NONQUALIFIED STOCK OPTION AGREEMENT
NONQUALIFIED STOCK OPTION AGREEMENT, dated as of August 9, 2000, by and
between, Empyrean Bioscience, Inc., a Wyoming corporation (the "Company"), and
International Bioscience Corporation, a Florida corporation (the "Optionee").
WITNESSETH:
WHEREAS, the Company and the Optionee are parties to a Joint Venture
Agreement dated August 9, 2000 which contemplates that the Company will, among
other matters and in order to induce the Optionee to enter into the Joint
Venture Agreement, issue to the Optionee an option to acquire certain shares of
the Company's Common Stock, no par value, on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained in this Agreement, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
meanings set forth below:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" when used with reference to any Person, shall mean any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Person
specified.
"Board" shall mean the board of directors of the Company.
"Common Stock" shall mean the shares of Common Stock of the Company, no
par value.
"Contemplated Agreements" shall mean the following agreements dated as
of August 9, 2000: (i) the Trademark License Agreement from the Company to the
Optionee; (ii) the Trademark License Agreement from the Company to IBC-Empyrean,
L.L.C.; (iii) the License Agreement from the Optionee to the Company; (iv) the
Trademark License Agreement from the Optionee to the Company; (v) the License
Agreement from the Optionee to IBC-Empyrean, L.L.C.; (vi) the Trademark License
Agreement from the Optionee to IBC-Empyrean, L.L.C.; (vii) the Joint Venture
Agreement between the Company and the Optionee (the "Joint Venture Agreement");
(viii) the Limited Liability Company Agreement of IBC-Empyrean, L.L.C.; (ix) the
Put Agreement between the Company and the Optionee; and (x) the Voting Agreement
between the Optionee and Lawrence D. Bain (the "Voting Agreement").
"Derivative Products" shall mean products hereinafter developed by the
Optionee having an effective amount of Formulation therein, and being of a
different product category than those Licensed Products currently being
manufactured.
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"Exercise Price" shall have the meaning ascribed to such term in
Section 2 of this Agreement.
"Fair Market Value" of a share of Common Stock on any date shall mean,
(i) if the Common Stock is listed on a national stock exchange, the officially
quoted closing price on such stock exchange, (ii) if the Common Stock is listed
on the NASDAQ National Market, the officially quoted closing price on NASDAQ,
(iii) if the Common Stock is listed on NASDAQ but not on the National Market,
the average of the closing bid and asked prices reported by NASDAQ, in each case
on the date as of which the value is to be determined (or if such date is not a
trading day, as of the preceding trading day), (iv) if the Common Stock is
listed on an over-the-counter market, the average of the last bid prices on the
date as of which the value is to be determined (or if such date is not a trading
day, as of the preceding trading day) or (v) if the Common Stock is not listed
on either a national stock exchange or NASDAQ, the fair market value determined
in good faith by the Board.
"Formulation" shall mean the proprietary formulation (including
manufacturing technology and processes) comprising Benzalkonium Chloride as an
active ingredient with Octoxynol 9 (and others) invented and created by Dr.
David Thornburgh and exclusively owned by the Optionee known as the GEDA line of
products.
"GEDA Plus Product" shall mean the spermicide and microbicide
contraceptive gel product embodying the Formulation presently being developed by
the Optionee, also known as the "Gel Product", designed to prevent the
transmission of sexually transmitted diseases including, but not limited to,
gonorrhea, chlamydia, syphilis, Trichomonas, herpes I and II and HIV, and which
is presently undergoing the appropriate and necessary United States governmental
regulatory compliance process to permit the Company to include such product as a
Licensed Product.
"Licensed Products" shall mean products having an effective amount of
the Formulation therein and having all necessary government approval for
commercialization, including, but not limited to, the Lotion Products, the Gel
Product and any Derivative Products hereinafter developed by the Optionee.
"Lotion Products" (also known as GEDA Lotion) shall mean the hand
sanitizing lotion presently being manufactured for the Company by Canadian
Custom Packaging and sold by the Company as a Licensed Product, and presently
being marketed by the Company under appropriate and necessary United States
governmental regulatory compliance.
"Option" shall have the meaning set forth in Section 2 hereof.
"Person" shall mean any individual, limited liability company,
partnership, corporation, group, trust or other legal entity.
2. Grant of Option; Option Price. On the terms and subject to the
conditions of this Agreement, the Company hereby grants to the Optionee the
option (the "Option") to purchase an aggregate of 2,226,000 shares of Common
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Stock (the "Option Shares") at an exercise price of $.83 per share (the
"Exercise Price").
3. Term. The term of the Option (the "Option Term") shall commence on the
date hereof and expire on the tenth anniversary of the date hereof, unless the
Option shall theretofore have been terminated in accordance with the terms of
this Agreement.
4. Vesting and Exercisability. The right to acquire the shares of Common
Stock (the "Shares") represented by this Option shall vest as follows, and shall
otherwise be exercisable in accordance with the following terms and conditions:
(i) 1,000,000 of the Option Shares may be purchased upon receipt of the
pre-IND number from the Food and Drug Administration for the GEDA Plus Product;
(ii) 1,000,000 of the Option Shares may be purchased upon delivery of the
towlettes presently being manufactured with agreed upon claims for retail
distribution; and
(iii) the remaining 226,000 Option Shares may be immediately purchased upon
execution of the Contemplated Agreements.
5. Procedure for Exercise.
(a) The Option may be exercised with respect to Shares that are
exercisable, from time to time, in whole or in part (but for the purchase of
whole Shares only), by delivery of a written notice (the "Exercise Notice") from
the Optionee to the Company at its principal executive office, which Exercise
Notice shall:
(i) state that the Optionee elects to exercise the Option;
(ii) specify the number of Shares with respect to which the
Optionee is exercising the Option;
(iii) include any representations of the Optionee required under
Section 7 hereof;
(iv) state the date upon which the Optionee desires to consummate
the purchase of such Shares (which date must be prior to the termination of the
Option);
(v) state the payment method for the exercise of the Option; and
(vi) comply with such further provisions as the Company may
reasonably require.
(b) Payment of the Exercise Price for the Shares to be purchased on
the exercise of the Option shall be made by cash or check payable to the order
of the Company. Notwithstanding the foregoing, the Optionee shall have the
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right, subject to the Company's approval (in its sole discretion), to receive in
lieu of the Shares an amount in cash from the Company equal to the difference
between the Fair Market Value of the Shares to be received upon the exercise of
the Option and the Exercise Price therefore.
(c) The Company shall be entitled to require as a condition of
delivery of the Shares that the Optionee agree to remit when due an amount in
cash sufficient to satisfy all current or estimated future federal, state and
local withholding and employment taxes relating thereto.
6. Rights as a Stockholder. The Optionee's rights as a stockholder upon
exercise of the Option Shares shall be subject to the Voting Agreement.
7. Registration of Shares and Additional Provisions Related to Exercise.
(a) The registration of the Common Stock underlying the Option Shares
and the registration rights of the Optionee are subject to Section 7 of the
Joint Venture Agreement.
(b) In the event of the exercise of the Option at a time when there is
not in effect a registration statement under the Securities Act of 1933, as
amended (the "Act"), relating to the Shares, the Optionee hereby represents and
warrants, and by virtue of such exercise shall be deemed to represent and
warrant, to the Company that the Shares are being acquired for investment only
and not with a view to the distribution thereof except in compliance with such
Act, and the Optionee shall provide the Company with such further
representations and warranties as the Board may reasonably require in order to
ensure compliance with applicable federal and state securities, "blue sky" and
other laws. No Shares shall be purchased upon the exercise of the Option unless
and until the Company and/or the Optionee shall have complied with all
applicable federal or state registration, listing and/or qualification
requirements and all other requirements of law or of any regulatory agencies
having jurisdiction.
8. Restriction on Transfer. The Option may not be transferred, pledged,
assigned, hypothecated or otherwise disposed of in any way by the Optionee and
may be exercised only by the Optionee. The Option shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option, shall be null and void and without effect.
9. Adjustment.
(a) If the Shares are changed, or the number of Shares outstanding is
increased or diminished, by reason of a stock split, reverse stock split, stock
dividend, recapitalization or similar corporate event or converted into or
exchanged for cash or other securities as a result of a merger, consolidation or
reorganization or a dividend in cash or property (other than an ordinary cash
dividend after the Company has become public) is made to the stockholders of the
Company, the Board shall make such adjustments in the number and class of shares
of stock or other securities subject to the Option, and such adjustments to the
exercise price of outstanding Options as it determines to be equitable and
appropriate in its good faith judgment under the circumstances. In the event of
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a merger, consolidation, corporate reorganization or a recapitalization to which
the Company is a party that involves any change in the number or class of shares
of capital stock of the Company outstanding, the Option shall thereafter be
exercisable only for and to the extent of the kind and amount of cash,
securities and/or other property, or the cash equivalent thereof, receivable as
a result of such event by the holder of a number of Shares for which the Option
could have been exercised immediately prior to such event (taking account of all
Shares issuable under the Option, whether or not then exercisable).
(b) The following rules shall apply in connection with Section 9(a)
above:
(i) no fractional shares shall be issued as a result of any such
adjustment, and any fractional shares resulting from the computations pursuant
to Section 9(a) shall be eliminated without consideration from the Option;
(ii) no adjustment shall be made for the issuance to stockholders
of rights to subscribe for additional Shares or other securities; and
(iii) any adjustments referred to in Section 9(a) shall be made
by the Board in its reasonable discretion and shall be conclusive and binding on
the Optionee.
10. Notices. All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given and delivered if personally delivered or if sent by nationally
recognized overnight courier by telecopy or by registered or certified mail,
return receipt requested and postage prepaid, addressed as follows:
(a) if to the Company, at:
Empyrean Bioscience, Inc.
23800 Commerce Park Road, Suite A
Cleveland, Ohio 44122
Attention: Mr. Richard C. Adamany
Facsimile No.: (216) 360-7909
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Richard H. Kronthal, Esq.
Facsimile No.: 212-836-8689
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(b) if to the Optionee, at:
International Bioscience Corporation
777 South Flagler Drive
Phillips Point Building
East Tower, Suite 909
West Palm Beach, Florida 33401
Attn: Ms. Sara Gomez de Ferro
Facsimile No.: (561) 366-8905
with a copy to:
Holtzman, Krinzman, Equels & Furia
2601 South Bayshore Drive, Suite 600
Miami, Florida 33133
Attn: Mr. Arthur J. Furia, Esq.
Facsimile No.: (305) 859-9996
Any such notice or communication shall be deemed to have been received (i) in
the case of personal delivery, on the date of such delivery (or if such date is
not a business day, on the next business day after the date sent), (ii) in the
case of nationally-recognized overnight courier, on the next business day after
the date sent, (iii) in the case of telecopy transmission, when received (or if
not sent on a business day, on the next business day after the date sent), and
(iv) in the case of mailing, on the third business day following the date on
which the piece of mail containing such communication is posted.
11. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement must be in writing and shall not operate or be
construed as a waiver of any other or subsequent breach. Any of the provisions
of this Agreement may be waived only by an instrument in writing executed by the
party or parties whose rights are being waived.
12. Optionee's Undertaking. The Optionee hereby agrees to take whatever
additional actions and execute whatever additional documents the Company may in
its reasonable judgment deem necessary or advisable in order to carry out or
effect one or more of the obligations or restrictions imposed on the Optionee
pursuant to the provisions of this Agreement.
13. Amendment. This Agreement may not be amended, terminated, suspended or
otherwise modified except in a written instrument, duly executed by both
parties. Waivers of or amendments to this Agreement shall be binding as against
the Company only if approved by the Board.
14. Governing Law. (i) This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Florida regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
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(ii) Except for actions brought for wrongful termination or to
seek termination of this Agreement, if any disagreement arises regarding the
interpretation of any points of the Agreement or any other point not covered
herein or any claims for damages or specific performance, the disagreement, upon
request of either party hereto delivered in writing to the other party, shall be
resolved by arbitration before a single arbitrator in accordance with the
commercial rules and procedures set forth by the American Arbitration
Association. The prevailing party in such action or arbitration shall be
entitled to receive from the other party a reasonable sum for it's attorneys'
fees and all other reasonable costs and expenses incurred in such action or
arbitration.
(iii) The venue of any arbitration between the parties arising
from or related to this Agreement shall be in either Miami-Dade County or Palm
Beach County, Florida. Any litigation arising from or related to this Agreement
shall be brought exclusively in an appropriate state or federal court in
Miami-Dade County or Palm Beach County, Florida, and the parties waive any right
to challenge such venue.
15. Counterparts. This Agreement may be executed in one or more
counterparts, and each such counterpart shall be deemed to be an original, but
all such counterparts together shall constitute but one agreement.
16. Entire Agreement. This Agreement is the sole and complete statement of
the parties of their rights and obligations with respect to the subject matter
hereof. This Agreement is an integrated agreement and replaces and supersedes
any and all previous obligations and agreements between the parties. The parties
hereto recognize and agree that no representations or warranties have been made
except as set forth in this Agreement. Except as may otherwise be expressly
provided herein, by signing this Agreement the parties expressly release each
other from any and all existing obligations that pre-date this Agreement as if
such obligations have been fully performed and satisfied.
17. Severability. In the event any provision of this Agreement shall be
held to be invalid, illegal or unenforceable, the remaining terms shall remain
in full force and effect, to effectuate this Agreement in accordance with its
intent. Headings, title and subtitles of this Agreement are for convenience of
reference only and are not to be considered in construing the terms of this
Agreement.
18. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, subject to the limitations set forth in Section 8 hereof.
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IN WITNESS WHEREOF, the parties hereto do hereby sign, enter into and
acknowledge this Nonqualified Stock Option Agreement on the date first written
above.
INTERNATIONAL BIOSCIENCE CORPORATION
By:
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Title:
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EMPYREAN BIOSCIENCE, INC.
By:
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Title:
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