This document contains 51 pages.
Exhibit Index appears at page 11.
The Registrant requests that the
Registration Statement become effective
immediately upon filing pursuant to
Securities Act Rule 462.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TORVEC, INC.
(Exact Name of issuer as specified in its charter)
NEW YORK 16-1509512
(State or other jurisdiction (IRS Employer ID Number)
of incorporation or organization)
3740 ROUTE 104, WILLIAMSON, NEW YORK 14587
(Address of Principal Executive Offices) (Zip Code)
TORVEC, INC. 1998 STOCK OPTION PLAN
(Full Title of the Plan)
RICHARD B. SULLIVAN, ESQ.
CHAMBERLAIN, D'AMANDA, OPPENHEIMER & GREENFIELD
1600 Crossroads Office Building
Rochester, New York 14614
(Name and Address of agent for service)
716/232-3730
(Telephone Number, including area code, of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
</CAPTION>
- -----------------------------------------------------------------------------
<S> <C> <C> <C>PROPOSED <C>
TITLE OF PROPOSED MAXIMUM
SECURITIES MAXIMUM AGGREGATE AMOUNT OF
TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(4) PER SHARE PRICE FEE
Common Stock 2,000,000 (1) (2) (1) (2) (3) $3.06 (3)
Par Value shares
$0.01 per
share
- -----------------------------------------------------------------------------
</TABLE>
(1) The Shares registered pursuant to this Registration Statement will not
be sold to members of the general public but solely to executive
officers, key employees, consultants and advisors of Torvec, Inc. in
accordance with the terms of the Torvec, Inc. 1998 Stock Option Plan,
pursuant to the exercise of options granted by the Board of Directors
under the Plan.
(2) Under the terms of the Torvec, Inc. 1998 Stock Option Plan, the Board
of Directors of the Company establishes the option price at which
shares can be purchased under the Plan. In the case of options which
constitute "incentive stock options" as defined in Section 422 of the
Internal Revenue Code of 1986, the option price shall not be less than
the fair market value of the shares with respect to which the option is
granted at the time of the granting of the option. For this purpose,
fair market value shall be the closing price for the common stock of
the Company as quoted by the National Association of Securities
Dealers, Inc. on the day the incentive stock option is granted. In the
case of nonqualified options granted under the Plan, the option price
generally shall not be less than the fair market value of the shares on
the business day immediately preceding the date of grant, although the
Board, in its sole discretion, may set a lower price.
(3) Statutory Fee: Section 6(b) of the Securities Act of 1933 and Rule
457(h)(1). There presently is no market for Torvec, Inc.'s common
stock. The book value of the common stock of the Company as of
September 30, 1998 was $11,000. Based upon the statutory formula
contained in Section 6(b), the Registration Fee is $3.06.
(4) Also registered hereunder pursuant to Rule 416(a) are an indeterminate
number of shares of common stock which may be issued pursuant to the
anti-dilution provisions of the Plan.
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
</CAPTION>
<S>ITEMS <C> <C>PAGE
Item 3. Incorporation of Documents by 4
Reference
Item 4. Description of Securities N/A
Item 5. Interests of Named Experts and 4
Counsel
Item 6. Indemnification of Directors and 5
Officers
Item 7. Exemption from Registration Claimed N/A
Item 8. Undertakings 8
Item 9. Exhibits 9
Signatures 10
</TABLE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Registrant hereby states that the following documents, listed in
subparagraphs (a) through (c) below are incorporated by reference in this
Registration Statement:
(a) The Registrant's effective registration statement on Form 10-
SB/A filed pursuant to Section 13(g) of the Securities Exchange
Act of 1934 containing audited financial statements for the
Registrant's latest fiscal year;
(b) All other Reports, including Quarterly Reports (Form 10-QSB)
filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 since the end of the fiscal year covered by
the Registrant's latest Form 10-SB/A; and
(c) A description of the class of securities to be offered as
registered under Section 12 of the Securities Exchange Act of 1934
and as contained in the Form 10-SB/A Registration Statement filed
under such Act, including any amendment or report filed for the
purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of l934, prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Registration
Statement and to be a part hereof from the date of the filing of such
documents.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert named in the Registration Statement as having prepared or
certified any part thereof or is named as having prepared or certified a
report for use in connection with the Registration Statement or
incorporated by reference therein has received, or is to receive in
connection with the offering to which the Registration Statement pertains,
a substantial interest, direct or indirect, in the Registrant.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The By-Laws of the Registrant, in Article XI thereof, provide for the
indemnification of the Registrant's Officers and Directors in certain
circumstances as follows:
1. GENERALLY
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or his testator or intestate
(a) is or was a director or officer of the Corporation or (b) is or was a
director or officer of the Corporation who serves or served, in any
capacity, any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise at the request of the
Corporation (hereinafter an "Indemnitee"), shall be indemnified and held
harmless by the Corporation against all expense, liability and loss
including ERISA excise taxes or penalties, judgments, fines, penalties,
amounts paid in settlement (provided the Corporation shall have given its
prior consent to such settlement, which consent shall not be unreasonably
withheld by it) and reasonable expenses, including attorneys' fees
suffered or incurred by such Indemnitee in connection therewith and such
indemnification shall continue as to an Indemnitee who has ceased to be a
director or officer and shall inure to the benefit of the Indemnitee's
heirs and fiduciaries; provided, however, that no indemnification may be
made to or on behalf of any director or officer if his acts were
committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated or
otherwise disposed of, or he personally gained in fact a financial profit
or other advantage to which he was not legally entitled. Notwithstanding
the foregoing, except as contemplated by Section 3 hereof, the
Corporation shall indemnify any such Indemnitee in connection with a
proceeding (or part thereof) initiated by such Indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
2. ADVANCEMENT OF EXPENSES
All expenses reasonably incurred by an Indemnitee in connection with
a threatened or actual proceeding with respect to which any such
Indemnitee is or may be entitled to indemnification under this Article
shall be advanced to him or promptly reimbursed by the Corporation in
advance of the final disposition of such proceeding, upon receipt of an
undertaking by him or on his behalf to repay the amount of such advances,
if any, as to which he is ultimately found not to be entitled to
indemnification or, where indemnification is granted, to the extent such
advances exceed the indemnification to which he is entitled. Such person
shall cooperate in good faith with any request by the Corporation that
common counsel be used by the parties to an action or proceeding who are
similarly situated unless to do so would be inappropriate due to an
actual or potential conflict of interest.
3. PROCEDURE FOR INDEMNIFICATION
(a) Not later than thirty (30) days following final disposition of
a proceeding with respect to which the Corporation has received written
request by an Indemnitee for indemnification pursuant to this Article or
with respect to which there has been an advancement of expenses pursuant
to Section 2 of this Article, if such indemnification has not been
ordered by a court, the Board of Directors shall meet and find whether
the Indemnitee met the standard of conduct set forth in Section 1 of this
Article, and, if it finds that he did, or to the extent it so finds,
shall authorize such indemnification.
(b) Such standard shall be found to have been met unless (i) a
judgment or other final adjudication adverse to the Indemnitee
established that the standard of conduct set forth in Section 1 of this
Article was not met, or (ii) if the proceeding was disposed of other than
by judgment or other final adjudication, the Board finds in good faith
that, if it had been disposed of by judgment or other final adjudication,
such judgment or other final adjudication would have been adverse to the
Indemnitee and would have established that the standard of conduct set
forth in Section 1 of this Article was not met.
(c) If the Board fails or is unable to make the determination
called for by paragraph (a) of this Section 3, or if indemnification is
denied, in whole or in part, because of an adverse finding by the Board,
or because the Board believes the expenses for which indemnification is
requested to be unreasonable, such action, inaction or inability of the
Board shall in no way affect the right of the Indemnitee to make
application therefor in any court having jurisdiction thereof. In such
action or proceeding, or in a suit brought by the Corporation to recover
an advancement of expenses pursuant to the terms of an undertaking, the
issue shall be whether the Indemnitee met the standard of conduct set
forth in Section 1 of this Article, or whether the expenses were
reasonable, as the case may be (not whether the finding of the Board with
respect thereto was correct.) If the judgment or other final
adjudication in such action or proceeding establishes that the Indemnitee
met the standard set forth in Section 1 of this Article, or that the
disallowed expenses were reasonable, or to the extent that it does, the
Board shall then find such standard to have been met or the expenses to
be reasonable, and shall grant such indemnification, and shall also grant
to the Indemnitee indemnification of the expenses incurred by him in
connection with the action or proceeding resulting in the judgment or
other final adjudication that such standard of conduct was met, or if
pursuant to such court determination such person is entitled to less than
the full amount of indemnification denied by the Corporation, the portion
of such expenses proportionate to the amount of such indemnification
shall be so awarded. Neither the failure of the Board to have made
timely a determination prior to the commencement of such suit that
indemnification of the Indemnitee is proper in the circumstances because
the Indemnitee has met the applicable standard of conduct set forth in
Section 1, nor an actual determination by the Board that the Indemnitee
has not met such applicable standard of conduct, shall create a
presumption that the Indemnitee has not met the applicable standard of
conduct. In any suit brought by the Indemnitee to enforce a right to
indemnification, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving
that the Indemnitee is not entitled to indemnification, under this
Article or otherwise, shall be on the Corporation.
(d) A finding by the Board pursuant to this Section 3 that the
standard of conduct set forth in Section 1 of this Article has been met
shall mean a finding of the Board or shareholders as provided by law.
4. CONTRACTUAL ARTICLE
The rights conferred by this Article are contract rights which shall
not be abrogated by any amendment or repeal of this Article with respect
to events occurring prior to such amendment or repeal and shall, to the
fullest extent permitted by law, be retroactive to events occurring prior
to the adoption of this Article. No amendment of the Business
Corporation Law, insofar as it reduces the permissible extent of the
right of indemnification of an indemnitee under this Article, shall be
effective as to such person with respect to any event, act or omission
occurring or allegedly occurring prior to the effective date of such
amendment irrespective of the date of any claim or legal action in
respect thereto. This Article shall be binding on any successor to the
Corporation, including any corporation or other entity which acquires all
or substantially all of the Corporation's assets.
5. NON-EXCLUSIVITY
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which any person covered hereby may be
entitled other than pursuant to this Article. The Corporation is
authorized to enter into agreements with any such person providing rights
to indemnification or advancement of expenses in addition to the
provisions therefor in this Article, and the Corporation's shareholders
and its Board of Directors are authorized to adopt, in their discretion,
resolutions providing any such person with any such rights.
6. INSURANCE
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under this Article or applicable law.
7. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION
The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and the
advancement of expenses to any employee or agent of the Corporation with
the same scope and effect as provided in this Article to directors and
officers of the Corporation.
UNDERTAKINGS
(a) Rule 415 Offering
The undersigned Registrant will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) N/A;
(ii) N/A;
(iii) include any additional or changed
material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration of the securities offered, and
the offering of securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain resold at the end of the offering
<TABLE>
<CAPTION>
EXHIBITS
</CAPTION>
<S> <C> <C>
Exhibit
Number Description Page
------- ----------- ----
(4) Instruments defining the rights of security N/A
holders
Incorporated By Reference to Form 10-SB/A as
updated by Quarterly Report (Form 10-QSB)
for period ending September 30, 1998, and
exhibits filed therewith
(5) Opinion of Counsel
5.1 Opinion of Counsel re: legality 12
(15) Letter re: Unaudited interim financial information N/A
(23) Consents of Experts and Counsel
23.1 Consent of Independent Accountants 14
23.2 Consent of Counsel 15
(24) Power of Attorney N/A
(25) Statement of Eligibility of Trustee N/A
(27) Financial Data Schedule N/A
(99) Additional Exhibits
99.1 Torvec, Inc. 1998 Stock Option Plan 17
99.2 Form of Incentive Stock Option Agreement 38
99.3 Form of Non-Qualified Stock Option 45
Agreement
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Rochester, State of New York on December 17, 1998.
TORVEC, INC.
BY: /S/KEITH E. GLEASMAN
---------------------------
KEITH E. GLEASMAN, President
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 date indicated.
Date: December 17, 1998 /S/HERBERT H. DOBBS
-----------------------------
Herbert H. Dobbs, Chairman of Board of
Directors
Date: December 17, 1998 /S/KEITH E. GLEASMAN
------------------------------
Keith E. Gleasman, President and Director
Date: December 17, 1998 /S/MORTON A. POLSTER
-----------------------------
Morton A. Polster, Secretary and Director
Date: December 17, 1998 /S/LEE E. SAWYER
-----------------------------
Lee E. Sawyer, Director
Date: December 17, 1998 /S/JAMES A. GLEASMAN
-----------------------------
James A. Gleasman, Director
Date: December 17, 1998 /S/SAMUEL M. BRONSKY
-----------------------------
Samuel M. Bronsky, Chief Financial Officer
<TABLE>
<CAPTION>
EXHIBIT INDEX
</CAPTION>
<S>Exhibit <C> <C>
Number Description Page
------ ----------- ----
(4) Instruments defining the rights of security N/A
holders
Incorporated By Reference to Form 10-SB/A as
updated by Quarterly Report (Form 10-QSB) for
period ending September 30, 1998, and exhibits
filed therewith
(5) Opinion of Counsel
5.1 Opinion of Counsel re: legality 12
(15) Letter re: Unaudited interim financial information N/A
(23) Consents of Experts and Counsel
23.1 Consent of Independent Accountants 14
23.2 Consent of Counsel 15
(24) Power of Attorney N/A
(25) Statement of Eligibility of Trustee N/A
(27) Financial Data Schedule N/A
(99) Additional Exhibits
99.1 Torvec, Inc. 1998 Stock Option Plan 17
99.2 Form of Incentive Stock Option Agreement 38
99.3 Form of Non-Qualified Stock Option 45
Agreement
</TABLE>
EXHIBIT 5.1
December 16, 1998
Torvec, Inc.
3740 Route 104
Williamson, New York 14587
Gentlemen:
We have examined the corporate records and proceedings of Torvec, Inc., a
New York business corporation (hereinafter referred to as "Company"), with
respect to:
1. The organization of the Company;
2. The legal sufficiency of all corporate proceedings of the Company
taken in connection with the creation, issuance, all of the present outstanding
and issued stock of the Company; and
3. The legal sufficiency of all corporate proceedings of the Company
taken in connection with the creation, issuance, form and validity, and full
payment and nonassessability when issued, of the 2,000,000 shares of the $.01
par value Common Stock of the Company ("Registered Shares") covered by the
Registration Statement (hereinafter referred to as the "Registration
Statement") and Prospectus as dated as of December 16, 1998.
Based upon such examination, we are of the opinion that:
(a) Torvec, Inc. is duly organized and validly existing under the laws of
the State of New York;
(b) The Company is authorized to issue 40,000,000 shares of Common Stock
of the par value of $.01 per share, of which 20,783,216.6 shares of such Common
Stock have been issued and are presently outstanding;
Torvec, Inc.
December 16, 1998
Page 2
(c) The Company has taken all necessary and required corporate
proceedings in connection with the creation and issuance of the said presently
issued stock of the Company, and all of said stock so issued has been validly
issued, is fully paid and nonassessable, and in all respects is in proper form;
and
(d) When the Registration Statement shall have become effective and the
Registered Shares shall have been issued and sold upon the terms and conditions
set forth in the Registration Statement, the Company's shares will be validly
authorized and legally issued, fully paid and nonassessable and in all respects
in proper form.
We hereby consent:
(1) To be named in the Registration Statement, as the attorneys who will
pass upon legal matters in connection with an issuance of the Company's shares;
and
(2) To the filing of this opinion as Exhibit 5.1 to the Registration
Statement.
Very truly yours,
CHAMBERLAIN D'AMANDA
OPPENHEIMER & GREENFIELD
By: /S/RICHARD B. SULLIVAN
-------------------------
Richard B. Sullivan
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 4, 1998, on our audit of the
financial statements of Torvec, Inc. (the "Company") as of December 31, 1997 and
for the year ended December 31, 1997 and for the periods from September 25, 1996
(inception) through December 31, 1996 and September 25, 1996 (inception) through
December 31, 1997 included in the Company's Registration Statement on Form 10-SB
(as amended) dated September 4, 1998.
/S/ RICHARD A. EISNER & COMPANY, LLP
Richard A. Eisner & Company, LLP
New York, New York
December 16, 1998
EXHIBIT 23.2
December 16, 1998
Torvec, Inc.
3740 Route 104
Williamson, New York 14587
Gentlemen:
We have examined the corporate records and proceedings of Torvec, Inc., a
New York business corporation (hereinafter referred to as "Company"), with
respect to:
1. The organization of the Company;
2. The legal sufficiency of all corporate proceedings of the Company
taken in connection with the creation, issuance, all of the present outstanding
and issued stock of the Company; and
3. The legal sufficiency of all corporate proceedings of the Company
taken in connection with the creation, issuance, form and validity, and full
payment and nonassessability when issued, of the 2,000,000 shares of the $.01
par value Common Stock of the Company ("Registered Shares") covered by the
Registration Statement (hereinafter referred to as the "Registration
Statement") and Prospectus as dated as of December 16, 1998.
Based upon such examination, we are of the opinion that:
(a) Torvec, Inc. is duly organized and validly existing under the laws of
the State of New York;
(b) The Company is authorized to issue 40,000,000 shares of Common Stock
of the par value of $.01 per share, of which 20,783,216.6 shares of such Common
Stock have been issued and are presently outstanding;
Torvec, Inc.
December 16, 1998
Page 2
(c) The Company has taken all necessary and required corporate
proceedings in connection with the creation and issuance of the said presently
issued stock of the Company, and all of said stock so issued has been validly
issued, is fully paid and nonassessable, and in all respects is in proper form;
and
(d) When the Registration Statement shall have become effective and the
Registered Shares shall have been issued and sold upon the terms and conditions
set forth in the Registration Statement, the Company's shares will be validly
authorized and legally issued, fully paid and nonassessable and in all respects
in proper form.
We hereby consent:
(1) To be named in the Registration Statement, as the attorneys who will
pass upon legal matters in connection with an issuance of the Company's shares;
and
(2) To the filing of this opinion as Exhibit 23.2 to the Registration
Statement.
Very truly yours,
CHAMBERLAIN D'AMANDA
OPPENHEIMER & GREENFIELD
By: /S/RICHARD B. SULLIVAN
------------------------
Richard B. Sullivan
EXHIBIT 99.1
TORVEC, INC.
1998 STOCK OPTION PLAN
ARTICLE I - GENERAL
1.01. PURPOSE
The purposes of the 1998 Stock Option Plan (the "Plan") are to: (1)
closely associate the interests of the management of Torvec, Inc. (the
"Company") with the shareholders by reinforcing the relationship between
participants' rewards and shareholder gains; (2) provide management with an
equity ownership in the Company commensurate with Company performance, as
reflected in increased shareholder value; (3) maintain competitive compensation
levels; (4) provide an incentive to management for continuous employment with
the Company; and (5) provide key consultants and/or advisors of the Company with
an equity interest commensurate with Company performance, as reflected in
increased shareholder value.
1.02. ADMINISTRATION
(a) The Plan shall be administered by The Board of Directors.
(b) The Board shall have the authority, in its sole discretion and from
time to time to:
(i) designate the employees and/or consultants and
advisors or classes of the same eligible to participate
in the Plan;
(ii) grant Options provided in the Plan in such form
and number as the Board shall determine;
(iii) impose such limitations, restrictions and
conditions upon any such Option as the Board shall deem
appropriate, consistent with the purposes of the Plan;
and
(iv) interpret the Plan, adopt, amend and rescind rules and
regulations relating to the Plan, and make all other
determinations and take all other action necessary or
advisable for the implementation and administration of
the Plan.
(c) Decisions and determinations of the Board on all matters relating to
the Plan shall be in its sole discretion and shall be conclusive. No member of
the Board shall be liable for any action taken or decision made in good faith
relating to the Plan or any Option granted hereunder.
1.03. ELIGIBILITY FOR PARTICIPATION
Participants in the Plan shall be selected by the Board from the executive
officers, key employees, and consultants and advisors of the Company who occupy
responsible managerial or professional positions and who have the capability of
making a substantial contribution to the success of the Company. In making this
selection and in determining the form and amount of Options, the Board shall
consider any factors deemed relevant, including the individual's functions,
responsibilities, value of services to the Company and past and potential
contributions to the Company's profitability and sound growth.
1.04. TYPES OF OPTIONS UNDER THE PLAN
Options under the Plan may be in the form of any one or more of the
following:
(i) Stock Options, as described in Article II;
(ii) Incentive Stock Options, as described in Article III;
and
(iii) Reload Options, as described in Article IV.
1.05. AGGREGATE LIMITATION ON OPTIONS
Shares of stock which may be issued under the Plan shall, in the discretion
of the Board of Directors of the Company, consist either in whole or in part of
authorized but unissued shares or treasury shares of the $.01 par value common
stock of the Company ("Shares"). The maximum number of Shares which may be
issued under the Plan shall be 2,000,000. Any Shares subject to a Stock Option,
Incentive Stock Option, or Reload Option which for any reason is terminated
unexercised or expires shall again be available for issuance under the Plan.
1.06. EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan's Effective Date is December 1, 1997, the date on which it
was adopted by the Board of Directors of the Company, subject to the
authorization and approval by a majority vote of the outstanding number of
shares of the Company present in person or by proxy at a special meeting of the
shareholders of the Company duly called and held on May 27, 1998.
(b) No Options shall be granted under the Plan after the last day of the
Company's fiscal year ended December 1, 2007 provided, however, that the Plan
and all Options made under the Plan prior to such date shall remain in effect
until such Options have been exercised or lapsed in accordance with the Plan and
the terms of such Options.
1.07. AMENDMENT AND TERMINATION OF PLAN
The Board of Directors of the Company, without further approval of the
shareholders of the Company, may at any time suspend or terminate the Plan or
may amend it from time to time in any manner; provided, however, that no
amendment shall be effective without prior approval of the shareholders of the
Company which would (i) except as provided by the anti-dilution provisions of
this Plan, increase the maximum number of Shares which may be issued under the
Plan, (ii) change the eligibility requirements for individuals entitled to
receive awards under the Plan, (iii) cause Incentive Stock Options issued under
the Plan to fail to meet the requirements of incentive stock Options as defined
in Section 422 of the Internal Revenue Code of 1986 ("Code"), (iv) require prior
approval of a majority vote of shareholders of the Company under the applicable
provisions of the Business Corporation Law of New York State, or (v) materially
increase the benefits accruing to participants under the Plan within the meaning
of Rule 16b-3 of the Securities Exchange Act of 1934, as amended.
1.08. RESERVATION OF SHARES
The Company shall be under no obligation to reserve shares of its $.01 par
value common stock to meet its obligations under the Plan but it may do so. The
grant of Options or the issuance of Shares to employees hereunder shall not be
construed to constitute
the establishment of a trust with respect to such Options or Shares. The Company
shall be deemed to have complied with the terms of the Plan if, at the time of
issuance and delivery of Shares pursuant to the Plan, it has a sufficient number
of shares of its $.01 par value common stock authorized and unissued or in its
treasury which may then be appropriated and issued for purposes of the Plan,
irrespective of the date when such shares were authorized.
1.09. APPLICATION OF PROCEEDS
The proceeds of the issuance of Shares by the Company under the Plan will
constitute general funds of the Company and may be used by the Company for any
business purpose.
1.10. GENERAL RESTRICTIONS
Each Option granted under the Plan shall be subject to the requirement
that, if at any time the Board shall determine that (i) the consent or approval
of any governmental regulatory body, or (ii) an agreement by the Optionee of an
Option with respect to the disposition of the Shares is necessary or desirable
as a condition of, or in connection with, the granting of such Option or the
issue or purchase of Shares thereunder, such Option may not be exercised in
whole or in part unless such consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Board.
1.11. WITHHOLDING TAXES
Whenever the Company proposes or is required to issue or transfer Shares
under the Plan, the Company shall have the right to require the Optionee with
respect to an exercised Option to remit to the
Company an amount sufficient to satisfy any Federal, state and/or local
withholding tax requirements prior to the delivery of any certificate or
certificates for such Shares. Alternatively, the Company may issue or transfer
such Shares net of the number of shares sufficient to satisfy the withholding
tax requirements. For withholding tax purposes, the Shares shall be valued on
the date the withholding obligation is incurred.
1.12. RIGHT TO TERMINATE EMPLOYMENT
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any employee the right to continue in the employment of the
Company or effect any right which the Company may have to terminate the
employment of such employee.
1.13. NON-UNIFORM DETERMINATIONS
The Board's determinations under the Plan (including without limitation
determinations of the persons to receive Options, the form, amount and timing of
such Options, the terms and conditions of such Options and the agreements
evidencing the same) need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, Options under the Plan, whether
or not such persons are similarly situated.
1.14. LEAVES OF ABSENCE
The Board shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave of
absence taken by the recipient of any Option. Without limiting the generality
of the foregoing, the Board shall be entitled to determine (i) whether or not
any such leave of absence shall constitute a termination of employment within
the meaning of the Plan and (ii) the impact, if any, of any such leave of
absence on Options under the Plan theretofore made to any recipient who takes
such leave of absence.
1.15. ANTI-DILUTION PROVISION
(a) The Exercise Price and the number and character of the Shares which
are the subject of Stock Options granted under this Plan shall be subject to
adjustment, as follows:
1. In case the Company shall at any time pay a dividend in shares of
its common stock or subdivide its outstanding shares of common stock into a
greater number of shares, the Shares purchasable upon exercise of outstanding
Stock Options immediately prior to the record date established for such dividend
or subdivision shall be proportionately increased, and conversely, in case the
outstanding shares of common stock of the Company shall be combined into a
smaller number of shares, the Shares purchasable upon exercise immediately prior
to the record date established for such combination shall be proportionately
reduced.
2. In case of any reclassification, capital reorganization or other
organic change of outstanding shares of common stock of the Company, or in case
of any consolidation or merger of the Company into another corporation (other
than a merger with a wholly owned subsidiary in which merger the Company is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of common stock of
the class issuable upon exercise of outstanding Stock Options) or in case of any
sale or transfer to another corporation of the property of the Company as an
entirety or substantially as an entirety, the Company shall, as a condition
precedent to such transaction cause effective provision to be made that the
Optionee shall have the right thereafter, by exercising his Stock Option, to
purchase the kind and amount of shares of stock (and other securities and
property, as the case may be) receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or transfer by the
Optionee as if he had been a shareholder owning a beneficial
interest in the number of Shares immediately prior to the record date, or other
similar date established for such reclassification, capital reorganization or
other change, consolidation, merger, sale or transfer. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for with respect to outstanding Stock
Options. This subparagraph (a)2 shall similarly apply to any successive
reclassification, capital reorganization and other organic change of shares of
Common Stock and to successive consolidations, mergers, sales or transfers. In
the event that at any time, as a result of an adjustment made pursuant to this
subparagraph (a)2, the Optionee shall become entitled to purchase upon exercise
of his Stock Option, shares of stock, evidences of indebtedness, or other
securities or assets (other than shares of Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares of stock, evidences of indebtedness, other
securities or assets; and thereafter the number of such shares of stock,
evidences of indebtedness, or other securities or assets shall be subject to
adjustment from time to time in a manner and upon terms as nearly equivalent as
practicable to the provisions contained in this subparagraph 2.
3. In case the Company shall declare a dividend upon shares of
common stock payable otherwise than out of earnings, retained earnings, or
earned surplus or otherwise than in shares of common stock, the Optionee shall,
upon exercise of his Stock Option in whole or in part, be entitled to purchase,
in addition to the number of Shares deliverable upon such exercise against
payment of the Exercise Price therefor, but without further consideration, the
cash, stock or other securities or property which the Optionee would have
received as dividends (otherwise than out of such earnings, retained earnings,
or earned surplus and otherwise than in shares of common stock) if he had been a
shareholder owning a beneficial interest in the number of Shares of common stock
immediately prior to the record date established for such declaration. For
purposes of this subparagraph (a)3, a dividend payable otherwise than in cash or
otherwise than in shares of common stock shall be considered to be payable
out of earnings, retained earnings, or earned surplus only to the extent that
such earnings, retained earnings, or earned surplus shall be charged in an
amount equal to the fair value of such dividends as determined by the Board
of Directors.
4. Upon each adjustment of the number of Shares purchasable, the
Optionee shall thereafter (until another such adjustment) be entitled to
purchase, at a new Exercise Price, up to such number of Shares, calculated to
the nearest full share. Such new Exercise Price shall be calculated by
multiplying the number of Shares immediately prior to such adjustment by the
Exercise Price in effect immediately prior to such adjustment and dividing the
product so obtained by the new number of Shares.
(b) Whenever the Exercise Price shall be adjusted as required by the
provisions of the foregoing paragraph (a)4, the Company shall forthwith file in
the custody of its Secretary or an Assistant Secretary at its principal office,
and with its transfer agent, if any, a certificate from its independent
certified public accountants showing the new exercise price, determined as there
provided, setting forth in reasonable detail the facts requiring the adjustment
of such price, including a statement of the number of additional shares of
common stock, if any, and such other facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Each such accountants'
certificate shall be made available at all reasonable times for inspection by
the Optionee and the Company shall, forthwith after each such adjustment mail a
copy of such certificate to the Optionee.
(c) So long as Stock Options granted under the Plan shall be outstanding,
(i) if the Company shall pay any dividend or make any
distribution upon its Common Stock; or
(ii) if the Company shall offer to the beneficial owners of
its Common Stock for subscription or purchase by them
any shares of stock of any class or any other rights;
or
(iii) if any capital reorganization of the Company,
reclassification of the Common Stock of the Company,
consolidation or merger of the Company into another
corporation, sale or transfer of all or substantially
all of the property and assets of the Company to
another corporation, or any voluntary or involuntary
dissolution, liquidation or winding up of the Company
shall be effected;
then, in any such case, the Company shall cause to be mailed to the Optionee at
least ten (10) days prior to the earliest date hereinafter specified, a notice
containing a brief description of the proposed action and stating the
anticipated date on which (1) a record is to be taken for the purpose of such
dividend, distribution or rights, or (2) such reclassification, reorganization,
consolidation, merger, sale or transfer, dissolution, liquidation or winding up
is to take place and the anticipated date, if any, that is to be fixed, as of
which the beneficial owners of the common stock shall be entitled to exchange
their shares of common stock for securities or other property deliverable upon
such reclassification, reorganization, consolidation, merger, sale or transfer,
dissolution, liquidation or winding up. After any such notice shall be given,
the Company shall give the Optionee copies of all future notices sent to the
Company's stockholders with respect to the same transaction.
1.16. RIGHTS AS A SHAREHOLDER
The Optionee shall have no rights as a Shareholder with respect to the
Shares purchased by him pursuant to the exercise of a Stock Option under this
Plan until the Company has received full payment therefor and has issued a Stock
Certificate(s) to him representing such Shares. Except as provided in paragraph
1.15 above, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), for distributions
or for rights of any other kind with respect to Shares for which the record date
for such dividends or distributions or rights is prior to the date of the
issuance to the Optionee of a Certificate(s) for the Shares.
1.17. REGISTRATION
The Company shall use its best efforts to register the Shares issuable
under this Plan with the Securities and Exchange Commission under the provisions
of the Securities Act of 1933 in order to facilitate the resale of the Shares
acquired by non-affiliates of the Company under the Plan without federal
securities law restrictions.
1.18. ACCELERATION OF OPTIONS IN CERTAIN EVENTS
Notwithstanding any provisions to the contrary in this Plan or in any Stock
Option Agreement evidencing Stock Options granted hereunder, all Stock Options
then currently outstanding shall become immediately exercisable in full and
remain exercisable until their expiration in accordance with their respective
terms upon the occurrence of either of the following events:
(i) the first purchase of the Company's common stock
pursuant to a tender or exchange offer (other than a
tender or exchange offer made by the Company) or
(ii) approval by the Company's Shareholders of a (A) merger
or consolidation of the Company with or into another
corporation (other than a merger or consolidation in
which the Company is the surviving corporation and
which does not result in any reclassification or
reorganization of the Company's then outstanding common
stock), (B) sale or disposition of all or substantially
all of the Company's assets, or (C) plan of liquidation
and/or dissolution of the Company.
ARTICLE II - STOCK OPTIONS
2.01. AWARD OF STOCK OPTIONS
The Board may from time to time, and subject to the provisions of the Plan
and such other terms and conditions as the Board may prescribe, grant to any
eligible employee, consultant and/or advisor one or more Options to purchase for
cash or shares the number of Shares ("Stock Options") allotted by the Board.
The date a Stock Option is granted shall mean the date selected by the Board as
of which the Board allots a specific number of Shares to an employee pursuant to
the Plan.
2.02. STOCK OPTION AGREEMENTS
The grant of a Stock Option shall be evidenced by a written Stock Option
Agreement, executed by the Company and the holder of a Stock Option (the
"Optionee"), stating the number of Shares subject to the Stock Option evidenced
thereby, and such Stock Option Agreement shall be in such form as the Board may
from time to time determine. Each Agreement shall contain provisions consistent
with this Plan, including a provision prohibiting the sale, assignment,
exchange, alienation, pledge, encumbrance or other similar form of transfer for
value of any Shares acquired pursuant to the exercise of any Stock Option
granted under this Plan until after the date that is six (6) months from the
date of grant of the Stock Option and including, in the discretion of the Board,
a waiting period following the grant of any Stock Option during which all or any
part thereof may not be exercised.
2.03. TERMS AND CONDITIONS OF OPTIONS
Each Stock Option granted by the Board shall be subject to the following
terms and conditions:
(a) Price. Each Stock Option shall state the number of Shares subject to
the Stock Option and the Stock Option price, which, unless the Board, in its
absolute discretion, otherwise determines, shall be not less than the fair
market value of the Shares with respect to which the Option is granted at the
time of the granting of the Stock Option ("Exercise Price"). The Board is
explicitly authorized under this Plan to grant Stock Options the Exercise Price
per Share of which is less than the fair market value of the Shares at the time
of grant, but said Exercise Price per Share shall in no event be less than the
par value thereof.
For purposes of this paragraph 2.03(a), the fair market value per Share
shall be the closing price for the common stock of the Company as quoted by the
National Association of Securities Dealers, Inc. on the business day immediately
preceding the day the Stock Option is granted.
(b) Term. The term of each Stock Option shall be determined by the
Board. The Board and an Optionee may at any time by mutual agreement terminate
or modify the term of any Stock Option granted to such Optionee under this Plan.
(c) Exercise. Each Stock Option, or any installment thereof, shall
be exercised, whether in whole or in part, by giving written notice to the
Company at its principal office, specifying the number of Shares purchased, the
purchase price being paid, and accompanied by the payment of the purchase price.
An Optionee may pay for the Shares subject to the Stock Option with cash, a
certified check or a bank cashier's check payable to the order of the Company.
Alternatively, provided the Board of Directors shall approve the specific
transfer, he may pay for the Shares, in whole or in part, by the delivery of
common stock of the Company already owned by him which will be accepted in
payment for Shares at the fair market value of such common stock on the date of
exercise. For this purpose, fair market value per share of common stock shall
be the closing price for the common stock of the Company as quoted by the
National Association of Securities Dealers, Inc. on the business day immediately
preceding the day the common stock is mailed or otherwise delivered to the
Company. Certificates representing the Shares purchased by the Optionee shall
be issued by the Company as soon as reasonably practicable after the Optionee
has complied with these provisions.
(d) Restriction Upon Exercise. Notwithstanding any other provision
of this Plan, and subject to the following limitations, Shares obtained upon the
exercise of any Stock Option or Incentive Stock Option (within the meaning of
Section 422 of the Code) under this or any other stock Option plan of the
Company, may be used in satisfaction of any part of the Exercise Price for
Shares subject to Stock Options granted under this Plan. However, Shares
obtained upon the exercise of a given Stock Option may not be used to
acquire additional Shares under that same Stock Option. In addition,
shares acquired through the exercise of an Incentive Stock Option may
be used only if the transfer of such previously acquired shares takes place two
years from the date of the grant of the prior Incentive Stock Option and one
year from the date of exercise of the prior Incentive Stock Option.
The Board may, from time to time, impose such restrictions and/or
conditions upon the vesting and/or the subsequent transferability of any Shares
to be issued or transferred by the Company upon the exercise of any Stock
Options granted pursuant to this Plan as it may deem advisable for the orderly,
secondary transfer of such Shares.
The Stock Option Agreements utilized in connection with the grant and
exercise of Stock Options granted under this Plan shall alert the Optionee as to
the existence of the Company's policy regarding trading in the Company's
securities while in possession of material, inside information regarding the
Company as well as the guidelines and procedures designed to implement such
policy. In particular, such documents shall state that the Optionee may be
required, under the Company's policy and procedures, to obtain permission of the
Company's Clearinghouse Committee prior to any sale or transfer for value of the
Shares to be acquired under Stock Options granted under the Plan.
2.04. NON-ASSIGNMENT/NON-TRANSFERABILITY
Unless the Board, in its discretion shall otherwise determine with respect
to the grant of a specific Option(s) during the lifetime of the Optionee, Stock
Options issued pursuant to this Plan shall be exercisable only by him and shall
not be assignable or transferable by him, whether voluntarily or by operation of
law or otherwise, and no other person shall acquire any rights therein.
2.05. DEATH OF THE OPTIONEE
In the event that an Optionee shall die while he is an employee of the
Company and prior to his complete exercise of Stock Options granted to him under
this Plan, any such remaining Stock Option may be exercised in whole or in part
only: (i) by the Optionee's estate or by or on behalf of such person or persons
to whom the Optionee's rights pass under his Will or by the laws of descent and
distribution, (ii) to the extent that the Optionee was entitled to exercise the
Stock Option at the date of his death, and subject to all of the conditions and
restrictions contained in this Plan, and (iii) prior to the expiration of the
term of the Stock Option.
2.06. TERMINATION OF EMPLOYMENT
Unless the Board in its discretion shall otherwise determine with respect
to the grant of a specific Option, a Stock Option shall be exercisable, during
the lifetime of the employee to whom it is granted, only while he is an employee
of the Company and has been an employee continuously since the date the Stock
Option was granted. In addition, no Stock Option shall be exercisable after the
expiration of the term thereof.
ARTICLE III - INCENTIVE STOCK OPTIONS
3.01. AWARD OF INCENTIVE STOCK OPTIONS
The Board may, from time to time and subject to the provisions of the Plan
and such other terms and conditions as the Board may prescribe, grant to any
eligible employee one or more "incentive stock options", intended to qualify as
such under the provisions of Section 422 of the Code ("Incentive Stock Options")
to purchase for cash or shares the number of shares of Common Stock allotted by
the Board. The date an Incentive Stock Option is granted shall mean the date
selected by the Board as of which the Board allots a specific number of Shares
pursuant to the Plan.
3.02. ANNUAL LIMITATION
The aggregate fair market value (determined as of the time the Incentive
Stock Option is granted) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by any individual during any calendar
year (under this Plan and all other incentive stock Option plans of the Company,
any parent of the Company and any of its subsidiaries) shall not exceed
$100,000.00. For purposes of the application of this rule, Incentive Stock
Options shall be taken into account in the order in which they were granted.
3.03. INCENTIVE STOCK OPTION AGREEMENTS
The grant of an Incentive Stock Option shall be evidenced by a written
Incentive Stock Option Agreement, executed by the Company and the holder of an
Incentive Stock Option (the "Optionee"), stating the number of Shares subject to
the Incentive Stock Option evidenced thereby, and such Incentive Stock Option
Agreement shall be in such form as the Board may from time to time determine.
Each Agreement shall contain provisions consistent with this Plan, including a
provision prohibiting the sale, assignment, exchange, alienation, pledge,
encumbrance or other similar form of transfer for value of any Shares acquired
pursuant to the exercise of any Incentive Stock Option granted under this Plan
until after the date that is six (6) months from the date of grant of the
Incentive Stock Option and including, in the discretion of the Board, a waiting
period following the grant of any Incentive Stock Option during which all or any
part thereof may not be exercised.
3.04. TERMS AND CONDITIONS OF OPTIONS
Each Incentive Stock Option granted by the Board pursuant to this Plan
shall be subject to the following terms and conditions:
(a) Price. Each Incentive Stock Option shall state the number of Shares
subject to the Incentive Stock Option and the Incentive Stock Option price,
which shall be not less than the fair market value of the Shares with respect
to which the Incentive Stock Option is granted at the time of the granting
of the Incentive Stock Option. If an Incentive Stock Option is granted to
any person who, at the time the Incentive Stock Option is granted, owns
stock possessing more than ten (10) percent of the total combined voting
power of all classes of stock of the Company and/or its subsidiaries
(hereinafter referred to as a "Ten Percent Shareholder"), the Incentive Stock
Option price shall be not less than one hundred ten (110) percent of the fair
market value of the Shares with respect to which the Incentive Stock Option is
granted at the time of the granting of the Incentive Stock Option to the Ten
Percent Shareholder. For purposes of the foregoing limitation, the rules of
Section 424(d) of the Code (relating to attribution of stock ownership) shall
apply in determining share ownership, provided, however, Shares that an Optionee
may purchase under outstanding Incentive Stock and/or Stock Options shall not be
treated as stock owned by the individual.
For purposes of this paragraph 3.04(a), the fair market value per Share
shall be the closing price for the common stock of the Company as quoted by the
National Association of Securities Dealers, Inc. on the day the Incentive Stock
Option is granted.
(b) Term. The term of each Incentive Stock Option shall be determined by
the Board, but in no event shall an Incentive Stock Option be exercisable either
in whole or in part after the expiration of ten (10) years from the date on
which it is granted. In no event shall an Incentive Stock Option granted to a
Ten Percent Shareholder be exercisable either in whole or in part after the
expiration of five (5) years from the date on which it is granted. The Board
and an Optionee may at any time by mutual agreement terminate or modify the term
of any Incentive Stock Option granted to such Optionee under this Plan provided
that any modification of the term of any Incentive Stock Option granted under
this Plan shall meet the requirements of this paragraph.
(c) Exercise. Each Incentive Stock Option, or any installment thereof,
shall be exercised, whether in whole or in part, by giving written notice to the
Company at its principal office, specifying the number of Shares purchased and
the purchase price being paid, and accompanied by the payment of the purchase
price. An Optionee may pay for the Shares subject to the Incentive Stock Option
with cash, a certified check or a bank cashier's check payable to the order of
the Company. Alternatively, provided the Board of Directors shall approve the
specific transfer, he may pay for the Shares, in whole or in part, by the
delivery of common stock of the Company already owned by him which will be
accepted in payment for such Shares at the fair market value of such common
stock on the date of exercise. For this purpose, fair market value per share of
common stock shall be the closing price for the common stock of the Company as
quoted on the National Association of Securities Dealers, Inc. on the business
day immediately preceding the day the stock is mailed or otherwise delivered to
the Company. Certificates representing the Shares purchased by the Optionee
shall be issued by the Company as soon as reasonably practicable after the
Optionee has complied with these provisions.
(d) Restriction Upon Exercise. Notwithstanding any other provision of this
Plan, and subject to the following limitations, Shares obtained upon the
exercise of any Stock Option or Incentive Stock Option (within the meaning of
Section 422 of the Code) under this or any other stock Option plan of the
Company, may be used in satisfaction of any part of the Exercise Price for
Shares subject to Incentive Stock Options granted under this Plan. However,
Shares obtained upon the exercise of a given Incentive Stock Option may not be
used to acquire additional Shares under that same Incentive Stock Option. In
addition, Shares acquired through the exercise of an Incentive Stock Option may
be used only if the transfer of such previously acquired shares takes place two
years from the date of the grant of the prior Incentive Stock Option and one
year from the date of exercising the prior Incentive Stock Option.
The Board may, from time to time, impose such restrictions and/or
conditions upon the vesting and/or the subsequent transferability of any Shares
to be issued or transferred by the Company upon the exercise of any Incentive
Stock Options granted pursuant to this Plan as it may deem advisable for the
orderly, secondary transfer of such shares.
The Incentive Stock Option Agreements utilized in connection with the grant
and exercise of Options granted under this Plan shall alert the Optionee as to
the existence of the Company's policy regarding trading in the Company's
securities while in possession of material, inside information regarding the
Company and/or its subsidiaries, as well as the guidelines and procedures
designed to implement such policy. In particular, such documents shall state
that the Optionee may be required, under the Company's policy and procedures, to
obtain permission of the Company's Clearinghouse Committee prior to any sale or
transfer for value of the Shares to be acquired under Incentive Stock Options
granted under the Plan.
3.05. NON-ASSIGNMENT/NON-TRANSFERABILITY
Unless the Board in its discretion shall otherwise determine with respect
to the grant of a specific Option, during the lifetime of the Optionee,
Incentive Stock Options issued pursuant to this Plan shall be exercisable only
by him and shall not be assignable or transferable by him, whether voluntarily
or by operation of law or otherwise, and no other person shall acquire any
rights therein.
3.06. DEATH OF THE OPTIONEE
In the event that an Optionee shall die while he is an employee of the
Company and prior to his complete exercise of Incentive Stock Options granted to
him under this Plan, any such remaining Incentive Stock Option may be exercised
in whole or in part only: (i) by the Optionee's estate or by or on behalf of
such person or persons to whom the Optionee's rights pass under his Will or by
the laws of descent and distribution, (ii) to the extent that the Optionee
was entitled to exercise the Incentive Stock Option at the date of his
death, and subject to all of the conditions and restrictions contained in
this Plan, and (iii) prior to the expiration of the term of the Incentive
Stock Option.
3.07. TERMINATION OF EMPLOYMENT
Unless the Board in its discretion shall otherwise determine with respect
to the grant of a specific Option, an Incentive Stock Option shall be
exercisable, during the lifetime of the employee to whom it is granted, only
while he is an employee of the Company and has been an employee continuously
since the date the Incentive Stock Option was granted. In addition, no
Incentive Stock Option shall be exercisable after the expiration of the term
thereof.
ARTICLE IV - RELOAD OPTIONS
4.01. AUTHORIZATION OF RELOAD OPTIONS
Concurrently with the award of Stock Options and/or the award of Incentive
Stock Options, the Board may authorize reload Options ("Reload Options") to
purchase for cash or shares a number of shares of common stock. The grant of a
Reload Option will become effective upon the exercise of the underlying Stock
Option or Incentive Stock Option if the Optionee uses shares of common stock of
the Company to purchase, either in whole or part, the underlying Stock or
Incentive Stock Option. The number of Reload Options shall equal the number of
shares of common stock used to exercise the respective underlying Option.
4.02. RELOAD OPTION AGREEMENT
Each Stock Option Agreement and Incentive Stock Option Agreement shall
state whether the Board has authorized Reload Options with respect to the
underlying Stock Options and/or Incentive Stock Options. Upon the exercise of
the underlying Stock Option or the underlying Incentive Stock Option, the Reload
Option will be evidenced by an amendment to the underlying Stock Option
Agreement or Incentive Stock Option Agreement, which amendment shall set forth
the number of Reload Options, the Reload Option Price and such other terms and
conditions governing the Reload Option.
4.03. RELOAD OPTION PRICE
The Option price per share of Shares deliverable upon the exercise of a
Reload Option generally shall be the fair market value of a share of common
stock on the date the grant of the Reload Option becomes effective, that is, the
date on which the underlying Stock Option and/or Incentive Stock Option shall
have been exercised. For this purpose, the fair market value per Share shall be
the closing price for the common stock of the Company as quoted by the National
Association of Securities Dealers, Inc. on the business day immediately
preceding such date. Notwithstanding the general rule regarding fair market
value, in the case of a Reload Option granted where the Exercise Price of the
underlying Stock Option constituted a given percentage of the then fair market
value, in the Board's discretion, the Reload Option Price with respect to such
Reload Option, may be at the same percentage of the fair market value on the
date of the Reload Option's effectiveness.
4.04. TERMS AND CONDITIONS
Each Reload Option granted by the Board pursuant to this Plan shall
constitute a Stock Option if authorized with respect to underlying Stock Options
or an Incentive Stock Option if authorized with respect to underlying Incentive
Stock Options and consequently, each such Reload Option shall be governed
generally by the same terms and conditions, set forth in Article II or III of
this Plan respectively, as govern the underlying Stock Options or Incentive
Stock Options, as the case may be. The Board may impose additional terms and
conditions and/or restrictions on the exercise of Reload Options that, in its
absolute discretion, it deems advisable to carry out the purpose of the
Reload Option feature of this Plan. To this end, the Board may expressly
limit the consideration payable upon the exercise of a Reload Option to
cash, or may permit such consideration to consist of shares of common stock
of the Company which the Optionee has held for at least 12 months. Further,
the Board may, in its discretion, grant successive Reload Options if the
granting of such successive Reload Options is, in the Board's judgment,
in accordance with and in furtherance of the purposes of this Plan.
EXHIBIT 99.2
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT MADE as of this ______ day of
___________, 19__ between TORVEC, INC., a New York business corporation (herein
referred to as the "Company"), and ______________________________ (herein
referred to as the "Optionee");
WITNESSETH:
1. The Company hereby grants to the Optionee an Option (hereinafter
referred to as "Option") to purchase an aggregate of ____________ shares of the
$.01 par value Common Stock of the Company (herein referred to as the "Shares")
at a price of $___________ per Share to be paid by the Optionee with cash, a
certified check or a bank cashier's check made payable to the order of the
Company. Alternatively, provided the Board of Directors shall approve the
specific transfer, the Optionee may pay for the Shares, either in whole or in
part, by the delivery of Common Stock of the Company already owned by him which
will be accepted as payment for the Shares, based upon such Common Stock's fair
market value on the date of exercise. In addition, provided the Board of
Directors shall approve the specific transfer, payment for the Shares, either in
whole or in part, may be made by delivery of Common Stock acquired by the
Optionee under any of the Company's stock option plans, provided, however, that
if this Option is exercised in part, Shares acquired by such partial exercise
may not be used as payment for additional Shares to be acquired under this
Agreement. In order for the Optionee to so use shares of Common Stock
previously acquired under any of the Company's stock option plans as payment for
the Shares either in whole or in part, the transfer of such previously acquired
Common Stock as payment for all or a portion of the exercise price under this
Agreement must occur more than two years from the date of the grant and one year
from the date of exercise of the prior option pursuant to which the Optionee
acquired such Common Stock.
2. The term during which the Option shall be exercisable shall commence
on _______________ and expire on the close of business _______________, subject
to earlier termination as provided in the Torvec, Inc. 1998 Stock Option Plan
(herein referred to as the "Plan"). The Option to purchase the number of Shares
granted under this Agreement may not be exercised by the Optionee for a period
of one year immediately following the date of grant (that is, until
_______________) and then may be exercised each year during the Option term
after such initial one year period only to the extent of the greater of 2,500
Shares or 25% of the number of Shares subject to this Option, provided, however,
that to the extent the Optionee shall fail to exercise or, due to the above
limitation, be prohibited from exercising his Option in any year during the
Option period, such annual right to exercise this Option shall not expire, but
shall be cumulative, and carry over into and be exercisable in any subsequent
year during which the Option is outstanding.
However, this Option may be exercised only if the Optionee is and has
been continuously an employee of the Company or its subsidiaries for a period
beginning on the date of grant and ending on the day three months before the
date of exercise. If the Optionee terminates employment due to permanent and
total disability, the three month period referred to in the preceding sentence
shall be one year.
3. The Option is not transferable by the Optionee other than by Will
or the laws of descent and distribution and is exercisable, during his
lifetime, only by the Optionee. In the event that the right to exercise the
Option passes to the Optionee's estate, or to a person to whom such right
devolves by reason of the Optionee's death, then the Option shall be non
transferable in the hands of the Optionee's Executor or Administrator or of
such person, except that the Option may be distributed by the Optionee's
Executor or Administrator to the distributees of the Optionee's estate as a
part thereof.
4. In order for the Option to be exercised, in whole or in part, the
notice by the Optionee to the Company in the form attached hereto must be
accompanied by payment in full of the option price for the Shares being
purchased.
5. The Company agrees that it will use its best efforts to register the
sale of the Shares to be issued upon the exercise of the Option with the
Securities and Exchange Commission under the Securities Act of 1933. Upon the
effectiveness of the Registration Statement covering the Shares, the Optionee
shall be able to sell the Shares in "open market transactions" free of Federal
Securities Law restrictions, provided that at the time of sale, or within the
three month period immediately prior to such sale, he is not nor has he been an
"affiliate" of the Company. The Optionee further understands that, in
accordance with applicable Commission rules governing controlling persons of
public companies, members of the board of directors of a public company, such as
the Company, are deemed to be "affiliates" during their term of office. The
Optionee, therefore, agrees that he will consult with the Company's counsel as
to any Securities Law restrictions, including a limitation on the number of
Shares which may be sold at any one time, on his ability to sell the Shares
prior to any sale thereof.
6. The Company agrees to provide the Optionee with a copy of the
Prospectus prepared by the Company in connection with the Registration Statement
filed to register the Shares, together with its exhibits, and the Company hereby
acknowledges its obligation to provide the Optionee with all proxy and other
shareholder communications, including the annual report to security holders, for
the most recently completed fiscal year of the Company and all updates thereof.
The Optionee agrees that prior to exercise, either in whole or in part of the
Option granted to him hereunder, he shall have read such materials, including
the most recent annual and quarterly reports to shareholders, and shall have
received, if requested, and read all the documents incorporated by reference in
the Prospectus and Registration Statement filed with the Securities and Exchange
Commission.
7. The Optionee understands that except as provided in Paragraph 5 above,
the Company has not agreed to register either the issuance or the resale of the
Shares in accordance with the provisions of the Securities Act of 1933 or to
register either the issuance or the resale of the Shares under any applicable
State Securities Laws. Hence, the Optionee agrees that by virtue of the
provision of certain rules respecting "restricted securities" promulgated under
such Federal and/or State Laws, unless the resale of the Shares is registered as
provided in Paragraph 5 above, and until the registration of such Shares in
accordance with Paragraph 5 above shall have been declared effective by order of
the Commission, the Shares which the Optionee shall purchase upon the exercise
of this Option must be held indefinitely and may not be sold, transferred,
pledged, hypothecated, or otherwise encumbered for value, unless and until a
secondary distribution and/or resale of such Shares is subsequently registered
under such Federal and/or State Securities Laws, or unless an exemption from
registration is available, in which case the Optionee still may be limited as to
the amount of the Shares that may be sold, transferred, pledged and/or
encumbered for value. The Optionee therefore agrees that, until the
registration of such Shares shall have been declared effective by order of the
Commission, the Company may affix upon any certificate representing the Shares,
a legend that such Shares may not be transferred in violation of Section 5 of
the Securities Act of 1933.
8. The Optionee understands and agrees that the Shares to be acquired
upon the exercise of the Option may not be sold, transferred, exchanged,
hypothecated, encumbered, pledged or otherwise disposed of for value for a
period of six (6) months from the date of the grant of this Option.
9. The Optionee understands that the Company has established certain
policies and procedures governing trading in the Company's securities,
including the Shares to be acquired upon the exercise of this Option, while
in possession of material, inside information regarding the Company and/or
any of its subsidiaries. The Optionee agrees that upon exercise of this
Option, either in whole or in part, he will comply with all of the terms and
conditions of such policy, including the procedures and guidelines
established for its implementation. In particular, the Optionee agrees that
where required under such guidelines and procedures, he will obtain
permission of the Company's Clearinghouse Committee composed of senior
management prior to effectuating any sale or other transfer for value of the
Shares to be acquired by virtue of the exercise of this Option.
10. All the terms and provisions of the Plan, duly adopted at a
meeting of the Company's Board of Directors on _______________, 1998 and
approved by a majority vote of the Company's shareholders either in person
or by proxy at a duly called meeting of such shareholders held on
_______________, 1998 and as amended to date, are hereby expressly
incorporated into this Agreement and made a part hereof as if printed herein
and the Optionee, by the Optionee's signature hereon, acknowledges receipt
of a certified copy of said Plan. If there shall be any conflict between
this agreement and the Plan, the provisions of the Plan shall control.
11. In accordance with certain terms and conditions of the Plan, the
aggregate number and kind of Shares that may be purchased pursuant to the
grant of the Option under this Agreement shall be proportionately adjusted
for any increase, decrease or change in the total number of the outstanding
shares of the Company resulting from a stock dividend, stock-split or other
corporate reorganization which would result in or have the effect of the
Optionee being treated differently (but for the adjustment) than he would be
treated had he been the beneficial owner of the Shares subject to the Option
on the record date for such dividend, split or reorganization, as the case
may be.
12. The Optionee understands that the Option granted hereunder
constitutes an "incentive stock option" within the meaning of Section 422 of
the Internal Revenue Code. Consequently, under current provisions of
federal tax law, if the holding periods set forth in this paragraph are
observed, no income or gain shall be recognized for regular income tax
purposes to the Optionee upon either the grant of the Option or upon his
exercise of all or a portion of the Option granted hereunder. Upon the
disposition of the Shares of the Company acquired pursuant to exercise, long
or short term capital gain or loss will be recognized by the Optionee,
depending uon the holding period (eighteen months for long term capital gain
or loss) and the extent to which the seling price exceeds or is less than
the Optionee's basis in the Shares.
The amount of gain will be taxed at normal, ordinary tax rates,
with a maximum rate of 20% if the Shares are held for a period of at least
eighteen months. If the Shares are held for a period of at least twelve
months, the maximum rate on any gain from their sale will be taxed at 28%.
To achieve this favorable income tax treatment, the Optionee
understands that he cannot dispose of any Shares acquired pursuant to the
exercise of the Option granted hereunder for a period of two (2) years from
the date of the grant of this Option and for a period of one (1) year from
the date of exercise.
The Optionee also understands that for purposes of the federal
alternative minimum income tax calculation, the difference between the
exercise price and the fair market value of the Shares on the date of
exercise shall be includible as an item of gross income for the taxable year
of exercise except to the extent that such Shares are not transferable and
are subject to a substantial risk of forfeiture.
The Optionee also understands that the provisions of federal tax
law described herein are subject to change and, consequently, the Optionee
agrees to consult with his or her own tax advisor with respect to the tax
treatment to be accorded the grant of the Option herein, the exercise of
such Option, and the disposition of the Shares.
13. Consistent with the provisions of the Plan, this Agreement shall
be binding upon and inure to the benefit of any successor or assignee of the
Company and to any executor, administrator, legal representative, legatee,
or distributee entitled by law to the Optionee's right hereunder.
14. Except insofar as an interpretation of federal securities law
otherwise is required, or is controlling, this Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and the Optionee has
hereunto set his hand, as of the day and year first above written.
TORVEC, INC.
By: ______________________________
______________________________
, Optionee
NOTICE OF EXERCISE OF STOCK OPTION
AND
RECORD OF STOCK TRANSFER
Torvec, Inc.
3740 Route 104
Williamson, New York 14587
Gentlemen:
I hereby exercise my Incentive Stock Option granted to me by Torvec,
Inc. under an Incentive Stock Option Agreement dated _______________, subject
to all the terms and provisions thereof and of the Torvec, Inc. 1998 Stock
Option Plan referred to therein and notify you of my desire to purchase
Shares of the $.01 par value Common Stock of the Company which were offered
to me pursuant to the Incentive Stock Option Agreement. Enclosed is my
payment in the sum of __________________ in full payment of such Shares.
I understand that a Registration Statement covering the Shares to be
issued to me pursuant to this exercise of the Option granted to me was filed
with the Securities and Exchange Commission on _______________. The
Registration Statement became effective on _______________. Consequently, I
understand that unless I am an "affiliate" of the Company, the Shares I am
acquiring are freely tradeable and may be sold by me in "open market"
transactions. If I am an "affiliate" of the Company, however, or have been
one during the three month period prior to sale, I recognize that I may not
sell freely on the open market and therefore agree that I will consult the
Company's counsel as to the securities law restrictions on my ability to sell
the Shares.
I also understand that under the Plan, and in accordance with the terms
of the Incentive Stock Option Agreement, I may not sell, assign, alienate,
pledge, encumber or otherwise transfer for value the Shares unless a period
of six (6) months has elapsed from the date of the grant of the Option to me.
I acknowledge that I am aware that the Company has established a policy
with respect to trading in its securities while in possession of material
inside information regarding the Company and/or its subsidiaries, and that,
in accordance with certain guidelines and procedures designed to implement
such policy, I may be required to obtain permission from a Clearinghouse
Committee, composed of Senior Management, prior to any sale or other transfer
for value of the Shares hereby acquired.
I also acknowledge that I have received and have read the Prospectus
dated _______________ prepared by the Company in connection with the grant of
the Option contained herein, together with its exhibits, and all proxy and
other shareholder communications, including the annual report to security
holders, for the most recently completed fiscal year and all quarterly and
current updates thereof. I acknowledge that I have received all documents
incorporated by reference in the Prospectus and the Registration Statement
filed with the Securities and Exchange Commission that I requested and have
read the same. I acknowledge that I have had the opportunity to ask
questions of and receive answers from the Company's management concerning the
information set forth in such Prospectus, reports and updates and have been
satisfied with the answers provided regarding the same.
Finally, I acknowledge that there are significant federal income tax
consequences resulting from my exercise of this Option, that I have consulted
with and received advice from qualified tax counsel both as to the nature of
such tax consequences and their impact upon my own personal income tax
situation as the result of such exercise, and that I fully understand such
impact and have planned accordingly.
DATED: ______________ ______________________________
Receipt is hereby acknowledged of the delivery to me by Torvec, Inc. on
____________, 19__ of stock certificates for ______ shares of $.01 par value
common stock purchased by me pursuant to the terms and conditions of the
Torvec, Inc. 1998 Stock Option Plan referred to above.
DATED: _______________ ______________________________
EXHIBIT 99.3
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT MADE as of this ______ day of ____________,
19__ between TORVEC, INC., a New York business corporation (herein referred to
as the "Company"), and ______________________________ (herein referred to as the
"Optionee");
WITNESSETH:
1. The Company hereby grants to the Optionee an Option (hereinafter
referred to as "Option") to purchase an aggregate of ____________ shares of the
$.01 par value Common Stock of the Company (herein referred to as the "Shares")
at a price of $___________ per Share to be paid by the Optionee with cash, a
certified check or a bank cashier's check made payable to the order of the
Company. Alternatively, provided the Board of Directors shall approve the
specific transfer, the Optionee may pay for the Shares, either in whole or in
part, by the delivery of Common Stock of the Company already owned by him which
will be accepted as payment for the Shares, based upon such Common Stock's fair
market value on the date of exercise. In addition, provided the Board of
Directors shall approve the specific transfer, payment for the Shares, either in
whole or in part, may be made by delivery of Common Stock acquired by the
Optionee under any of the Company's stock option plans, provided, however, that
if this Option is exercised in part, Shares acquired by such partial exercise
may not be used as payment for additional Shares to be acquired under this
Agreement. In order for the Optionee to so use shares of Common Stock
previously acquired under any of the Company's stock option plans as payment for
the Shares either in whole or in part, the transfer of such previously acquired
Common Stock as payment for all or a portion of the exercise price under this
Agreement must occur more than two years from the date of the grant and one year
from the date of exercise of the prior option pursuant to which the Optionee
acquired such Common Stock.
2. The term during which the Option shall be exercisable shall commence
on _______________ and expire on the close of business _______________, subject
to earlier termination as provided in the Torvec, Inc. 1998 Stock Option Plan
(herein referred to as the "Plan"). The Option to purchase the number of Shares
granted under this Agreement may not be exercised by the Optionee for a period
of one year immediately following the date of grant (that is, until
_______________) and then may be exercised each year during the Option term
after such initial one year period only to the extent of the greater of 2,500
Shares or 25% of the number of Shares subject to this Option, provided, however,
that to the extent the Optionee shall fail to exercise or, due to the above
limitation, be prohibited from exercising his Option in any
year during the Option period, such annual right to exercise this Option shall
not expire, but shall be cumulative, and carry over into and be exercisable in
any subsequent year during which the Option is outstanding.
However, this Option may be exercised only if the Optionee is and has
been continuously an employee of the Company or its subsidiaries for a period
beginning on the date of grant and ending on the day three months before the
date of exercise. If the Optionee terminates employment due to permanent and
total disability, the three month period referred to in the preceding sentence
shall be one year.
3. The Option is not transferable by the Optionee other than by Will or
the laws of descent and distribution and is exercisable, during his lifetime,
only by the Optionee. In the event that the right to exercise the Option passes
to the Optionee's estate, or to a person to whom such right devolves by reason
of the Optionee's death, then the Option shall be non transferable in the hands
of the Optionee's Executor or Administrator or of such person, except that the
Option may be distributed by the Optionee's Executor or Administrator to the
distributees of the Optionee's estate as a part thereof.
4. In order for the Option to be exercised, in whole or in part, the
notice by the Optionee to the Company in the form attached hereto must be
accompanied by payment in full of the option price for the Shares being
purchased. In addition, the Optionee agrees to tender to the Company an
additional amount, in cash, certified check, cashier's check or bank draft,
equal to the amount of any taxes required to be collected or withheld by the
company in connection with the exercise of his Option.
5. The Company agrees that it will use its best efforts to register the
sale of the Shares to be issued upon the exercise of the Option with the
Securities and Exchange Commission under the Securities Act of 1933. Upon the
effectiveness of the Registration Statement covering the Shares, the Optionee
shall be able to sell the Shares in "open market transactions" free of Federal
Securities Law restrictions, provided that at the time of sale, or within the
three month period immediately prior to such sale, he is not nor has he been an
"affiliate" of the Company. The Optionee further understands that, in
accordance with applicable Commission rules governing controlling persons of
public companies, members of the board of directors of a public company, such as
the Company, are deemed to be "affiliates" during their term of office. The
Optionee, therefore, agrees that he will consult with the Company's counsel as
to any Securities Law restrictions, including a limitation on the number of
Shares which may be sold at any one time, on his ability to sell the Shares
prior to any sale thereof.
6. The Company agrees to provide the Optionee with a copy of the
Prospectus prepared by the Company in connection with the Registration Statement
filed to register the Shares, together with its exhibits, and the Company hereby
acknowledges its obligation to provide the Optionee with all proxy and other
shareholder communications, including the annual report to security holders, for
the most recently completed fiscal year of the Company and all updates thereof.
The Optionee agrees that prior to exercise, either in whole or in part of the
Option granted to him hereunder, he shall have read such materials, including
the most recent annual and quarterly reports to shareholders, and shall have
received, if requested, and read all the documents incorporated by reference in
the Prospectus and Registration Statement filed with the Securities and Exchange
Commission.
7. The Optionee understands that except as provided in Paragraph 5 above,
the Company has not agreed to register either the issuance or the resale of the
Shares in accordance with the provisions of the Securities Act of 1933 or to
register either the issuance or the resale of the Shares under any applicable
State Securities Laws. Hence, the Optionee agrees that by virtue of the
provision of certain rules respecting "restricted securities" promulgated under
such Federal and/or State Laws, unless the resale of the Shares is registered as
provided in Paragraph 5 above, and until the registration of such Shares in
accordance with Paragraph 5 above shall have been declared effective by order of
the Commission, the Shares which the Optionee shall purchase upon the exercise
of this Option must be held indefinitely and may not be sold, transferred,
pledged, hypothecated, or otherwise encumbered for value, unless and until a
secondary distribution and/or resale of such Shares is subsequently registered
under such Federal and/or State Securities Laws, or unless an exemption from
registration is available, in which case the Optionee still may be limited as to
the amount of the Shares that may be sold, transferred, pledged and/or
encumbered for value. The Optionee therefore agrees that, until the
registration of such Shares shall have been declared effective by order of the
Commission, the Company may affix upon any certificate representing the Shares,
a legend that such Shares may not be transferred in violation of Section 5 of
the Securities Act of 1933.
8. The Optionee understands and agrees that the Shares to be acquired
upon the exercise of the Option may not be sold, transferred, exchanged,
hypothecated, encumbered, pledged or otherwise disposed of for value for a
period of six (6) months from the date of the grant of this Option.
9. The Optionee understands that the Company has established certain
policies and procedures governing trading in the Company's securities, including
the Shares to be acquired upon the exercise of this Option, while in possession
of material, inside information regarding the Company and/or any of its
subsidiaries, receipt of which is hereby acknowledged. The Optionee agrees that
upon exercise of this Option, either in whole or in part, he will comply with
all of the terms and conditions of such policy, including the procedures and
guidelines established for its implementation. In particular, the Optionee
agrees that where required under such guidelines and procedures, he will obtain
permission of the Company's Clearinghouse Committee composed of senior
management prior to effectuating any sale or other transfer for value of the
Shares to be acquired by virtue of the exercise of this Option.
10. All the terms and provisions of the Plan, duly adopted at a meeting of
the Company's Board of Directors on _______________ and approved by a majority
vote of the Company's shareholders either in person or by proxy at a duly called
meeting of such shareholders held on _______________ and as amended to date, are
hereby expressly incorporated into this Stock Option Agreement and made a part
hereof as if printed herein and the Optionee, by the Optionee's signature
hereon, acknowledges receipt of a certified copy of said Plan. If there shall
be any conflict between this Agreement and the Plan, the provisions of the
Plan shall control.
11. In accordance with certain terms and conditions of the Plan, the
aggregate number and kind of shares that may be purchased pursuant to the grant
of the Option under this Agreement shall be proportionately adjusted for any
increase, decrease or change in the total number of the outstanding shares of
the Company resulting from a stock dividend, stock-split or other corporate
reorganization which would result in or have the effect of the Optionee being
treated differently (but for the adjustment) than he would be treated had
he been the beneficial owner of the Shares subject to the Option on the
record date for such dividend, split or reorganization, as the case may be.
12. The Optionee understands that the Option granted hereunder
constitutes a "nonqualified stock option" for federal, and if applicable, state
income tax purposes. Consequently, the Optionee understands that under current
provisions of federal tax law, for regular as well as for purposes to the
federal alternative minimum income tax, no gain or loss generally is
recognized to the Optionee upon the grant of the Option. In addition, the
Company will receive no business expense deduction as a result of the grant
of the Option.
For federal income tax purposes, upon the exercise of the Option, the
difference between the exercise price and the fair market value of the Shares on
the date of exercise constitutes ordinary income to the Optionee and is taxed to
the Optionee at normal, ordinary tax rates, except to the extent the Shares are
not transferable and are subject to a substantial risk of forfeiture. To the
extent such difference is required to be included as income by the Optionee, the
Company is entitled to a business expense deduction. Upon the later sale of the
Shares, long or short term capital gain or loss will be recognized by the
Optionee, depending upon the holding period (eighteen months for long term
capital gain or loss) and the extent to which the selling price exceeds
or is less than the Optionee's basis in the stock. The amount of gain will
be taxed at normal, ordinary tax rates, with a maximum rate of 20% if the
Shares are held for a period of at least eighteen months. If the Shares are
held for a period of at least twelve months, the maximum rate on any gain from
their sale will be taxed at 28%.
The Optionee also understands that the provisions of federal tax law
described herein are subject to change and, consequently, the Optionee agrees to
consult with his or her own tax advisor with respect to the tax treatment to be
accorded the grant of the Option herein, the exercise of such Option, and the
disposition of the Shares.
13. Consistent with the provisions of the Plan, this Agreement shall be
binding upon and inure to the benefit of any successor or assignee of the
Company and to any executor, administrator, legal representative, legatee,
or distributee entitled by law to the Optionee's right hereunder.
14. Except insofar as an interpretation of federal securities law
otherwise is required, or is controlling, this Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by its duly authorized officer and the Optionee has hereunto set his
hand, as of the day and year first above written.
TORVEC, INC.
By: ____________________________
____________________________
, Optionee
NOTICE OF EXERCISE OF STOCK OPTION
AND
RECORD OF STOCK TRANSFER
Torvec, Inc.
3740 Route 104
Williamson, New York 14587
Gentlemen:
I hereby exercise my Stock Option granted to me by Torvec, Inc. under a
Stock Option Agreement dated _______________, subject to all the terms and
provisions thereof and of the Torvec, Inc. 1998 Stock Option Plan referred to
therein and notify you of my desire to purchase Shares of the
$.01 par value Common Stock of the Company which were offered to me pursuant
to the Stock Option Agreement. Enclosed is my payment in the sum of
in full payment of such Shares.
I understand that a Registration Statement covering the Shares to be
issued to me pursuant to this exercise of the Option granted to me was filed
with the Securities and Exchange Commission on _______________. The
Registration Statement became effective on _______________. Consequently, I
understand that unless I am an "affiliate" of the Company, the Shares I am
acquiring are freely tradeable and may be sold by me in "open market"
transactions. If I am an "affiliate" of the Company, however, or have been
one during the three month period prior to sale, I recognize that I may not
sell freely on the open market and therefore agree that I will consult the
Company's counsel as to the securities law restrictions on my ability to sell
the Shares.
I also understand that under the Plan, and in accordance with the terms
of the Stock Option Agreement, I may not sell, assign, alienate, pledge,
encumber or otherwise transfer for value the Shares unless a period of six
(6) months has elapsed from the date of the grant of the Option to me.
I acknowledge that I am aware that the Company has established a policy
with respect to trading in its securities while in possession of material
inside information regarding the Company and/or its subsidiaries, and that,
in accordance with certain guidelines and procedures designed to implement
such policy, I may be required to obtain permission from a Clearinghouse
Committee, composed of Senior Management, prior to any sale or other transfer
for value of the Shares hereby acquired.
I also acknowledge that I have received and have read the Prospectus
dated _______________ prepared by the Company in connection with the grant of
the Option contained herein, together with its exhibits, and all proxy and
other shareholder communications, including the annual report to security
holders, for the most recently completed fiscal year and all quarterly and
current updates thereof. I acknowledge that I have received all documents
incorporated by reference in the Prospectus and the Registration Statement
filed with the Securities and Exchange Commission that I requested and have
read the same. I acknowledge that I have had the opportunity to ask
questions of and receive answers from the Company's management concerning the
information set forth in such Prospectus, reports and updates and have been
satisfied with the answers provided regarding the same.
Finally, I acknowledge that there are significant federal income tax
consequences resulting from my exercise of this Option, that I have consulted
with and received advice from qualified tax counsel both as to the nature of
such tax consequences and their impact upon my own personal income tax
situation as the result of such exercise, and that I fully understand such
impact and have planned accordingly.
DATED: _______________ ______________________________
Receipt is hereby acknowledged of the delivery to me by Torvec, Inc. on
____________, 19__ of stock certificates for __________ shares of $.01 par
value common stock purchased by me pursuant to the terms and conditions of
the Torvec, Inc. 1998 Stock Option Plan referred to above.
DATED: ________________ ______________________________
