NONQUALIFIED STOCK OPTION AGREEMENT
FOR DISCOUNTED NON-PLAN OPTION
This Nonqualified Stock Option Agreement for Discounted Non-Plan Option
("Agreement") is executed by and between Epitope, Inc., an Oregon corporation
("Epitope") and Robert D. Thompson ("Participant"), effective as of the Grant
Date, as defined below. This Agreement and the Option evidenced by this
Agreement are not granted under or subject in any way to the Epitope, Inc., 1991
Stock Award Plan or the Epitope, Inc. 2000 Stock Award Plan (the "Plans").
INTRODUCTION
Capitalized terms not otherwise defined have the definitions assigned in Section
14 of this Agreement.
Participant has been hired by Epitope as its Chief Executive Officer. As a term
of his employment, the board of directors of Epitope has authorized the grant of
a nonqualified stock option to Participant, so that Participant will have a
significant financial interest in Epitope's success.
AGREEMENT
The parties agree as follows:
1. GRANT OF OPTION.
Subject to the terms and conditions of this Agreement, Epitope has granted to
Participant as of January 5, 2000 (the "Grant Date"), an Option to purchase
375,000 Shares (the "Option Shares") from Epitope at an exercise price of
$4.5930 per share.
2. OPTION TYPE AND TERM.
2.1 TYPE OF OPTION. The Option is not intended to be an incentive stock
option as described in Internal Revenue Code Section 422.
2.2 TERM. The term of the Option will be ten years from the Grant Date,
unless earlier terminated pursuant to this Agreement.
2.3 VESTING. Except as otherwise provided in this Agreement, the Option
shall be vested as to, and accordingly may be exercised from time to time during
the term to purchase, Shares up to the following limits during the periods
indicated following the Grant Date:
(a) During the period from the Grant Date to January 5, 2001 (the
"First Anniversary"), no portion of the Option will be vested;
(b) Effective as of the First Anniversary, the Option will become
vested as to one-third (1/3) of the total number of the Option Shares; and
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(c) Effective as of the 5th day of February 2001, and on the
corresponding day of each succeeding calendar month, the Option will become
vested as to one-twenty-fourth (1/24) of the Option Shares that did not become
vested pursuant to the foregoing paragraph (b).
2.4 RIGHTS AS SHAREHOLDER. Participant shall not have any rights as a
shareholder with respect to Shares subject to this Agreement until such Shares
are issued in the name of Participant.
3. EMPLOYMENT REQUIREMENT.
3.1 GENERAL. Except as provided in Section 4 of this Agreement, the Option
may not be exercised and shall not be deemed vested unless the Participant is
employed by Epitope and/or one or more of its Subsidiaries (an "Employer")
continuously for at least one year after the Grant Date, unless employment is
terminated by death, Disability, or Retirement. "Employment" for purposes of the
Option shall include periods of illness or other leaves of absence authorized by
Employer.
3.2 NO EMPLOYMENT CONTRACT. The Option shall not constitute a contract of
employment of Participant by any Employer.
3.3 EXPIRATION AFTER TERMINATION OF EMPLOYMENT. If Participant ceases to
be an active employee of any Employer, the right to exercise the Option shall
expire at the end of the following periods:
After Termination
On Account Of Period
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Death 1 year
Retirement 5 years
Disability 1 year
Any other reason 1 year
3.4 EFFECT OF TERMINATION ON VESTING. Subject to Section 3.1, the Option
shall continue vesting in accordance with Section 2.3 for 90 days following
termination of employment and shall then cease vesting. The Shares as to which
the Option is exercisable under Section 3.3 shall be those as to which the
Option is vested at the time of exercise.
4. ACCELERATION OF EXERCISABILITY.
Upon a Change in Control Date occurring while Participant is employed by
Employer or within 90 days after termination of employment, the Option shall
become immediately and fully vested and exercisable as to all Shares covered by
the Option. A Change in Control Date occurring more than 90 days after
termination of employment shall not cause the Option to become vested as to
additional Shares.
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5. SERVICE PERIODS.
The periods of service as an employee in connection with the grant of the Option
are as follows:
5.1 FIRST YEAR. The portion of the Option vesting pursuant to Section
2.3(b) is in connection with services to be performed in the one-year period
commencing on the Grant Date.
5.2 ADDITIONAL YEARS. The portions of the Option vesting in monthly
installments pursuant to Section 2.3(c) are respectively in connection with
services to be performed in the consecutive monthly periods ending immediately
before each monthly vesting date.
6. METHOD OF EXERCISE.
6.1 EXERCISE OF OPTION. The Option, or a portion thereof, may be
exercised, to the extent it has become exercisable pursuant to the terms of this
Agreement, by delivery of written notice to Epitope in the form attached hereto
stating the number of Shares, form of payment, and proposed date of closing.
6.2 OTHER DOCUMENTS. Participant shall furnish Epitope, before closing of
any exercise of the Option, such other documents or representations as Epitope
may require to assure compliance with applicable laws and regulations.
6.3 PAYMENT. The exercise price for the Shares purchased upon exercise of
the Option shall be paid in full at or before closing by one or a combination of
the following:
(a) Payment in cash;
(b) By delivery (in a form approved by the Committee) of an
irrevocable direction to a securities broker acceptable to the Committee:
(i) To sell Shares subject to the Option and to deliver all or
a part of the sales proceeds to Epitope in payment of all or a part
of the exercise price and withholding taxes due; or
(ii) To pledge Shares subject to the Option to the broker as
security for a loan and to deliver all or a part of the loan
proceeds to Epitope in payment of all or a part of the exercise
price and withholding taxes due; or
(c) Delivery of previously acquired Shares having a Fair Market
Value at least equal to the exercise price.
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6.4 PREVIOUSLY ACQUIRED SHARES. Delivery of previously acquired Shares
surrendered in full or partial payment of the exercise price of the Option, or
any portion thereof, shall be subject to the following conditions:
(a) The Shares tendered shall be in good delivery form;
(b) The Fair Market Value of the Shares, together with the amount of
cash, if any, tendered shall equal or exceed the exercise price of the
Option;
(c) Any Shares remaining after satisfying payment of the exercise
price shall be reissued in the same manner as the Shares tendered; and
(d) No fractional Shares will be issued and cash will not be paid to
Participant for any fractional Share value not used to satisfy payment of
the exercise price.
7. TRANSFERABILITY.
7.1 RESTRICTION.
(a) The Option is not transferable by Participant other than by
testamentary will or the laws of descent and distribution and, during
Participant's lifetime, may be exercised only by Participant or
Participant's guardian or legal representative;
(b) No assignment or transfer of the Option, whether voluntary,
involuntary, or by operation of law or otherwise, except by testamentary
will or the laws of descent and distribution, shall vest in the assignee
or transferee any interest or right; and
(c) Immediately upon any attempt to assign or transfer the Option,
the Option shall terminate and be of no force or effect.
7.2 EXERCISE IN THE EVENT OF DEATH OR DISABILITY. Whenever the word
"Participant" is used in any provision of this Agreement under circumstances
when the provision should logically be construed to apply to Participant's
guardian, legal representative, executor, administrator, or the person or
persons to whom the Option may be transferred by testamentary will or by the
laws of descent and distribution, the word "Participant" shall be deemed to
include such person or persons.
8. SECURITIES LAWS.
Epitope shall not be required to distribute any Shares upon exercise of the
Option, or any portion thereof, until Epitope shall have taken any action
required to comply with the provisions of the Securities Act of 1933 or any
other then applicable federal or state securities laws.
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9. TAX REIMBURSEMENT.
In the event any withholding or similar tax liability is imposed on Epitope in
connection with or with respect to the exercise of the Option governed by this
Agreement or the disposition by Participant of the Shares acquired upon exercise
of the Option, Participant agrees to pay to Epitope an amount sufficient to
satisfy such tax liability.
10. CONDITIONS PRECEDENT.
Epitope will use its best efforts to obtain any required approvals of the Option
by any state or federal agency or authority that Epitope determines has
jurisdiction. If Epitope determines that any required approval cannot be
obtained, the Option will terminate on notice to Participant to that effect.
11. TERMINATION FOR CAUSE; COMPETITION.
11.1 ANNULMENT OF AWARDS. The grant of the Option governed by this
Agreement is provisional until Participant becomes entitled to a certificate for
Shares in settlement thereof. In the event the employment of Participant is
terminated for cause (as defined below), any portion of the Option which is
provisional shall be annulled as of the date of such termination for cause. For
the purpose of this Section 9.1, the term "for cause" shall have the meaning set
forth in Participant's employment agreement, if any, or otherwise means any
discharge (or removal) for material or flagrant violation of the policies and
procedures of Epitope or for other job performance or conduct which is
materially detrimental to the best interests of Epitope, as determined by the
Committee.
11.2 ENGAGING IN COMPETITION WITH EPITOPE. If Participant terminates
employment with Epitope or a Subsidiary for any reason whatsoever, and within 18
months after the date thereof accepts employment with any competitor of (or
otherwise engages in competition with) Epitope, the Committee, in its sole
discretion, may require Participant to return to Epitope the economic value of
the Option that is realized or obtained (measured at the date of exercise) by
Participant at any time during the period beginning on the date that is six
months prior to the date of Participant's termination of employment with the
Employer.
12. SUCCESSORSHIP.
Subject to the restrictions on transferability of the Option set forth in this
Agreement, this Agreement shall be binding upon and benefit the parties, their
successors, and assigns.
13. ADJUSTMENTS BY COMMITTEE.
In the event of any change in capitalization affecting the common stock of
Epitope, such as a stock dividend, stock split, recapitalization, merger,
consolidation, split-up, combination or exchange of shares or other form of
reorganization, or any other change affecting the common stock, such
proportionate adjustments, if any, as the Committee, in its sole discretion, may
deem appropriate to reflect such change, will be made with respect to the shares
covered by the Option granted by this Agreement, and the price
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per Share in respect of the Option. The Committee may also make such adjustments
in the number of Shares covered by, and price or value of, the Option in the
event of a spin-off or other distribution (other than normal cash dividends) of
Epitope assets to shareholders.
14. DEFINED TERMS.
When used in this Agreement, the following terms shall have the meanings
specified below:
14.1 "ACQUIRING PERSON" shall mean any person or related person or related
persons which constitute a "group" for purposes of Section 13(d) and Rule 13d-5
under the Securities Exchange Act of 1934 (the "Exchange Act"), as such Section
and Rule are in effect as of the date of the Agreement; provided, however, that
the term Acquiring Person shall not include:
(a) Epitope or any of its Subsidiaries;
(b) Any employee benefit plan of Epitope or any of its Subsidiaries;
(c) Any entity holding voting capital stock of Epitope for or
pursuant to the terms of any such employee benefit plan, or
(d) Any person or group solely because such person or group has
voting power with respect to capital stock of Epitope arising from a
revocable proxy or consent given in response to a public proxy or consent
solicitation made pursuant to the Exchange Act.
14.2 "CHANGE IN CONTROL" shall mean:
(a) A change in control of Epitope of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date of the Agreement pursuant to the
Exchange Act; provided that, without limitation, such a change in control
shall be deemed to have occurred at such time as any Acquiring Person
hereafter becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 30 percent or more of the
combined voting power of Voting Securities; or
(b) During any period of 12 consecutive calendar months, individuals
who at the beginning of such period constitute the board of directors
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election, by Epitope's shareholders of
each new director was approved by a vote of at least a majority of the
directors then still in office who were directors at the beginning of the
period; or
(c) There shall be consummated (i) any consolidation or merger of
Epitope in which Epitope is not the continuing or surviving corporation or
pursuant to which Voting Securities would be converted into cash,
securities, or
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other property, other than a merger of Epitope in which the holders of
Voting Securities immediately prior to the merger have the same, or
substantially the same, proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (ii) any sale,
lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of
Epitope; or
(d) Approval by the shareholders of Epitope of any plan or proposal
for the liquidation or dissolution of Epitope.
14.3 "CHANGE IN CONTROL DATE" shall mean the first date following the date
of the Agreement on which a Change in Control has occurred.
14.4 "COMMITTEE" shall mean the executive compensation committee of the
board of directors of Epitope.
14.5 "COMMON STOCK" shall mean the Common Stock, no par value, of Epitope
or any security of Epitope issued in substitution, exchange, or in lieu of such
stock.
14.6 "DISABILITY" shall mean the condition of being "disabled" within the
meaning of Section 422(c)(6) of the Internal Revenue Code.
14.7 "FAIR MARKET VALUE" shall mean, with respect to the Shares, on a
particular day, the mean between the reported high and low sale prices, or, if
there is no sale on such day, the mean between the reported bid and asked
prices, of Shares of the applicable class on that day, or, if that day is not a
trading day, the last prior trading day, on the securities exchange or
authorized interdealer quotation system on which such Shares have been traded.
14.8 "OPTION" means the Nonqualified Stock Option granted to Participant
evidenced by the Agreement.
14.9 "RETIREMENT" shall mean retirement from active employment with
Epitope and its Subsidiaries at or after age 50, or such earlier retirement date
as approved by the Committee.
14.10 "SHARE" shall mean a share of Common Stock.
14.11 "SUBSIDIARY" shall mean a subsidiary corporation of Epitope within
the meaning of Section 425 of the Internal Revenue Code, namely any corporation
in which Epitope directly or indirectly controls 50 percent or more of the total
combined voting power of all classes of stock having voting power.
14.12 "VOTING SECURITIES" shall mean Epitope's issued and outstanding
securities ordinarily having the right to vote at elections for Epitope's board
of directors.
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15. NOTICES.
Any notices regarding the Option shall be in writing and shall be effective when
actually delivered personally or, if mailed, when deposited as registered or
certified mail directed to the address maintained in Epitope's records or to
such other address as a party may certify by notice to the other party.
16. GOVERNING LAW.
Except with respect to references to the Internal Revenue Code or federal
securities laws, this Agreement shall be governed by and construed in accordance
with the laws of the state of Oregon.
17. DETERMINATION BY COMMITTEE.
The Committee shall have authority to construe and interpret any provision of
this Agreement. Decisions of the Committee as to the construction and
interpretation of this Agreement will be final, conclusive, and binding on
Epitope and Participant.
Epitope, Inc.
By: /s/ Charles Bergeron /s/ Robert D. Thompson
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Title: Chief Finanical Officer Robert D. Thompson
Attachment: Exercise Form
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