Act of 1933 or
under any state securities law and that the Option Shares, upon exercise, may
not be so registered in the foreseeable future.
9.17 REPRESENTATION BY COUNSEL. Optionee represents that he has been
advised that he is not being represented in this transaction by the
Corporation's attorneys and that Optionee has been advised to seek separate
legal counsel for advice in this matter and has done so to the extent desired.
EXECUTED at Poway, California by:
ONTRO, INC.
a California corporation
By: /s/ James A. Scudder
-----------------------------------
JAMES A. SCUDDER, President
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Non-Qualified Stock Option Agreement, accepts the option
granted thereunder and agrees to the terms and conditions thereof.
/s/ L. Lawrence Potomac
Dated: January 27, 1997 --------------------------------------
L. LAWRENCE POTOMAC, Optionee
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ONTRO, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise my Non-Qualified Stock Option granted by Ontro, Inc. and
seek to purchase __________________________ common shares of the Corporation
pursuant to said Option. I understand that this exercise is subject to all the
terms and provisions of the Non-Qualified Stock Option Agreement.
Enclosed is my check in the sum of $___________ in payment for such shares.
I hereby represent that the shares of common shares to be delivered to me
pursuant to the above-mentioned exercise of said Option are being acquired by me
as an investment and not with a view to, or for sale in connection with, the
distribution of any thereof.
Dated: ,
-------------------- ------
- ----------------------------------
Signature of Optionee
Receipt is hereby acknowledged of the delivery to me by Ontro, Inc. of
certificates for _____________ common shares of the Corporation purchased by me
pursuant to the terms and conditions of the Non-Qualified Stock Option Agreement
referred to above.
Dated: ,
-------------------- ------
- ----------------------------------
Signature of Optionee
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EXHIBIT 4.5
FORM OF STOCK OPTION AGREEMENT BETWEEN THE REGISTRANT AND
ROBERT F. COSTON, DOUGLAS W. MOUL, CARROLL E. TAYLOR
AND C. ROWLAND HANSON
<PAGE>
THESE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR UNDER ANY STATE SECURITIES
LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT, AND NOT WITH A VIEW
TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, PLEDGED, MORTGAGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED (1) WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS, OR (2) UNLESS ONTRO,
INC. HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT AND ITS COUNSEL THAT
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
ONTRO, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of September 16, 1998 by and between Ontro, Inc. and Carroll
Taylor (the "Optionee").
The Company has granted to the Optionee an option to purchase certain
Shares, upon the terms and conditions set forth in this Option Agreement (the
"Option").
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "DATE OF OPTION GRANT" means September 16, 1998.
(b) "NUMBER OF OPTION SHARES" means Fifty Thousand (50,000)
Shares as adjusted from time to time pursuant to Section 9.
(c) "EXERCISE PRICE" means One and 88/00 Dollars ($1.88) per
Share, as adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means September 16, 1999.
(e) "OPTION EXPIRATION DATE" means September 16, 2005.
(f) VESTING PRECONDITIONS; subject to the provisions of Sections
5 and 8 the Option may be exercised as to Ten Thousand (10,000) Shares on each
of September 16, 1999, September 16, 2000, September 16, 2001, September 16,
2002 and September 16, 2003.
(g) "COMPANY" means Ontro, Inc. or any successor corporation
thereto.
(h) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
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1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is intended to include the conjunctive as well
as the disjunctive.
2. NOTICE OF GRANT OF OPTION. On the terms and conditions set forth
herein, the Company grants to Optionee on the Date of the Option Grant the
option to purchase the Number of Option Shares at the Exercise Price, all as set
forth in Section 1.1.
3. TAX CONSEQUENCES.
3.1 TAX STATUS OF THE OPTION. This Option is intended to be a
Non-Qualified Stock Option. The Optionee should consult with the Optionee's own
tax advisor regarding the tax effects of this Option under various provisions of
the Code.
3.2 ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE. If
the Optionee exercises this Option to purchase Shares and if such shares are
both nontransferable and subject to a substantial risk of forfeiture, the
Optionee understands that the Optionee should consult with the Optionee's tax
advisor regarding the advisability of filing with the Internal Revenue Service
an election under Section 83(b) of the Internal Revenue Code ("Code"), which
must be filed no later than thirty (30) days after the date on which the
Optionee exercises the Option. Shares acquired upon exercise of the Option are
nontransferable and subject to a substantial risk of forfeiture if, for example,
(a) are subject to a right of the Company to repurchase such shares at the
Optionee's original purchase price upon the occurrence of some subsequent event,
(b) the Optionee is an officer, director or 10% shareholder ("Insider") and
exercises the Option within six (6) months of the Date of Option Grant (if a
class of equity security of the Company is registered under Section 12 of the
Securities Exchange Act of 1934, as amended ("Exchange Act") and no exemption
from Rule 16b-3 is available), or (c) the Optionee is subject to a restriction
on transfer to comply with "Pooling-of-Interests Accounting" rules. Failure to
file an election under Section 83(b), if appropriate, may result in adverse tax
consequences to the Optionee. The Optionee acknowledges that the Optionee has
been advised to consult with a tax advisor prior to the exercise of the Option
regarding the tax consequences to the Optionee of the exercise of the Option.
AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON
WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE
OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE
OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
4. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company,
including any duly appointed Committee of the Board of Directors of the
Company. All determinations by the Board of Directors of the Company shall be
final and binding upon all persons having an interest in the Option. Any
officer of the Company or a parent or subsidiary shall have the authority to
act on behalf of the
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Company with respect to any matter, right, obligation or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation
or election.
5. EXERCISE OF THE OPTION.
5.1 RIGHT TO EXERCISE.
(a) Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Exercise Date and prior to the termination
of the Option (as provided in Sections 7 and 8) in an amount not to exceed the
Number of Option Shares vested through that date, less the number of shares
previously acquired upon exercise of the Option.
(b) Notwithstanding any other provision contained in this
Agreement to the contrary, Optionee shall have no right, under any
circumstances, to exercise the Option, or any part thereof, prior to the valid
authorization of all of the Shares subject to issuance pursuant to the Option
and approval of the Option by the shareholders of the Company.
(c) This Option is exercisable by delivery of a notice of
exercise in the form attached as Exhibit A ("Notice of Exercise") which shall
state the election to exercise the Option, the number of Shares in respect of
which the Option is being exercised ("Exercised Shares") and such other
representations and agreements as may be required by the Company. The Notice of
Exercise shall be completed by the Optionee and delivered to the Company along
with the form of payment permitted by this Option Agreement. This Option, or
any part thereof, shall be deemed to be exercised for such number of Shares
specified upon receipt by the Company of such fully executed Notice of Exercise.
No shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with applicable laws.
5.2 PAYMENT OF EXERCISE PRICE.
(a) FORM OF PAYMENT. Payment of the aggregate Exercise Price
for the Shares to be issued shall be made upon exercise of a portion of the
Option shall be determined by the Board of Directors at the time of grant and
may consist entirely of:
(1) cash;
(2) check;
(3) other Shares which: (i) in the case of Shares acquired
upon exercise of option shares which have been owned by the Optionee for more
than six months on the date of surrender unless otherwise permitted under
applicable laws, including Rule 16b-3; and (ii) have a fair market value on the
date of surrender not greater than the aggregate exercise price of the Shares as
to which said Option shall be exercised;
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(4) delivery of a properly executed exercise notice
together with such other documentation as the Board 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 to
effect a cashless exercise;
(5) notwithstanding anything to the contrary contained in
paragraph 2(a), the Optionee may elect to exercise this Option in whole or in
part by receiving shares of Common Stock equal to the value (as determined
below) of this Option, or any part hereof, upon surrender of the Option at the
principal office of the Company together with notice of such election in which
event the Company shall issue to the Optionee a number of shares of Common Stock
computed using the following formula:
X=Y(A-B)
------
A
Where X = the number of shares of Common Stock to be issued to the Holder;
Y = the number of shares of Common Stock underlying the Option to be
exercised;
A = the current fair market value of one share of Common Stock; and
B = the Exercise Price of the Option.
As used herein, current fair market value of Common Stock shall mean with
respect to each share of Common Stock the last reported sale price of the
Company's Common Stock sold on the principal national securities exchanges on
which the Common Stock is at the time admitted to trading or listed, or, if
there have been no sales of any such exchange on such day, the average of the
highest bid and lowest ask price on such day as reported by the National
Association of Securities Dealers Automated Quotation system ("Nasdaq"), or any
similar organization if the Nasdaq is no longer reporting such information,
either (i) on the date which the form of election is deemed to have been sent to
the Company (the "Notice Date") or (ii) over a period of five (5) trading days
preceding the Notice Date, whichever of (i) or (ii) is greater. If on the date
for which the current fair market value is to be determined, the Common Stock is
not listed on any securities exchange or quoted on the Nasdaq system or the
over-the-counter market, the current fair market value of Common Stock shall be
the highest price per share which the Company could then obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in good faith by
the Board of Directors of the Company, unless prior to such date the Company has
become subject to a binding agreement for a merger, acquisition or other
consolidation pursuant to which the Company is not the surviving party, in which
case the current fair market value of the Common Stock shall be deemed to be the
value to be received by the holders of the Company's Common Stock for each share
thereof pursuant to the Company's acquisition.
(6) any combination of the foregoing methods of payment; or
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(7) such other consideration and method of payment for the
issuance of Shares to the extent permitted by the Board of Directors of the
Company and applicable law.
(b) TENDER OF STOCK. Notwithstanding the foregoing, the Option
may not be exercised by tender of Shares to the Company to the extent such
tender of Shares would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender of Shares to the Company of Shares unless
such Shares either have been owned by the Optionee for more than six (6) months,
or such Shares were not acquired, directly or indirectly, from the Company
unless approved by the Board of Directors of the Company and in compliance with
applicable laws, including Rule 16b-3.
5.3 TAX WITHHOLDING. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from any amounts payable to the Optionee, and
otherwise agrees to make adequate provision for, any sums required to satisfy
the federal, state, local and foreign tax withholding obligations of the
Company, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon: (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or in part, of any shares acquired upon
exercise of the Option, (iii) the operation of any law or regulation providing
for the imputation of interest, or (iv) the lapsing of any restriction with
respect to any shares acquired upon exercise of the Option. The Optionee is
cautioned that the Option is not exercisable unless the tax withholding
obligations of the Company are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired, even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares or
release such shares to the Optionee. At the discretion of the Company,
Optionees may satisfy withholding obligations by electing to have the Company
withhold from the Shares to be issued upon award, vesting or exercise of the
Option, that number of Shares having a fair market value equal to the amount
required to be withheld.
5.4 CERTIFICATE REGISTRATION. Except in the event the Exercise Price
is paid by means of a cashless exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, the heirs of the Optionee. In the event of a cashless
exercise, registration of certificates shall be as provided in the irrevocable
instructions to the Company or a broker as described in Section 5.2 above.
5.5 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of Shares upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option
may not be exercised if the issuance of Shares upon exercise would constitute
a violation of any applicable federal, state or foreign securities laws or
other law or regulations or the requirements of any stock exchange or market
system upon which the Shares may then be listed. In addition, the Option may
not be exercised unless: (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to
the Shares issuable upon exercise of the Option, or (ii) in the opinion of
legal counsel to the Company, the Shares issuable upon exercise of the Option
may be issued in accordance with the terms of an applicable exemption from
the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE
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OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority, if any, deemed by
the Company's legal counsel to be necessary to the lawful issuance and sale
of any Shares subject to the Option shall relieve the Company of any
liability in respect to the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained. As a condition to the
exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation and to make any representation or
warranty with respect thereto as maybe requested by the Company.
5.6 FRACTIONAL SHARES. The Company shall not be required to issue
fractional Shares upon the exercise of the Option.
6. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, may be so exercised by the Optionee's legal representative
or by any person empowered to do so under the deceased Optionee's will or under
the then applicable laws of descent and distribution.
7. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date or
(b) to the extent provided in Section 8 or 9.
8. TERMINATING EVENTS.
8.1 OPTION EXERCISABILITY.
(a) DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the deceased
Optionee's Option by bequest or inheritance may exercise the Option, but only
within twelve (12) months following the date of death, and only to the extent
that the Optionee was entitled to exercise it at the date of death (but in no
event later than the expiration of the term of such Option as set forth in the
Option Agreement). To the extent that Optionee was not entitled to exercise an
Option at the date of death, and to the extent that the Optionee's estate or a
person who acquired the right to exercise such Option does not exercise such
Option (to the extent otherwise so entitled) within the time specified herein,
the Option shall terminate.
(b) UNWILLINGNESS TO SERVE AS A MEMBER OF BOARD OF DIRECTORS.
In the event Optionee is not willing to serve as a Member of the Board of
Directors of the Company, no further Shares will become subject to exercise
thereafter under the terms of Section 1.1(f). For purposes of this Section,
Optionee will be conclusively deemed willing to serve as a member of the Board
of Directors of the Company if he is actually so serving or if he has indicated
his willingness
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to allow his nomination to be submitted to the Shareholders of the Company at
the next annual meeting.
8.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 8.1 is prevented by the provisions of Section 5.5, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as
to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisor as to the tax consequences to the
Optionee of any such delayed exercise.
8.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding
the foregoing, if a sale within the applicable time periods set forth in Section
8.1 of shares acquired upon the exercise of the Option would subject the
Optionee to legal claims or liabilities under Section 16(b) of the Exchange Act,
the Option shall remain exercisable until the earliest to occur of: (i) the
tenth (10th) day following the date on which a sale of such shares by the
Optionee would no longer be subject to such suit; or (ii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any
such delayed exercise. The Optionee should consult with the Optionee's own tax
advisor as to the tax consequences to the Optionee of any such delayed exercise.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER, ASSET
SALE OR CHANGE OF CONTROL.
9.1 CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board of
Directors of the Company, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
9.2 DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board of Directors of the Company
may, in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Board of Directors of the
Company and give each Optionee the right to exercise his or her Option as to all
or any part of the Shares underlying this Option, including Shares as to which
the Option would not otherwise be exercisable.
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9.3 MERGER OR ASSET SALE. Subject to the provisions of Sections 9.4
and 9.5, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option shall become exercisable by Optionee upon approval of the
transaction by the shareholders of the Company, or by its Board of Directors of
the Company if no shareholder approval is required, and shall remain exercisable
for a period of 30 days following consummation of such transaction. This Option
shall terminate upon the expiration of such 30 day period.
9.4 CHANGE IN CONTROL. In the event of a "Change in Control" of the
Company, as defined in paragraph 9.5 below, the following acceleration and
valuation provisions shall apply:
(a) Except as otherwise determined by the Board of Directors of
the Company, in its discretion, prior to the occurrence of a Change in Control,
any Options outstanding on the date such Change in Control is determined to have
occurred that are not yet exercisable and vested on such date shall become fully
exercisable and vested; and
(b) Except as otherwise determined by the Board of Directors of
the Company, in its discretion, prior to the occurrence of a Change in Control,
all outstanding Options, to the extent they are exercisable and vested
(including Options that shall become exercisable and vested pursuant to this
Section 9, shall be terminated in exchange for a cash payment equal to the
Change in Control Price (reduced by the exercise price, if any, applicable to
such Options). These cash proceeds shall be paid to the Optionee or, in the
event of death of an Optionee prior to payment, to the estate of the Optionee or
to a person who acquired the right to exercise the Option by bequest or
inheritance.
9.5 DEFINITION OF "CHANGE IN CONTROL." For purposes of this Section
9, a "Change in Control" means the happening of any of the following:
(a) When any "person", as such term is used in Section 13(d) and
14(d) of the Exchange Act (other than the Company, a subsidiary of the Company
or a Company employee benefit plan, including any trustee of such plan acting as
trustee) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power of the Company's then
outstanding securities entitled to vote generally in the election of directors;
or
(b) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve an agreement for the
sale or disposition by the Company of all or substantially all the Company's
assets; or
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(c) A change in the composition of the Board of Directors of the
Company occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).
9.6 CHANGE IN CONTROL PRICE. For purposes of this Section 9, "Change
in Control Price" shall be, as determined by the Board of Directors of the
Company; (i) the highest fair market value of a Share within the 60-day period
immediately preceding the date of determination of the Change in Control Price
by the Board of Directors of the Company (the "60-Day Period"), (ii) the highest
price paid or offered per Share, as determined by the Board of Directors of the
Company, in any bona fide transaction or bona fide offer related to the Change
in Control of the Company, at any time within the 60-Day Period, or (iii) such
lower price as the Board of Directors of the Company, in its discretion,
determines to be a reasonable estimate of the fair market value of a Share.
10. RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any Shares covered by the Option until the date of
the issuance of a certificate for the Shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). No adjustment shall be
made for dividends, distributions or other rights for which the record date is
prior to the date such certificate is issued, except as provided in Section 9.
11. LEGENDS. The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
11.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED or HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
9
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11.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
12. PUBLIC OFFERING. The Optionee hereby agrees that in the event of any
underwritten public offering of stock made by the Company pursuant to an
effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such public offering; provided,
however, that such period of time shall not exceed eighteen (18) months from the
effective date of the registration statement to be filed in connection with such
public offering. The foregoing limitation shall not apply to shares registered
in the public offering under the Securities Act. The Optionee shall be subject
to this Section provided and only if all the officers and directors of the
Company are also subject to similar arrangements.
13. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
14. TERMINATION OR AMENDMENT. The Board of Directors of the Company may
terminate or amend the Option at any time; provided, however, that no such
termination or amendment may adversely affect the Option or any unexercised
portion hereof without the consent of the Optionee unless such termination or
amendment is necessary to comply with any applicable law or government
regulation. No amendment or addition to this Option Agreement shall be
effective unless in writing.
15. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company with respect to the
subject matter contained herein, and there are no agreements, understandings,
restrictions, representations or warranties among the Optionee and the Company
with respect to such subject matter other than those set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
16. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
Ontro, Inc.
a California corporation
By: /s/ James A. Scudder
----------------------------------
James A. Scudder, President
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 this Option Agreement. Optionee has
reviewed this Option Agreement in its entirety, has had an
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opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of this Option Agreement. The
Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board of Directors of the Company upon
any questions arising under this Option Agreement.
OPTIONEE:
Date: /s/ Carroll Taylor
------------------------ ----------------------------------
Carroll Taylor
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EXHIBIT A
NOTICE OF EXERCISE
Ontro, Inc.
13250 Gregg Street
Poway, CA 92064
Attention: Corporate Secretary
1. EXERCISE OF OPTION. Effective as of today, ___________, _____, the
undersigned ("Purchaser") hereby elects to purchase ______ shares (the "Shares")
of the Common Stock of Ontro, Inc. (the "Company") under and pursuant to the
Nonqualified Option Agreement dated __________, _____ (the "Option Agreement").
The purchase price for the Shares shall be $________, as required by the Option
Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the
full purchase price for the Shares or such other method of payment acceptable
under the Option Agreement.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that Purchaser
has received, read and understood the Option Agreement and agrees to abide by
and be bound by its terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Shares so acquired shall be
issued to Purchaser as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date of issuance, except as provided in the Option Agreement.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. INVESTMENT REPRESENTATION. Purchaser hereby confirms that, in the
event a registration statement with the Securities and Exchange Commission and
in appropriate states is not currently effective, the Shares are being acquired
for investment, and not with a view to, or for resale in connection with, any
distribution thereof. Purchaser will not sell or dispose of the Shares in the
absence of a registration statement in effect or an opinion of counsel
satisfactory to the Company and its counsel that such registration is not
required or unless sold pursuant to Rule 144 of the Securities Act of 1933 (the
"Act"). Purchaser further understands that the certificate representing the
Shares may
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bear a restrictive legend in accordance with the Act and as required
by such other state or federal law or regulations applicable to the delivery of
the Shares.
7. ENTIRE AGREEMENT; GOVERNING LAW. The Option Agreement is incorporated
herein by reference. This Agreement and the Option Agreement constitute the
entire 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 Purchaser with respect to the subject matter hereof, and may not be modified
adversely to the Purchaser's interest except by means of a writing signed by the
Company and Purchaser. This Agreement is governed by the internal substantive
laws, but not the choice of law rules, of California.
8. COMPLIANCE WITH COMPANY SECURITIES TRADES RULES. Purchaser
acknowledges and agrees that it shall comply with the Company's policy on
securities trades before it exercises or sells any of the Shares of the Company
under the Option Agreement.
Submitted by: Accepted by:
PURCHASER: ONTRO, INC.
- --------------------------------- -----------------------------------
Signature By
- --------------------------------- -----------------------------------
Print Name Title
Address: Address:
- --------------------------------- 13250 Gregg Street
- --------------------------------- Poway, CA 92064
Social Security Number: -----------------------------------
Date Received
- ---------------------------------
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EXHIBIT 5
OPINION AND CONSENT OF FISHER THURBER LLP
<PAGE>
May 19, 1999
Board of Directors
Ontro, Inc.
13250 Gregg Street
Poway, CA 92064
Re: Form S-8 Registration Statement
Gentlemen:
We have examined the Registration Statement on Form S-8 (the
"Registration Statement") to be filed by you with the Securities and Exchange
Commission on or about May 19, 1999 to register 1,548,065 shares of common
stock, no par value per share (the "Common Stock"), of Ontro, Inc., a
California corporation (the "Company"). The Common Stock is issuable solely
upon exercise of the options referenced in the Registration Statement.
For purposes of rendering this opinion, we have made such legal and
factual examinations as we have deemed necessary under the circumstances and,
as part of such examination, we have examined, among other things, originals
and copies, certified and otherwise, identified to our satisfaction, of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate. For the purposes of such examination, we have assumed the
genuineness of all signatures on original documents and the conformity to
original documents of all copies submitted to us.
On the basis of and relying upon the foregoing examination and
assumptions, we are of the opinion that, assuming the Registration Statement
shall have become effective pursuant to the provisions of the Securities Act of
1933, as amended, the shares of Common Stock being offered in the Registration
Statement, when issued in accordance with the Registration Statement and the
provisions of the option agreements will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and any amendments thereto.
FISHER THURBER LLP
By: /s/ David A. Fisher
---------------------------------
DAVID A. FISHER
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG LLP OF MAY 17, 1999
The Board of Directors
Ontro, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-8 of Ontro, Inc. of our reported dated February 12, 1999, relating to the
consolidated balance sheets of Ontro, Inc. and subsidiary as of December 31,
1997 and 1998, and the related consolidated statements of operations,
shareholders' equity (deficit), and cash flows for each of the years in the
two-year period ended December 31, 1998 and for the period from inception
(November 8, 1994) to December 31, 1998, which report appears in the December
31, 1998 annual report on Form 10-KSB of Ontro, Inc.
San Diego, California
May 17, 1999
