Exhibit 4.1
VISUALANT, INCORPORATED 2005 COMBINED INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN
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This Combined Incentive and Non-Qualified Stock Option Plan (the "Plan") is
designed to retain directors, executives and selected employees and consultants
and reward them for making major contributions to the success of the Company.
These objectives are accomplished by making long-term incentive awards under the
Plan thereby providing Participants with a proprietary interest in the growth
and performance of the Company.
1. Definitions.
(a) "Board" - The Board of Directors of the Company.
(b) "Code" - The Internal Revenue Code of 1986, as amended from time to
time.
(c) "Committee" - The Compensation Committee of the Company's Board, or
such other committee of the Board that is designated by the Board to
administer the Plan, composed of not less than two members of the
Board who are disinterested persons, as contemplated by Rule 16b-3
("Rule 16b-3") promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(d) "Company" - VISUALANT, INCORPORATED and its subsidiaries including
subsidiaries of subsidiaries.
(e) "Exchange Act" - The Securities Exchange Act of 1934, as amended from
time to time.
(f) "Fair Market Value" - The fair market value of the Company's issued
and outstanding Stock as determined in good faith by the Board or
Committee.
(g) "Grant" - The grant of any form of stock option, stock award, or stock
purchase offer, whether granted singly, in combination or in tandem,
to a Participant pursuant to such terms, conditions and limitations as
the Committee may establish in order to fulfill the objectives of the
Plan.
(h) "Grant Agreement" - An agreement between the Company and a Participant
that sets forth the terms, conditions and limitations applicable to a
Grant.
(i) "Option" - Either an Incentive Stock Option, in accordance with
Section 422 of Code, or a Nonstatutory Option, to purchase the
Company's Stock that may be awarded to a Participant under the Plan. A
Participant who receives an award of an Option shall be referred to as
an "Optionee."
(j) "Participant" - A director, officer, employee or consultant of the
Company to whom an Award has been made under the Plan.
(k) "Restricted Stock Purchase Offer" - A Grant of the right to purchase a
specified number of shares of Stock pursuant to a written agreement
issued under the Plan.
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1. Definitions - continued
(l) "Securities Act" - The Securities Act of 1933, as amended from time to
time.
(m) "Stock" - Authorized and issued or unissued shares of common stock of
the Company.
(n) "Stock Award" - A Grant made under the Plan in stock or denominated in
units of stock for which the Participant is not obligated to pay
additional consideration.
2. Administration. The Plan shall be administered by the Board, provided
however, that the Board may delegate such administration to the Committee.
Subject to the provisions of the Plan, the Board and/or the Committee shall
have authority to (a) grant, in its discretion, Incentive Stock Options in
accordance with Section 422 of the Code, or Nonstatutory Options, Stock
Awards or Restricted Stock Purchase Offers; (b) determine in good faith the
fair market value of the Stock covered by any Grant; (c) determine which
eligible persons shall receive Grants and the number of shares,
restrictions, terms and conditions to be included in such Grants; (d)
construe and interpret the Plan; (e) promulgate, amend and rescind rules
and regulations relating to its administration, and correct defects,
omissions and inconsistencies in the Plan or any Grant; (f) consistent with
the Plan and with the consent of the Participant, as appropriate, amend any
outstanding Grant or amend the exercise date or dates thereof; (g)
determine the duration and purpose of leaves of absence which may be
granted to Participants without constituting termination of their
employment for the purpose of the Plan or any Grant; and (h) make all other
determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan
or selection of Participants shall be conclusive and final. No member of
the Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Grant made thereunder.
3. Eligibility.
(a) General: The persons who shall be eligible to receive Grants shall be
directors, officers, employees or consultants to the Company. The term
consultant shall mean any person, other than an employee, who is
engaged by the Company to render services and is compensated for such
services. An Optionee may hold more than one Option. Any issuance of a
Grant to an officer or director of the Company subsequent to the first
registration of any of the securities of the Company under the
Exchange Act shall comply with the requirements of Rule 16b-3.
(b) Incentive Stock Options: Incentive Stock Options may only be issued to
employees of the Company. Incentive Stock Options may be granted to
officers or directors, provided they are also employees of the
Company. Payment of a director's fee shall not be sufficient to
constitute employment by the Company.
The Company shall not grant an Incentive Stock Option under the Plan
to any employee if such Grant would result in such employee holding the
right to exercise for the first time in any one calendar year, under all
Incentive Stock Options granted under the Plan or any other plan maintained
by the Company, with respect to shares of Stock having an aggregate fair
market value, determined as of the date of the Option is granted, in excess
of $100,000. Should it be determined that an Incentive Stock Option granted
under the Plan exceeds such maximum for any reason other than a failure in
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3. Eligibility - continued
good faith to value the Stock subject to such option, the excess portion of
such option shall be considered a Nonstatutory Option. To the extent the
employee holds two (2) or more such Options which become exercisable for
the first time in the same calendar year, the foregoing limitation on the
exercisability of such Option as Incentive Stock Options under the Federal
tax laws shall be applied on the basis of the order in which such Options
are granted. If, for any reason, an entire Option does not qualify as an
Incentive Stock Option by reason of exceeding such maximum, such Option
shall be considered a Nonstatutory Option.
(c) Nonstatutory Option: The provisions of the foregoing Section 3(b)
shall not apply to any Option designated as a "Nonstatutory Option" or
which sets forth the intention of the parties that the Option be a
Nonstatutory Option.
(d) Stock Awards and Restricted Stock Purchase Offers: The provisions of
this Section 3 shall not apply to any Stock Award or Restricted Stock
Purchase Offer under the Plan.
4. Stock.
(a) Authorized Stock: Stock subject to Grants may be either unissued or
reacquired Stock.
(b) Number of Shares: Subject to adjustment as provided in Section 5(i) of
the Plan, the total number of shares of Stock which may be purchased
or granted directly by Options, Stock Awards or Restricted Stock
Purchase Offers, or purchased indirectly through exercise of Options
granted under the Plan shall not exceed Two Million (2,000,000). If
any Grant shall for any reason terminate or expire, any shares
allocated thereto but remaining unpurchased upon such expiration or
termination shall again be available for Grants with respect thereto
under the Plan as though no Grant had previously occurred with respect
to such shares. Any shares of Stock issued pursuant to a Grant and
repurchased pursuant to the terms thereof shall be available for
future Grants as though not previously covered by a Grant.
(c) Reservation of Shares: The Company shall reserve and keep available at
all times during the term of the Plan such number of shares as shall
be sufficient to satisfy the requirements of the Plan. If, after
reasonable efforts, which efforts shall not include the registration
of the Plan or Grants under the Securities Act, the Company is unable
to obtain authority from any applicable regulatory body, which
authorization is deemed necessary by legal counsel for the Company for
the lawful issuance of shares hereunder, the Company shall be relieved
of any liability with respect to its failure to issue and sell the
shares for which such requisite authority was so deemed necessary
unless and until such authority is obtained.
(d) Application of Funds: The proceeds received by the Company from the
sale of Stock pursuant to the exercise of Options or rights under
Stock Purchase Agreements will be used for general corporate purposes.
(e) No Obligation to Exercise: The issuance of a Grant shall impose no
obligation upon the Participant to exercise any rights under such
Grant.
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5. Terms and Conditions of Options. Options granted hereunder shall be
evidenced by agreements between the Company and the respective Optionees,
in such form and substance as the Board or Committee shall from time to
time approve. The form of Incentive Stock Option Agreement attached hereto
as Exhibit A and the three forms of a Nonstatutory Stock Option Agreement
for employees, for directors and for consultants, attached hereto as
Exhibit B-1, Exhibit B-2 and Exhibit B-3, respectively, shall be deemed to
be approved by the Board. Option agreements need not be identical, and in
each case may include such provisions as the Board or Committee may
determine, but all such agreements shall be subject to and limited by the
following terms and conditions:
(a) Number of Shares: Each Option shall state the number of shares to
which it pertains.
(b) Exercise Price: Each Option shall state the exercise price, which
shall be determined as follows:
(i) Any Incentive Stock Option granted to a person who at the time
the Option is granted owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power or value of all
classes of stock of the Company ("Ten Percent Holder") shall have
an exercise price of no less than 110% of the Fair Market Value
of the Stock as of the date of grant; and
(ii) Incentive Stock Options granted to a person who at the time the
Option is granted is not a Ten Percent Holder shall have an
exercise price of no less than 100% of the Fair Market Value of
the Stock as of the date of grant.
For the purposes of this Section 5(b), the Fair Market Value
shall be as determined by the Board in good faith, which determination
shall be conclusive and binding; provided however, that if there is a
public market for such Stock, the Fair Market Value per share shall be
the average of the bid and asked prices (or the closing price if such
stock is listed on the NASDAQ National Market System or Small Cap
Issue Market) on the date of grant of the Option, or if listed on a
stock exchange, the closing price on such exchange on such date of
grant.
(c) Medium and Time of Payment: The exercise price shall become
immediately due upon exercise of the Option and shall be paid in cash
or check made payable to the Company. Should the Company's outstanding
Stock be registered under Section 12(g) of the Exchange Act at the
time the Option is exercised, then the exercise price may also be paid
as follows:
(i) in shares of Stock held by the Optionee for the requisite period
necessary to avoid a charge to the Company's earnings for
financial reporting purposes and valued at Fair Market Value on
the exercise date, or
(ii) through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written
instructions (a) to a Company designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable Federal,
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5. Terms and Conditions of Options - continued
state and local income and employment taxes required to be
withheld by the Company by reason of such purchase and (b) to the
Company to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction.
At the discretion of the Board, exercisable either at the
time of Option grant or of Option exercise, the exercise price
may also be paid (i) by Optionee's delivery of a promissory note
in form and substance satisfactory to the Company and permissible
under the Securities Rules of the State of Nevada and bearing
interest at a rate determined by the Board in its sole
discretion, but in no event less than the minimum rate of
interest required to avoid the imputation of compensation income
to the Optionee under the Federal tax laws, or (ii) in such other
form of consideration permitted by the Nevada corporations law as
may be acceptable to the Board.
(d) Term and Exercise of Options: Any Option granted to an employee of the
Company shall become exercisable over a period of no longer than five
(5) years. In no event shall any Option be exercisable after the
expiration of ten (10) years from the date it is granted, and no
Incentive Stock Option granted to a Ten Percent Holder shall, by its
terms, be exercisable after the expiration of five (5) years from the
date of the Option. Unless otherwise specified by the Board or the
Committee in the resolution authorizing such Option, the date of grant
of an Option shall be deemed to be the date upon which the Board or
the Committee authorizes the granting of such Option.
Each Option shall be exercisable to the nearest whole share, in
installments or otherwise, as the respective Option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by
the Optionee and shall not be assignable or transferable by the Optionee,
and no other person shall acquire any rights therein. To the extent not
exercised, installments (if more than one) shall accumulate, but shall be
exercisable, in whole or in part, only during the period for exercise as
stated in the Option agreement, whether or not other installments are then
exercisable.
(e) Termination of Status as Employee, Consultant or Director: If
Optionee's status as an employee shall terminate for any reason other
than Optionee's disability or death, then Optionee (or if the Optionee
shall die after such termination, but prior to exercise, Optionee's
personal representative or the person entitled to succeed to the
Option) shall have the right to exercise the portions of any of
Optionee's Incentive Stock Options which were exercisable as of the
date of such termination, in whole or in part, not less than 30 days
nor more than three (3) months after such termination (or, in the
event of "termination for good cause" as that term is defined in
Nevada case law related thereto, or by the terms of the Plan or the
Option Agreement or an employment agreement, the Option shall
automatically terminate as of the termination of employment as to all
shares covered by the Option).
With respect to Nonstatutory Options granted to employees,
directors or consultants, the Board may specify such period for
exercise, not less than 30 days (except that in the case of
"termination for cause" or removal of a director, the Option shall
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5. Terms and Conditions of Options - continue
automatically terminate as of the termination of employment or
services as to shares covered by the Option), following termination of
employment or services as the Board deems reasonable and appropriate.
The Option may be exercised only with respect to installments that the
Optionee could have exercised at the date of termination of employment
or services. Nothing contained herein or in any Option granted
pursuant hereto shall be construed to affect or restrict in any way
the right of the Company to terminate the employment or services of an
Optionee with or without cause.
(f) Disability of Optionee: If an Optionee is disabled (within the meaning
of Section 22(e)(3) of the Code) at the time of termination, the three
(3) month period set forth in Section 5(e) shall be a period, as
determined by the Board and set forth in the Option, of not less than
six months nor more than one year after such termination.
(g) Death of Optionee: If an Optionee dies while employed by, engaged as a
consultant to, or serving as a Director of the Company, the portion of
such Optionee's Option which was exercisable at the date of death may
be exercised, in whole or in part, by the estate of the decedent or by
a person succeeding to the right to exercise such Option at any time
within (i) a period, as determined by the Board and set forth in the
Option, of not less than six (6) months nor more than one (1) year
after Optionee's death, which period shall not be more, in the case of
a Nonstatutory Option, than the period for exercise following
termination of employment or services, or (ii) during the remaining
term of the Option, whichever is the lesser. The Option may be so
exercised only with respect to installments exercisable at the time of
Optionee's death and not previously exercised by the Optionee.
(h) Nontransferability of Option: No Option shall be transferable by the
Optionee, except by will or by the laws of descent and distribution.
(i) Recapitalization: Subject to any required action of shareholders, the
number of shares of Stock covered by each outstanding Option, and the
exercise price per share thereof set forth in each such Option, shall
be proportionately adjusted for any increase or decrease in the number
of issued shares of Stock of the Company resulting from a stock split,
stock dividend, combination, subdivision or reclassification of
shares, or the payment of a stock dividend, or any other increase or
decrease in the number of such shares affected without receipt of
consideration by the Company; provided, however, the conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration" by the Company.
In the event of a proposed dissolution or liquidation of the
Company, a merger or consolidation in which the Company is not the
surviving entity, or a sale of all or substantially all of the assets
or capital stock of the Company (collectively, a "Reorganization"),
unless otherwise provided by the Board, this Option shall terminate
immediately prior to such date as is determined by the Board, which
date shall be no later than the consummation of such Reorganization.
In such event, if the entity which shall be the surviving entity does
not tender to Optionee an offer, for which it has no obligation to do
so, to substitute for any unexercised Option a stock option or capital
stock of such surviving entity, as applicable, which on an equitable
basis shall provide the Optionee with substantially the same economic
benefit as such unexercised Option, then the Board may grant to such
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5. Terms and Conditions of Options - continued
Optionee, in its sole and absolute discretion and without obligation,
the right for a period commencing thirty (30) days prior to and ending
immediately prior to the date determined by the Board pursuant hereto
for termination of the Option or during the remaining term of the
Option, whichever is the lesser, to exercise any unexpired Option or
Options without regard to the installment provisions of Paragraph 5(d)
of the Plan; provided, that any such right granted shall be granted to
all Optionees not receiving an offer to receive substitute options on
a consistent basis, and provided further, that any such exercise shall
be subject to the consummation of such Reorganization.
Subject to any required action of shareholders, if the Company
shall be the surviving entity in any merger or consolidation, each
outstanding Option thereafter shall pertain to and apply to the
securities to which a holder of shares of Stock equal to the shares
subject to the Option would have been entitled by reason of such
merger or consolidation.
In the event of a change in the Stock of the Company as presently
constituted, which is limited to a change of all of its authorized
shares without par value into the same number of shares with a par
value, the shares resulting from any such change shall be deemed to be
the Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided in this Section 5(i), the
Optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class, and the number or price of shares of
Stock subject to any Option shall not be affected by, and no
adjustment shall be made by reason of, any dissolution, liquidation,
merger, consolidation or sale of assets or capital stock, or any issue
by the Company of shares of stock of any class or securities
convertible into shares of stock of any class.
The Grant of an Option pursuant to the Plan shall not affect in
any way the right or power of the Company to make any adjustments,
reclassifications, reorganizations or changes in its capital or
business structure or to merge, consolidate, dissolve, or liquidate or
to sell or transfer all or any part of its business or assets.
(j) Rights as a Shareholder: An Optionee shall have no rights as a
shareholder with respect to any shares covered by an Option until the
effective date of the issuance of the shares following exercise of
such Option by Optionee. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date
is prior to the date such stock certificate is issued, except as
expressly provided in Section 5(i) hereof.
(k) Modification, Acceleration, Extension, and Renewal of Options: Subject
to the terms and conditions and within the limitations of the Plan,
the Board may modify an Option, or, once an Option is exercisable,
accelerate the rate at which it may be exercised, and may extend or
renew outstanding Options granted under the Plan or accept the
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5. Terms and Conditions of Options - continued
surrender of outstanding Options (to the extent not theretofore
exercised) and authorize the granting of new Options in substitution
for such Options, provided such action is permissible under Section
422 of the Code and the Nevada Securities Rules. Notwithstanding the
provisions of this Section 5(k), however, no modification of an Option
shall, without the consent of the Optionee, alter to the Optionee's
detriment or impair any rights or obligations under any Option
theretofore granted under the Plan.
(l) Exercise Before Exercise Date: At the discretion of the Board, the
Option may, but need not, include a provision whereby the Optionee may
elect to exercise all or any portion of the Option prior to the stated
exercise date of the Option or any installment thereof. Any shares so
purchased prior to the stated exercise date shall be subject to
repurchase by the Company upon termination of Optionee's employment as
contemplated by Section 5(n) hereof prior to the exercise date stated
in the Option and such other restrictions and conditions as the Board
or Committee may deem advisable.
(m) Other Provisions: The Option agreements authorized under the Plan
shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Options, as the Board or the
Committee shall deem advisable. Shares shall not be issued pursuant to
the exercise of an Option, if the exercise of such Option or the
issuance of shares thereunder would violate, in the opinion of legal
counsel for the Company, the provisions of any applicable law or the
rules or regulations of any applicable governmental or administrative
agency or body, such as the Code, the Securities Act, the Exchange
Act, the Nevada Securities Rules, Nevada corporation law, and the
rules promulgated under the foregoing or the rules and regulations of
any exchange upon which the shares of the Company are listed. Without
limiting the generality of the foregoing, the exercise of each Option
shall be subject to the condition that if at any time the Company
shall determine that (i) the satisfaction of withholding tax or other
similar liabilities, or (ii) the listing, registration or
qualification of any shares covered by such exercise upon any
securities exchange or under any state or federal law, or (iii) the
consent or approval of any regulatory body, or (iv) the perfection of
any exemption from any such withholding, listing, registration,
qualification, consent or approval is necessary or desirable in
connection with such exercise or the issuance of shares thereunder,
then in any such event, such exercise shall not be effective unless
such withholding, listing registration, qualification, consent,
approval or exemption shall have been effected, obtained or perfected
free of any conditions not acceptable to the Company.
(n) Repurchase Agreement: The Board may, in its discretion, require as a
condition to the Grant of an Option hereunder, that an Optionee
execute an agreement with the Company, in form and substance
satisfactory to the Board in its discretion ("Repurchase Agreement"),
(i) restricting the Optionee's right to transfer shares purchased
under such Option without first offering such shares to the Company or
another shareholder of the Company upon the same terms and conditions
as provided therein; and (ii) providing that upon termination of
Optionee's employment with the Company, for any reason, the Company
(or another shareholder of the Company, as provided in the Repurchase
Agreement) shall have the right at its discretion (or the discretion
of such other shareholders) to purchase and/or redeem all such shares
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5. Terms and Conditions of Options - continued
owned by the Optionee on the date of termination of his or her
employment at a price equal to: (A) the fair value of such shares as
of such date of termination; or (B) if such repurchase right lapses at
20% of the number of shares per year, the original purchase price of
such shares, and upon terms of payment permissible under the Nevada
Securities Rules; provided that in the case of Options or Stock Awards
granted to officers, directors, consultants or affiliates of the
Company, such repurchase provisions may be subject to additional or
greater restrictions as determined by the Board or Committee.
6. Stock Awards and Restricted Stock Purchase Offers.
(a) Types of Grants.
(i) Stock Award. All or part of any Stock Award under the Plan may be
subject to conditions established by the Board or the Committee,
and set forth in the Stock Award Agreement, which may include,
but are not limited to, continuous service with the Company,
achievement of specific business objectives, increases in
specified indices, attaining growth rates and other comparable
measurements of Company performance. Such Awards may be based on
Fair Market Value or other specified valuation. All Stock Awards
will be made pursuant to the execution of a Stock Award Agreement
substantially in the form attached hereto as Exhibit C.
(ii) Restricted Stock Purchase Offer. A Grant of a Restricted Stock
Purchase Offer under the Plan shall be subject to such (i)
vesting contingencies related to the Participant's continued
association with the Company for a specified time and (ii) other
specified conditions as the Board or Committee shall determine,
in their sole discretion, consistent with the provisions of the
Plan. All Restricted Stock Purchase Offers shall be made pursuant
to a Restricted Stock Purchase Offer substantially in the form
attached hereto as Exhibit D.
(b) Conditions and Restrictions. Shares of Stock which Participants may
receive as a Stock Award under a Stock Award Agreement or Restricted
Stock Purchase Offer under a Restricted Stock Purchase Offer may
include such restrictions as the Board or Committee, as applicable,
shall determine, including restrictions on transfer, repurchase
rights, right of first refusal, and forfeiture provisions. When
transfer of Stock is so restricted or subject to forfeiture provisions
it is referred to as "Restricted Stock". Further, with Board or
Committee approval, Stock Awards or Restricted Stock Purchase Offers
may be deferred, either in the form of installments or a future lump
sum distribution. The Board or Committee may permit selected
Participants to elect to defer distributions of Stock Awards or
Restricted Stock Purchase Offers in accordance with procedures
established by the Board or Committee to assure that such deferrals
comply with applicable requirements of the Code including, at the
choice of Participants, the capability to make further deferrals for
distribution after retirement. Any deferred distribution, whether
elected by the Participant or specified by the Stock Award Agreement,
Restricted Stock Purchase Offers or by the Board or Committee, may
require the payment be forfeited in accordance with the provisions of
Section 6(c). Dividends or dividend equivalent rights may be extended
to and made part of any Stock Award or Restricted Stock Purchase
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6. Stock Awards and Restricted Stock Purchase Offers - continued
Offers denominated in Stock or units of Stock, subject to such terms,
conditions and restrictions as the Board or Committee may establish.
(c) Cancellation and Rescission of Grants. Unless the Stock Award
Agreement or Restricted Stock Purchase Offer specifies otherwise, the
Board or Committee, as applicable, may cancel any unexpired, unpaid,
or deferred Grants at any time if the Participant is not in compliance
with all other applicable provisions of the Stock Award Agreement or
Restricted Stock Purchase Offer, the Plan and with the following
conditions:
(i) A Participant shall not render services for any organization or
engage directly or indirectly in any business which, in the
judgment of the chief executive officer of the Company or other
senior officer designated by the Board or Committee, is or
becomes competitive with the Company, or which organization or
business, or the rendering of services to such organization or
business, is or becomes otherwise prejudicial to or in conflict
with the interests of the Company. For Participants whose
employment has terminated, the judgment of the chief executive
officer shall be based on the Participant's position and
responsibilities while employed by the Company, the Participant's
post-employment responsibilities and position with the other
organization or business, the extent of past, current and
potential competition or conflict between the Company and the
other organization or business, the effect on the Company's
customers, suppliers and competitors and such other
considerations as are deemed relevant given the applicable facts
and circumstances. A Participant who has retired shall be free,
however, to purchase as an investment or otherwise, stock or
other securities of such organization or business so long as they
are listed upon a recognized securities exchange or traded
over-the-counter, and such investment does not represent a
substantial investment to the Participant or a greater than ten
percent (10%) equity interest in the organization or business.
(ii) A Participant shall not, without prior written authorization from
the Company, disclose to anyone outside the Company, or use in
other than the Company's business, any confidential information
or material, as defined in the Company's Proprietary Information
and Invention Agreement or similar agreement regarding
confidential information and intellectual property, relating to
the business of the Company, acquired by the Participant either
during or after employment with the Company.
(iii)A Participant, pursuant to the Company's Proprietary Information
and Invention Agreement, shall disclose promptly and assign to
the Company all right, title and interest in any invention or
idea, patentable or not, made or conceived by the Participant
during employment by the Company, relating in any manner to the
actual or anticipated business, research or development work of
the Company and shall do anything reasonably necessary to enable
the Company to secure a patent where appropriate in the United
States and in foreign countries.
(iv) Upon exercise, payment or delivery pursuant to a Grant, the
Participant shall certify on a form acceptable to the Committee
that he or she is in compliance with the terms and conditions of
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6. Stock Awards and Restricted Stock Purchase Offers - continued
the Plan. Failure to comply with all of the provisions of this
Section 6(c) prior to, or during the six months after, any
exercise, payment or delivery pursuant to a Grant shall cause
such exercise, payment or delivery to be rescinded. The Company
shall notify the Participant in writing of any such rescission
within two years after such exercise, payment or delivery. Within
ten days after receiving such a notice from the Company, the
Participant shall pay to the Company the amount of any gain
realized or payment received as a result of the rescinded
exercise, payment or delivery pursuant to a Grant. Such payment
shall be made either in cash or by returning to the Company the
number of shares of Stock that the Participant received in
connection with the rescinded exercise, payment or delivery.
(d) Non-assignability.
(i) Except pursuant to Section 6(e)(iii) and except as set forth in
Section 6(d)(ii), no Grant or any other benefit under the Plan
shall be assignable or transferable, or payable to or exercisable
by, anyone other than the Participant to whom it was granted.
(ii) Where a Participant terminates employment and retains a Grant
pursuant to Section 6(e)(ii) in order to assume a position with a
governmental, charitable or educational institution, the Board or
Committee, in its discretion and to the extent permitted by law,
may authorize a third party (including but not limited to the
trustee of a "blind" trust), acceptable to the applicable
governmental or institutional authorities, the Participant and
the Board or Committee, to act on behalf of the Participant with
regard to such Awards.
(e) Termination of Employment. If the employment or service to the Company
of a Participant terminates, other than pursuant to any of the
following provisions under this Section 6(e), all unexercised,
deferred and unpaid Stock Awards or Restricted Stock Purchase Offers
shall be cancelled immediately, unless the Stock Award Agreement or
Restricted Stock Purchase Offer provides otherwise:
(i) Retirement Under a Company Retirement Plan. When a Participant's
employment terminates as a result of retirement in accordance
with the terms of a Company retirement plan, the Board or
Committee may permit Stock Awards or Restricted Stock Purchase
Offers to continue in effect beyond the date of retirement in
accordance with the applicable Grant Agreement and the
exercisability and vesting of any such Grants may be accelerated.
(ii) Rights in the Best Interests of the Company. When a Participant
resigns from the Company and, in the judgment of the Board or
Committee, the acceleration and/or continuation of outstanding
Stock Awards or Restricted Stock Purchase Offers would be in the
best interests of the Company, the Board or Committee may (i)
authorize, where appropriate, the acceleration and/or
continuation of all or any part of Grants issued prior to such
termination and (ii) permit the exercise, vesting and payment of
such Grants for such period as may be set forth in the applicable
Grant Agreement, subject to earlier cancellation pursuant to
Section 9 or at such time as the Board or Committee shall deem
11
6. Stock Awards and Restricted Stock Purchase Offers - continued
the continuation of all or any part of the Participant's Grants
are not in the Company's best interest.
(iii) Death or Disability of a Participant.
(1) In the event of a Participant's death, the Participant's
estate or beneficiaries shall have a period up to the
expiration date specified in the Grant Agreement within
which to receive or exercise any outstanding Grant held by
the Participant under such terms as may be specified in the
applicable Grant Agreement. Rights to any such outstanding
Grants shall pass by will or the laws of descent and
distribution in the following order: (a) to beneficiaries so
designated by the Participant; if none, then (b) to a legal
representative of the Participant; if none, then (c) to the
persons entitled thereto as determined by a court of
competent jurisdiction. Grants so passing shall be made at
such times and in such manner as if the Participant were
living.
(2) In the event a Participant is deemed by the Board or
Committee to be unable to perform his or her usual duties by
reason of mental disorder or medical condition which does
not result from facts which would be grounds for termination
for cause, Grants and rights to any such Grants may be paid
to or exercised by the Participant, if legally competent, or
a committee or other legally designated guardian or
representative if the Participant is legally incompetent by
virtue of such disability.
(3) After the death or disability of a Participant, the Board or
Committee may in its sole discretion at any time (1)
terminate restrictions in Grant Agreements; (2) accelerate
any or all installments and rights; and (3) instruct the
Company to pay the total of any accelerated payments in a
lump sum to the Participant, the Participant's estate,
beneficiaries or representative; notwithstanding that, in
the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due
under the Grant might ultimately have become payable to
other beneficiaries.
(4) In the event of uncertainty as to interpretation of or
controversies concerning this Section 6, the determinations
of the Board or Committee, as applicable, shall be binding
and conclusive.
7. Investment Intent. All Grants under the Plan are intended to be exempt from
registration under the Securities Act provided by Rule 701 thereunder.
Unless and until the granting of Options or sale and issuance of Stock
subject to the Plan are registered under the Securities Act or shall be
exempt pursuant to the rules promulgated thereunder, each Grant under the
Plan shall provide that the purchases or other acquisitions of Stock
thereunder shall be for investment purposes and not with a view to, or for
resale in connection with, any distribution thereof. Further, unless the
issuance and sale of the Stock have been registered under the Securities
Act, each Grant shall provide that no shares shall be purchased upon the
exercise of the rights under such Grant unless and until (i) all then
12
7. Investment Intent - continued
applicable requirements of state and federal laws and regulatory agencies
shall have been fully complied with to the satisfaction of the Company and
its counsel, and (ii) if requested to do so by the Company, the person
exercising the rights under the Grant shall (i) give written assurances as
to knowledge and experience of such person (or a representative employed by
such person) in financial and business matters and the ability of such
person (or representative) to evaluate the merits and risks of exercising
the Option, and (ii) execute and deliver to the Company a letter of
investment intent and/or such other form related to applicable exemptions
from registration, all in such form and substance as the Company may
require. If shares are issued upon exercise of any rights under a Grant
without registration under the Securities Act, subsequent registration of
such shares shall relieve the purchaser thereof of any investment
restrictions or representations made upon the exercise of such rights.
8. Amendment, Modification, Suspension or Discontinuance of the Plan. The
Board may, insofar as permitted by law, from time to time, with respect to
any shares at the time not subject to outstanding Grants, suspend or
terminate the Plan or revise or amend it in any respect whatsoever, except
that without the approval of the shareholders of the Company, no such
revision or amendment shall (i) increase the number of shares subject to
the Plan, (ii) decrease the price at which Grants may be granted, (iii)
materially increase the benefits to Participants, or (iv) change the class
of persons eligible to receive Grants under the Plan; provided, however, no
such action shall alter or impair the rights and obligations under any
Option, or Stock Award, or Restricted Stock Purchase Offer outstanding as
of the date thereof without the written consent of the Participant
thereunder. No Grant may be issued while the Plan is suspended or after it
is terminated, but the rights and obligations under any Grant issued while
the Plan is in effect shall not be impaired by suspension or termination of
the Plan.
In the event of any change in the outstanding Stock by reason of a
stock split, stock dividend, combination or reclassification of shares,
recapitalization, merger, or similar event, the Board or the Committee may
adjust proportionally (a) the number of shares of Stock (i) reserved under
the Plan, (ii) available for Incentive Stock Options and Nonstatutory
Options and (iii) covered by outstanding Stock Awards or Restricted Stock
Purchase Offers; (b) the Stock prices related to outstanding Grants; and
(c) the appropriate Fair Market Value and other price determinations for
such Grants. In the event of any other change affecting the Stock or any
distribution (other than normal cash dividends) to holders of Stock, such
adjustments as may be deemed equitable by the Board or the Committee,
including adjustments to avoid fractional shares, shall be made to give
proper effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization
or liquidation, the Board or the Committee shall be authorized to issue or
assume stock options, whether or not in a transaction to which Section
424(a) of the Code applies, and other Grants by means of substitution of
new Grant Agreements for previously issued Grants or an assumption of
previously issued Grants.
9. Tax Withholding. The Company shall have the right to deduct applicable
taxes from any Grant payment and withhold, at the time of delivery or
exercise of Options, Stock Awards or Restricted Stock Purchase Offers or
vesting of shares under such Grants, an appropriate number of shares for
payment of taxes required by law or to take such other action as may be
necessary in the opinion of the Company to satisfy all obligations for
13
9. Tax Withholding - continued
withholding of such taxes. If Stock is used to satisfy tax withholding,
such stock shall be valued based on the Fair Market Value when the tax
withholding is required to be made.
10. Availability of Information. During the term of the Plan and any additional
period during which a Grant granted pursuant to the Plan shall be
exercisable, the Company shall make available, not later than one hundred
and twenty (120) days following the close of each of its fiscal years, such
financial and other information regarding the Company as is required by the
bylaws of the Company and applicable law to be furnished in an annual
report to the shareholders of the Company.
11. Notice. Any written notice to the Company required by any of the provisions
of the Plan shall be addressed to the chief personnel officer or to the
chief executive officer of the Company, and shall become effective when it
is received by the office of the chief personnel officer or the chief
executive officer.
12. Indemnification of Board. In addition to such other rights or
indemnifications as they may have as directors or otherwise, and to the
extent allowed by applicable law, the members of the Board and the
Committee shall be indemnified by the Company against the reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any claim, action, suit or proceeding, or in
connection with any appeal thereof, to which they or any of them may be a
party by reason of any action taken, or failure to act, under or in
connection with the Plan or any Grant granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such claim, action, suit or
proceeding, except in any case in relation to matters as to which it shall
be adjudged in such claim, action, suit or proceeding that such Board or
Committee member is liable for negligence or misconduct in the performance
of his or her duties; provided that within sixty (60) days after
institution of any such action, suit or Board proceeding the member
involved shall offer the Company, in writing, the opportunity, at its own
expense, to handle and defend the same.
13. Governing Law. The Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by the Code or the
securities laws of the United States, shall be governed by the laws of the
State of Nevada and construed accordingly.
14. Effective and Termination Dates. The Plan shall become effective on the
date it is approved by the holders of a majority of the shares of Stock
then outstanding. The Plan shall terminate ten years later, subject to
earlier termination by the Board pursuant to Section 8.
The foregoing Combined Incentive and Non-Qualified Stock Plan was duly adopted
and approved by the Board of Directors on June 28, 2005.
VISUALANT, INCORPORATED
/s/ Ronald P. Erickson
--------------------------
By: Ronald P. Erickson
Chair man of the Board
14
EXHIBIT A
VISUALANT, INCORPORATED
INCENTIVE STOCK OPTION AGREEMENT
================================================================================
This Incentive Stock Option Agreement ("Agreement") is made and entered
into as of the date set forth below, by and between VISUALANT, INCORPORATED, a
Nevada corporation (the "Company"), and the employee of the Company named in
Section 1(b). ("Optionee"):
In consideration of the covenants herein set forth, the parties hereto
agree as follows:
1. Option Information.
(a) Date of Option: __________________________
(b) Optionee: __________________________
(c) Number of Shares: __________________________
(d) Exercise Price: __________________________
2. Acknowledgements.
(a) Optionee is an employee of the Company.
(b) The Board of Directors (the "Board" which term shall include an
authorized committee of the Board of Directors) and shareholders of the
Company have heretofore adopted a 2005 Incentive Stock Plan (the "Plan"),
pursuant to which this Option is being granted.
(c) The Board has authorized the granting to Optionee of an incentive stock
option ("Option") as defined in Section 422 of the Internal Revenue Code of
1986, as amended, (the "Code") to purchase shares of common stock of the
Company ("Stock") upon the terms and conditions hereinafter stated and
pursuant to an exemption from registration under the Securities Act of
1933, as amended (the "Securities Act") provided by Rule 701 thereunder.
3. Shares; Price. The Company hereby grants to Optionee the right to purchase,
upon and subject to the terms and conditions herein stated, the number of shares
of Stock set forth in Section 1(c) above (the "Shares") for cash (or other
consideration as is authorized under the Plan and acceptable to the Board, in
their sole and absolute discretion) at the price per Share set forth in Section
1(d) above (the "Exercise Price"), such price being not less than the fair
market value per share of the Shares covered by this Option as of the date
hereof (unless Optionee is the owner of Stock possessing ten percent or more of
the total voting power or value of all outstanding Stock of the Company, in
which case the Exercise Price shall be no less than 110% of the fair market
value of such Stock).
4. Term of Option; Continuation of Employment. This Option shall expire, and all
rights hereunder to purchase the Shares shall terminate five (5) years from the
date hereof. This Option shall earlier terminate subject to Sections 7 and 8
hereof upon, and as of the date of, the termination of Optionee's employment if
such termination occurs prior to the end of such five (5) year period. Nothing
contained herein shall confer upon Optionee the right to the continuation of his
or her employment by the Company or to interfere with the right of the Company
15
2. Acknowledgements - continued
to terminate such employment or to increase or decrease the compensation of
Optionee from the rate in existence at the date hereof.
5. Vesting of Option. Subject to the provisions of Sections 7 and 8 hereof, this
Option shall become exercisable during the term of Optionee's employment in four
(4) equal annual installments of twenty-five percent (25%) of the Shares covered
by this Option, the first installment to be exercisable on the six (6) month
anniversary of the date of this Option (the "Initial Vesting Date"), with an
additional twenty-five percent (25%) of such Shares becoming exercisable on each
of the three (3) successive twelve (12) month periods following the Initial
Vesting Date. The installments shall be cumulative (i.e., this option may be
exercised, as to any or all Shares covered by an installment, at any time or
times after an installment becomes exercisable and until expiration or
termination of this option)].
6. Exercise. This Option shall be exercised by delivery to the Company of (a)
written notice of exercise stating the number of Shares being purchased (in
whole shares only) and such other information set forth on the form of Notice of
Exercise attached hereto as Appendix A, (b) a check or cash in the amount of the
Exercise Price of the Shares covered by the notice (or such other consideration
as has been approved by the Board of Directors consistent with the Plan) and (c)
a written investment representation as provided for in Section 13 hereof. This
Option shall not be assignable or transferable, except by will or by the laws of
descent and distribution, and shall be exercisable only by Optionee during his
or her lifetime, except as provided in Section 8 hereof.
7. Termination of Employment. If Optionee shall cease to be employed by the
Company for any reason, whether voluntarily or involuntarily, other than by his
or her death, Optionee (or if the Optionee shall die after such termination, but
prior to such exercise date, Optionee's personal representative or the person
entitled to succeed to the Option) shall have the right at any time within three
(3) months following such termination of employment or the remaining term of
this Option, whichever is the lesser, to exercise in whole or in part this
Option to the extent, but only to the extent, that this Option was exercisable
as of the date of termination of employment and had not previously been
exercised; provided, however: (i) if Optionee is permanently disabled (within
the meaning of Section 22(e)(3) of the Code) at the time of termination, the
foregoing three (3) month period shall be extended to six (6) months; or (ii) if
Optionee is terminated "for cause" as that term is defined under the Nevada
Labor Code and case law related thereto, or by the terms of the Plan or this
Option Agreement or by any employment agreement between the Optionee and the
Company, this Option shall automatically terminate as to all Shares covered by
this Option not exercised prior to termination. Unless earlier terminated, all
rights under this Option shall terminate in any event on the expiration date of
this Option as defined in Section 4 hereof.
8. Death of Optionee. If the Optionee shall die while in the employ of the
Company, Optionee's personal representative or the person entitled to Optionee's
rights hereunder may at any time within six (6) months after the date of
Optionee's death, or during the remaining term of this Option, whichever is the
lesser, exercise this Option and purchase Shares to the extent, but only to the
extent, that Optionee could have exercised this Option as of the date of
Optionee's death; provided, in any case, that this Option may be so exercised
only to the extent that this Option has not previously been exercised by
Optionee.
16
9. No Rights as Shareholder. Optionee shall have no rights as a shareholder with
respect to the Shares covered by any installment of this Option until the
effective date of issuance of Shares following exercise of this Option, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such stock certificate or certificates are issued except as
provided in Section 10 hereof.
10. Recapitalization. Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the Exercise Price
thereof, shall be proportionately adjusted for any increase or decrease in the
number of issued shares resulting from a subdivision or consolidation of shares
or the payment of a stock dividend, or any other increase or decrease in the
number of such shares effected without receipt of consideration by the Company;
provided however that the conversion of any convertible securities of the
Company shall not be deemed having been "effected without receipt of
consideration by the Company".
In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or a
sale of all or substantially all of the assets or capital stock of the Company
(collectively, a "Reorganization"), unless otherwise provided by the Board, this
Option shall terminate immediately prior to such date as is determined by the
Board, which date shall be no later than the consummation of such
Reorganization. In such event, if the entity which shall be the surviving entity
does not tender to Optionee an offer, for which it has no obligation to do so,
to substitute for any unexercised Option a stock option or capital stock of such
surviving entity, as applicable, which on an equitable basis shall provide the
Optionee with substantially the same economic benefit as such unexercised
Option, then the Board may grant to such Optionee, in its sole and absolute
discretion and without obligation, the right for a period commencing thirty (30)
days prior to and ending immediately prior to the date determined by the Board
pursuant hereto for termination of the Option or during the remaining term of
the Option, whichever is the lesser, to exercise any unexpired Option or Options
without regard to the installment provisions of Section 5; provided, however,
that such exercise shall be subject to the consummation of such Reorganization.
Subject to any required action by the shareholders of the Company, if the
Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the installment provisions of
Section 5 shall continue to apply.
In the event of a change in the shares of the Company as presently
constituted, which is limited to a change of all of its authorized Stock without
par value into the same number of shares of Stock with a par value, the shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Option.
To the extent that the foregoing adjustments relate to shares or securities
of the Company, such adjustments shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as hereinbefore
expressly provided, Optionee shall have no rights by reason of any subdivision
or consolidation of shares of Stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class, and the number and price of Shares subject to this Option shall not
be affected by, and no adjustments shall be made by reason of, any dissolution,
liquidation, merger, consolidation or sale of assets or capital stock, or any
issue by the Company of shares of stock of any class or securities convertible
into shares of stock of any class.
17
10. Recapitalization - continued
The grant of this Option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
in its capital or business structure or to merge, consolidate, dissolve or
liquidate or to sell or transfer all or any part of its business or assets.
11. Additional Consideration. Should the Internal Revenue Service determine that
the Exercise Price established by the Board as the fair market value per Share
is less than the fair market value per Share as of the date of Option grant,
Optionee hereby agrees to tender such additional consideration, or agrees to
tender upon exercise of all or a portion of this Option, such fair market value
per Share as is determined by the Internal Revenue Service.
12. Modifications, Extension and Renewal of Options. The Board or Committee, as
described in the Plan, may modify, extend or renew this Option or accept the
surrender thereof (to the extent not theretofore exercised) and authorize the
granting of a new option in substitution therefore (to the extent not
theretofore exercised), subject at all times to the Plan, and Section 422 of the
Code. Notwithstanding the foregoing provisions of this Section 12, no
modification shall, without the consent of the Optionee, alter to the Optionee's
detriment or impair any rights of Optionee hereunder.
13. Investment Intent; Restrictions on Transfer.
(a) Optionee represents and agrees that if Optionee exercises this Option
in whole or in part, Optionee will in each case acquire the Shares upon
such exercise for the purpose of investment and not with a view to, or for
resale in connection with, any distribution thereof; and that upon such
exercise of this Option in whole or in part, Optionee (or any person or
persons entitled to exercise this Option under the provisions of Sections 7
and 8 hereof) shall furnish to the Company a written statement to such
effect, satisfactory to the Company in form and substance. If the Shares
represented by this Option are registered under the Securities Act, either
before or after the exercise of this Option in whole or in part, the
Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Company with the
foregoing written statement.
(b) Optionee further represents that Optionee has had access to the
financial statements or books and records of the Company, has had the
opportunity to ask questions of the Company concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information.
(c) Unless and until the Shares represented by this Option are registered
under the Securities Act, all certificates representing the Shares and any
certificates subsequently issued in substitution therefor and any
certificate for any securities issued pursuant to any stock split, share
reclassification, stock dividend or other similar capital event shall bear
legends in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE
SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE
SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE
SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.
18
13. Investment Intent; Restrictions on Transfer - continued
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
THAT CERTAIN INCENTIVE STOCK OPTION AGREEMENT DATED _________ BETWEEN THE
COMPANY AND THE ISSUER WHICH RESTRICTS THE TRANSFER OF THESE SHARES WHICH
ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.
such other legend or legends as the Company and its counsel deem necessary or
appropriate. Appropriate stop transfer instructions with respect to the Shares
have been placed with the Company's transfer agent.
14. Effects of Early Disposition. Optionee understands that if an Optionee
disposes of shares acquired hereunder within two (2) years after the date of
this Option or within one (1) year after the date of issuance of such shares to
Optionee, such Optionee will be treated for income tax purposes as having
received ordinary income at the time of such disposition of an amount generally
measured by the difference between the purchase price and the fair market value
of such stock on the date of exercise, subject to adjustment for any tax
previously paid, in addition to any tax on the difference between the sales
price and Optionee's adjusted cost basis in such shares. The foregoing amount
may be measured differently if Optionee is an officer, director or ten percent
holder of the Company. Optionee agrees to notify the Company within ten (10)
working days of any such disposition.
15. Stand-off Agreement. Optionee agrees that in connection with any
registration of the Company's securities under the Securities Act, and upon the
request of the Company or any underwriter managing an underwritten offering of
the Company's securities, Optionee shall not sell, short any sale of, loan,
grant an option for, or otherwise dispose of any of the Shares (other than
Shares included in the offering) without the prior written consent of the
Company or such managing underwriter, as applicable, for a period of at least
one year following the effective date of registration of such offering.
16. Restriction Upon Transfer. The Shares may not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated by the
Optionee except as hereinafter provided.
(a) Repurchase Right on Termination Other Than for Cause. For the purposes
of this Section, a "Repurchase Event" shall mean an occurrence of one of
(i) termination of Optionee's employment by the Company, voluntary or
involuntary and with or without cause; (ii) retirement or death of
Optionee; (iii) bankruptcy of Optionee, which shall be deemed to have
occurred as of the date on which a voluntary or involuntary petition in
bankruptcy is filed with a court of competent jurisdiction; (iv)
dissolution of the marriage of Optionee, to the extent that any of the
Shares are allocated as the sole and separate property of Optionee's spouse
pursuant thereto (in which case this Section shall only apply to the Shares
so affected); or (v) any attempted transfer by the Optionee of Shares, or
any interest therein, in violation of this Agreement. Upon the occurrence
of a Repurchase Event, the Company shall have the right (but not an
obligation) to repurchase all or any portion of the Shares of Optionee at a
price equal to the fair value of the Shares as of the date of the
Repurchase Event.
(b) Repurchase Right on Termination for Cause. In the event Optionee's
employment is terminated by the Company "for cause", then the Company shall
have the right (but not an obligation) to repurchase Shares of Optionee at
a price equal to the Exercise Price. Such right of the Company to
repurchase Shares shall apply to 100% of the Shares for one (1) year from
the date of this Agreement; and shall thereafter lapse at the rate of
19
16. Restriction Upon Transfer - continued
twenty percent (20%) of the Shares on each anniversary of the date of this
Agreement. In addition, the Company shall have the right, in the sole
discretion of the Board and without obligation, to repurchase upon
termination for cause all or any portion of the Shares of Optionee, at a
price equal to the fair value of the Shares as of the date of termination,
which right is not subject to the foregoing lapsing of rights. In the event
the Company elects to repurchase the Shares, the stock certificates
representing the same shall forthwith be returned to the Company for
cancellation.
(c) Exercise of Repurchase Right. Any Repurchase Right under Paragraphs
16(a) or 16(b) shall be exercised by giving notice of exercise as provided
herein to Optionee or the estate of Optionee, as applicable. Such right
shall be exercised, and the repurchase price thereunder shall be paid, by
the Company within a ninety (90) day period beginning on the date of notice
to the Company of the occurrence of such Repurchase Event (except in the
case of termination of employment or retirement, where such option period
shall begin upon the occurrence of the Repurchase Event). Such repurchase
price shall be payable only in the form of cash (including a check drafted
on immediately available funds) or cancellation of purchase money
indebtedness of the Optionee for the Shares. If the Company can not
purchase all such Shares because it is unable to meet the financial tests
set forth in Nevada and/or Nevada corporation law, the Company shall have
the right to purchase as many Shares as it is permitted to purchase under
such sections. Any Shares not purchased by the Company hereunder shall no
longer be subject to the provisions of this Section 16.
(d) Right of First Refusal. In the event Optionee desires to transfer any
Shares during his or her lifetime, Optionee shall first offer to sell such
Shares to the Company. Optionee shall deliver to the Company written notice
of the intended sale, such notice to specify the number of Shares to be
sold, the proposed purchase price and terms of payment, and grant the
Company an option for a period of thirty days following receipt of such
notice to purchase the offered Shares upon the same terms and conditions.
To exercise such option, the Company shall give notice of that fact to
Optionee within the thirty (30) day notice period and agree to pay the
purchase price in the manner provided in the notice. If the Company does
not purchase all of the Shares so offered during foregoing option period,
Optionee shall be under no obligation to sell any of the offered Shares to
the Company, but may dispose of such Shares in any lawful manner during a
period of one hundred and eighty (180) days following the end of such
notice period, except that Optionee shall not sell any such Shares to any
other person at a lower price or upon more favorable terms than those
offered to the Company.
(e) Acceptance of Restrictions. Acceptance of the Shares shall constitute
the Optionee's agreement to such restrictions and the legending of his
certificates with respect thereto. Notwithstanding such restrictions,
however, so long as the Optionee is the holder of the Shares, or any
portion thereof, he shall be entitled to receive all dividends declared on
and to vote the Shares and to all other rights of a shareholder with
respect thereto.
(f) Permitted Transfers. Notwithstanding any provisions in this Section 16
to the contrary, the Optionee may transfer Shares subject to this Agreement
to his or her parents, spouse, children, or grandchildren, or a trust for
the benefit of the Optionee or any such transferee(s); provided, that such
permitted transferee(s) shall hold the Shares subject to all the provisions
20
16. Restriction Upon Transfer - continued
of this Agreement (all references to the Optionee herein shall in such
cases refer mutatis mutandis to the permitted transferee, except in the
case of clause (iv) of Section 16(a) wherein the permitted transfer shall
be deemed to be rescinded); and provided further, that notwithstanding any
other provisions in this Agreement, a permitted transferee may not, in
turn, make permitted transfers without the written consent of the Optionee
and the Company.
(g) Release of Restrictions on Shares. All other restrictions under this
Section 16 shall terminate five (5) years following the date of this
Agreement, or when the Company's securities are publicly traded, whichever
occurs earlier.
17. Notices. Any notice required to be given pursuant to this Option or the Plan
shall be in writing and shall be deemed to be delivered upon receipt or, in the
case of notices by the Company, five (5) days after deposit in the U.S. mail,
postage prepaid, addressed to Optionee at the address last provided to the
Company by Optionee for his or her employee records.
18. Agreement Subject to Plan; Applicable Law. This Option is made pursuant to
the Plan and shall be interpreted to comply therewith. A copy of such Plan is
available to Optionee, at no charge, at the principal office of the Company. Any
provision of this Option inconsistent with the Plan shall be considered void and
replaced with the applicable provision of the Plan. This Option has been
granted, executed and delivered in the State of Nevada, and the interpretation
and enforcement shall be governed by the laws thereof and subject to the
exclusive jurisdiction of the courts therein.
In Witness Whereof, the parties hereto have executed this Option as of the
date first above written.
COMPANY: VISUALANT, INCORPORATED
By: ____________________________
Name:___________________________
Title:__________________________
OPTIONEE:
By:_____________________________
(signature)
Name:___________________________
(one of the following, as appropriate, shall be signed)
I certify that as of the date hereof I By his or her signature, the spouse
am unmarried of Optionee hereby agrees to be bound
by the provisions of the foregoing
INCENTIVE STOCK OPTION AGREEMENT
______________________________________ _____________________________________
Optionee Spouse of Optionee
21
================================================================================
Appendix A
----------
NOTICE OF EXERCISE
VISUALANT, INCORPORATED
Re: Incentive Stock Option
Notice is hereby given pursuant to Section 6 of my Incentive Stock Option
Agreement that I elect to purchase the number of shares set forth below at the
exercise price set forth in my option agreement:
Incentive Stock Option Agreement dated: ____________
Number of shares being purchased: ____________
Exercise Price: $____________
A check in the amount of the aggregate price of the shares being purchased
is attached.
I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof. I will not sell or dispose of my
Shares in violation of the Securities Act of 1933, as amended, or any applicable
federal or state securities laws. Further, I understand that the exemption from
taxable income at the time of exercise is dependent upon my holding such stock
for a period of at least one year from the date of exercise and two years from
the date of grant of the Option.
I understand that the certificate representing the Option Shares will bear
a restrictive legend within the contemplation of the Securities Act and as
required by such other state or federal law or regulation applicable to the
issuance or delivery of the Option Shares.
I agree to provide to the Company such additional documents or information
as may be required pursuant to the Company's 2005 Incentive Stock Plan.
By:___________________________
(signature)
Name:_________________________
22
EXHIBIT B-1
-----------
VISUALANT, INCORPORATED
EMPLOYEE NONSTATUTORY STOCK OPTION AGREEMENT
================================================================================
This Employee Nonstatutory Stock Option Agreement ("Agreement") is made and
entered into as of the date set forth below, by and between VISUALANT,
INCORPORATED ("Company"), and the following employee of the Company
("Optionee"):
In consideration of the covenants herein set forth, the parties hereto
agree as follows:
1. Option Information.
(a) Date of Option: __________________________
(b) Optionee: __________________________
(c) Number of Shares: __________________________
(d) Exercise Price: __________________________
2. Acknowledgements.
(a) Optionee is an employee of the Company.
(b) The Board of Directors (the "Board" which term shall include an
authorized committee of the Board of Directors) and shareholders of the
Company have heretofore adopted a 2005 Incentive Stock Plan (the "Plan"),
pursuant to which this Option is being granted; and
(c) The Board has authorized the granting to Optionee of a nonstatutory
stock option ("Option") to purchase shares of common stock of the Company
("Stock") upon the terms and conditions hereinafter stated and pursuant to
an exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act") provided by Rule 701 thereunder.
3. Shares; Price. Company hereby grants to Optionee the right to purchase, upon
and subject to the terms and conditions herein stated, the number of shares of
Stock set forth in Section 1(c) above (the "Shares") for cash (or other
consideration as is authorized under the Plan and acceptable to the Board of
Directors of the Company, in their sole and absolute discretion) at the price
per Share set forth in Section 1(d) above (the "Exercise Price"), such price
being not less than eighty-five percent (85%) of the fair market value per share
of the Shares covered by this Option as of the date hereof.
4. Term of Option; Continuation of Service. This Option shall expire, and all
rights hereunder to purchase the Shares shall terminate, five (5) years from the
date hereof. This Option shall earlier terminate subject to Sections 7 and 8
hereof upon, and as of the date of, the termination of Optionee's employment if
such termination occurs prior to the end of such five (5) year period. Nothing
contained herein shall confer upon Optionee the right to the continuation of his
or her employment by the Company or to interfere with the right of the Company
to terminate such employment or to increase or decrease the compensation of
Optionee from the rate in existence at the date hereof.
5. Vesting of Option. Subject to the provisions of Sections 7 and 8 hereof, this
Option shall become exercisable during the term of Optionee's employment in
[five (5) equal annual installments of twenty percent (20%) of the Shares
23
5. Vesting of Option - continued
covered by this Option, the first installment to be exercisable on the first
anniversary of the date of this Option, with an additional twenty percent (20%)
of such Shares becoming exercisable on each of the four (4) successive
anniversary dates. The installments shall be cumulative (i.e., this option may
be exercised, as to any or all shares covered by an installment, at any time or
times after an installment becomes exercisable and until expiration or
termination of this option)].
6. Exercise. This Option shall be exercised by delivery to the Company of (a)
written notice of exercise stating the number of Shares being purchased (in
whole shares only) and such other information set forth on the form of Notice of
Exercise attached hereto as Appendix A, (b) a check or cash in the amount of the
Exercise Price of the Shares covered by the notice (or such other consideration
as has been approved by the Board of Directors consistent with the Plan) and (c)
a written investment representation as provided for in Section 13 hereof. This
Option shall not be assignable or transferable, except by will or by the laws of
descent and distribution, and shall be exercisable only by Optionee during his
or her lifetime, except as provided in Section 8 hereof.
7. Termination of Employment. If Optionee shall cease to be employed by the
Company for any reason, whether voluntarily or involuntarily, other than by his
or her death, Optionee (or if the Optionee shall die after such termination, but
prior to such exercise date, Optionee's personal representative or the person
entitled to succeed to the Option) shall have the right at any time within three
(3) months following such termination of employment or the remaining term of
this Option, whichever is the lesser, to exercise in whole or in part this
Option to the extent, but only to the extent, that this Option was exercisable
as of the date of termination of employment and had not previously been
exercised; provided, however: (i) if Optionee is permanently disabled (within
the meaning of Section 22(e)(3) of the Code) at the time of termination, the
foregoing three (3) month period shall be extended to six (6) months; or (ii) if
Optionee is terminated "for cause" as that term is defined under the Nevada
Labor Code and case law related thereto, or by the terms of the Plan or this
Option Agreement or by any employment agreement between the Optionee and the
Company, this Option shall automatically terminate as to all Shares covered by
this Option not exercised prior to termination. Unless earlier terminated, all
rights under this Option shall terminate in any event on the expiration date of
this Option as defined in Section 4 hereof.
8. Death of Optionee. If the Optionee shall die while in the employ of the
Company, Optionee's personal representative or the person entitled to Optionee's
rights hereunder may at any time within six (6) months after the date of
Optionee's death, or during the remaining term of this Option, whichever is the
lesser, exercise this Option and purchase Shares to the extent, but only to the
extent, that Optionee could have exercised this Option as of the date of
Optionee's death; provided, in any case, that this Option may be so exercised
only to the extent that this Option has not previously been exercised by
Optionee.
9. No Rights as Shareholder. Optionee shall have no rights as a shareholder with
respect to the Shares covered by any installment of this Option until the
effective date of issuance of the Shares following exercise of this Option, and
no adjustment will be made for dividends or other rights for which the record
date is prior to the date such stock certificate or certificates are issued
except as provided in Section 10 hereof.
24
10. Recapitalization. Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the Exercise Price
thereof, shall be proportionately adjusted for any increase or decrease in the
number of issued shares resulting from a subdivision or consolidation of shares
or the payment of a stock dividend, or any other increase or decrease in the
number of such shares effected without receipt of consideration by the Company;
provided however that the conversion of any convertible securities of the
Company shall not be deemed having been "effected without receipt of
consideration by the Company".
In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or a
sale of all or substantially all of the assets or capital stock of the Company
(collectively, a "Reorganization"), unless otherwise provided by the Board, this
Option shall terminate immediately prior to such date as is determined by the
Board, which date shall be no later than the consummation of such
Reorganization. In such event, if the entity which shall be the surviving entity
does not tender to Optionee an offer, for which it has no obligation to do so,
to substitute for any unexercised Option a stock option or capital stock of such
surviving entity, as applicable, which on an equitable basis shall provide the
Optionee with substantially the same economic benefit as such unexercised
Option, then the Board may grant to such Optionee, in its sole and absolute
discretion and without obligation, the right for a period commencing thirty (30)
days prior to and ending immediately prior to the date determined by the Board
pursuant hereto for termination of the Option or during the remaining term of
the Option, whichever is the lesser, to exercise any unexpired Option or Options
without regard to the installment provisions of Section 5; provided, however,
that such exercise shall be subject to the consummation of such Reorganization.
Subject to any required action by the shareholders of the Company, if the
Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the installment provisions of
Section 5 shall continue to apply.
In the event of a change in the shares of the Company as presently constituted,
which is limited to a change of all of its authorized Stock without par value
into the same number of shares of Stock with a par value, the shares resulting
from any such change shall be deemed to be the Shares within the meaning of this
Option.
To the extent that the foregoing adjustments relate to shares or securities
of the Company, such adjustments shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as hereinbefore
expressly provided, Optionee shall have no rights by reason of any subdivision
or consolidation of shares of Stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class, and the number and price of Shares subject to this Option shall not
be affected by, and no adjustments shall be made by reason of, any dissolution,
liquidation, merger, consolidation or sale of assets or capital stock, or any
issue by the Company of shares of stock of any class or securities convertible
into shares of stock of any class.
The grant of this Option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
in its capital or business structure or to merge, consolidate, dissolve or
liquidate or to sell or transfer all or any part of its business or assets.
25
11. Taxation upon Exercise of Option. Optionee understands that, upon exercise
of this Option, Optionee will recognize income, for Federal and state income tax
purposes, in an amount equal to the amount by which the fair market value of the
Shares, determined as of the date of exercise, exceeds the Exercise Price. The
acceptance of the Shares by Optionee shall constitute an agreement by Optionee
to report such income in accordance with then applicable law and to cooperate
with Company in establishing the amount of such income and corresponding
deduction to the Company for its income tax purposes. Withholding for federal or
state income and employment tax purposes will be made, if and as required by
law, from Optionee's then current compensation, or, if such current compensation
is insufficient to satisfy withholding tax liability, the Company may require
Optionee to make a cash payment to cover such liability as a condition of the
exercise of this Option.
12. Modification, Extension and Renewal of Options. The Board or Committee, as
described in the Plan, may modify, extend or renew this Option or accept the
surrender thereof (to the extent not theretofore exercised) and authorize the
granting of a new option in substitution therefore (to the extent not
theretofore exercised), subject at all times to the Plan, the Code and the
Nevada Securities Rules. Notwithstanding the foregoing provisions of this
Section 12, no modification shall, without the consent of the Optionee, alter to
the Optionee's detriment or impair any rights of Optionee hereunder.
13. Investment Intent; Restrictions on Transfer.
(a) Optionee represents and agrees that if Optionee exercises this Option
in whole or in part, Optionee will in each case acquire the Shares upon
such exercise for the purpose of investment and not with a view to, or for
resale in connection with, any distribution thereof; and that upon such
exercise of this Option in whole or in part, Optionee (or any person or
persons entitled to exercise this Option under the provisions of Sections 7
and 8 hereof) shall furnish to the Company a written statement to such
effect, satisfactory to the Company in form and substance. If the Shares
represented by this Option are registered under the Securities Act, either
before or after the exercise of this Option in whole or in part, the
Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Company with the
foregoing written statement.
(b) Optionee further represents that Optionee has had access to the
financial statements or books and records of the Company, has had the
opportunity to ask questions of the Company concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information
(c) Unless and until the Shares represented by this Option are registered
under the Securities Act, all certificates representing the Shares and any
certificates subsequently issued in substitution therefor and any
certificate for any securities issued pursuant to any stock split, share
reclassification, stock dividend or other similar capital event shall bear
legends in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE
SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE
SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE
SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.
26
13. Investment Intent; Restrictions on Transfer - continued
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED ____________ BETWEEN
THE COMPANY AND THE ISSUER WHICH RESTRICTS THE TRANSFER OF THESE SHARES
WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.
and/or such other legend or legends as the Company and its counsel deem
necessary or appropriate. Appropriate stop transfer instructions with respect to
the Shares have been placed with the Company's transfer agent.
14. Stand-off Agreement. Optionee agrees that, in connection with any
registration of the Company's securities under the Securities Act, and upon the
request of the Company or any underwriter managing an underwritten offering of
the Company's securities, Optionee shall not sell, short any sale of, loan,
grant an option for, or otherwise dispose of any of the Shares (other than
Shares included in the offering) without the prior written consent of the
Company or such managing underwriter, as applicable, for a period of at least
one year following the effective date of registration of such offering.
15. Restriction Upon Transfer. The Shares may not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated by the
Optionee except as hereinafter provided.
(a) Repurchase Right on Termination Other Than for Cause. For the purposes
of this Section, a "Repurchase Event" shall mean an occurrence of one of
(i) termination of Optionee's employment by the Company, voluntary or
involuntary and with or without cause; (ii) retirement or death of
Optionee; (iii) bankruptcy of Optionee, which shall be deemed to have
occurred as of the date on which a voluntary or involuntary petition in
bankruptcy is filed with a court of competent jurisdiction; (iv)
dissolution of the marriage of Optionee, to the extent that any of the
Shares are allocated as the sole and separate property of Optionee's spouse
pursuant thereto (in which case, this Section shall only apply to the
Shares so affected); or (v) any attempted transfer by the Optionee of
Shares, or any interest therein, in violation of this Agreement. Upon the
occurrence of a Repurchase Event, the Company shall have the right (but not
an obligation) to repurchase all or any portion of the Shares of Optionee
at a price equal to the fair value of the Shares as of the date of the
Repurchase Event.
(b) Repurchase Right on Termination for Cause. In the event Optionee's
employment is terminated by the Company "for cause", then the Company shall
have the right (but not an obligation) to repurchase Shares of Optionee at
a price equal to the Exercise Price. Such right of the Company to
repurchase Shares shall apply to 100% of the Shares for one (1) year from
the date of this Agreement; and shall thereafter lapse at the rate of
twenty percent (20%) of the Shares on each anniversary of the date of this
Agreement. In addition, the Company shall have the right, in the sole
discretion of the Board and without obligation, to repurchase upon
termination for cause all or any portion of the Shares of Optionee, at a
price equal to the fair value of the Shares as of the date of termination,
which right is not subject to the foregoing lapsing of rights. In the event
the Company elects to repurchase the Shares, the stock certificates
representing the same shall forthwith be returned to the Company for
cancellation.
(c) Exercise of Repurchase Right. Any Repurchase Right under Paragraphs
15(a) or 15(b) shall be exercised by giving notice of exercise as provided
herein to Optionee or the estate of Optionee, as applicable. Such right
27
15. Restriction Upon Transfer - continued
shall be exercised, and the repurchase price thereunder shall be paid, by
the Company within a ninety (90) day period beginning on the date of notice
to the Company of the occurrence of such Repurchase Event (except in the
case of termination of employment or retirement, where such option period
shall begin upon the occurrence of the Repurchase Event). Such repurchase
price shall be payable only in the form of cash (including a check drafted
on immediately available funds) or cancellation of purchase money
indebtedness of the Optionee for the Shares. If the Company can not
purchase all such Shares because it is unable to meet the financial tests
set forth in the Nevada and/or Nevada corporation law, the Company shall
have the right to purchase as many Shares as it is permitted to purchase
under such sections. Any Shares not purchased by the Company hereunder
shall no longer be subject to the provisions of this Section 15.
(d) Right of First Refusal. In the event Optionee desires to transfer any
Shares during his or her lifetime, Optionee shall first offer to sell such
Shares to the Company. Optionee shall deliver to the Company written notice
of the intended sale, such notice to specify the number of Shares to be
sold, the proposed purchase price and terms of payment, and grant the
Company an option for a period of thirty days following receipt of such
notice to purchase the offered Shares upon the same terms and conditions.
To exercise such option, the Company shall give notice of that fact to
Optionee within the thirty (30) day notice period and agree to pay the
purchase price in the manner provided in the notice. If the Company does
not purchase all of the Shares so offered during foregoing option period,
Optionee shall be under no obligation to sell any of the offered Shares to
the Company, but may dispose of such Shares in any lawful manner during a
period of one hundred and eighty (180) days following the end of such
notice period, except that Optionee shall not sell any such Shares to any
other person at a lower price or upon more favorable terms than those
offered to the Company.
(e) Acceptance of Restrictions. Acceptance of the Shares shall constitute
the Optionee's agreement to such restrictions and the legending of his
certificates with respect thereto. Notwithstanding such restrictions,
however, so long as the Optionee is the holder of the Shares, or any
portion thereof, he shall be entitled to receive all dividends declared on
and to vote the Shares and to all other rights of a shareholder with
respect thereto.
(f) Permitted Transfers. Notwithstanding any provisions in this Section 15
to the contrary, the Optionee may transfer Shares subject to this Agreement
to his or her parents, spouse, children, or grandchildren, or a trust for
the benefit of the Optionee or any such transferee(s); provided, that such
permitted transferee(s) shall hold the Shares subject to all the provisions
of this Agreement (all references to the Optionee herein shall in such
cases refer mutatis mutandis to the permitted transferee, except in the
case of clause (iv) of Section 15(a) wherein the permitted transfer shall
be deemed to be rescinded); and provided further, that notwithstanding any
other provisions in this Agreement, a permitted transferee may not, in
turn, make permitted transfers without the written consent of the Optionee
and the Company.
(g) Release of Restrictions on Shares. All other restrictions under this
Section 15 shall terminate five (5) years following the date of this
Agreement, or when the Company's securities are publicly traded, whichever
occurs earlier.
28
16. Notices. Any notice required to be given pursuant to this Option or the Plan
shall be in writing and shall be deemed to be delivered upon receipt or, in the
case of notices by the Company, five (5) days after deposit in the U.S. mail,
postage prepaid, addressed to Optionee at the address last provided by Optionee
for his or her employee records.
17. Agreement Subject to Plan; Applicable Law. This Option is made pursuant to
the Plan and shall be interpreted to comply therewith. A copy of such Plan is
available to Optionee, at no charge, at the principal office of the Company. Any
provision of this Option inconsistent with the Plan shall be considered void and
replaced with the applicable provision of the Plan. This Option has been
granted, executed and delivered in the State of Nevada, and the interpretation
and enforcement shall be governed by the laws thereof and subject to the
exclusive jurisdiction of the courts therein.
In Witness Whereof, the parties hereto have executed this Option as of the
date first above written.
COMPANY: VISUALANT, INCORPORATED
By:_____________________________
Name:___________________________
Title:__________________________
OPTIONEE:
By:_____________________________
(signature)
Name:___________________________
(one of the following, as appropriate, shall be signed)
I certify that as of the date hereof I By his or her signature, the spouse
am unmarried of Optionee hereby agrees to be bound
by the provisions of the foregoing
INCENTIVE STOCK OPTION AGREEMENT
______________________________________ _____________________________________
Optionee Spouse of Optionee
29
================================================================================
Appendix A
----------
NOTICE OF EXERCISE
VISUALANT, INCORPORATED
Re: Nonstatutory Stock Option
Notice is hereby given pursuant to Section 6 of my Nonstatutory Stock
Option Agreement that I elect to purchase the number of shares set forth below
at the exercise price set forth in my option agreement:
Nonstatutory Stock Option Agreement dated: ____________
Number of shares being purchased: ____________
Exercise Price: $____________
A check in the amount of the aggregate price of the shares being purchased
is attached.
I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof. I will not sell or dispose of my
Shares in violation of the Securities Act of 1933, as amended, or any applicable
federal or state securities laws. Further, I understand that the exemption from
taxable income at the time of exercise is dependent upon my holding such stock
for a period of at least one year from the date of exercise and two years from
the date of grant of the Option.
I understand that the certificate representing the Option Shares will bear
a restrictive legend within the contemplation of the Securities Act and as
required by such other state or federal law or regulation applicable to the
issuance or delivery of the Option Shares.
I agree to provide to the Company such additional documents or information
as may be required pursuant to the Company's 2005 Incentive Stock Plan.
By:____________________________
(signature)
Name:__________________________
30
================================================================================
EXHIBIT B-2
VISUALANT, INCORPORATED
NONSTATUTORY STOCK OPTION AGREEMENT
================================================================================
This Nonstatutory Stock Option Agreement ("Agreement") is made and entered
into as of the date set forth below, by and between VISUALANT, INCORPORATED, a
Nevada corporation (the "Company"), and the following Director of the Company
("Optionee"):
In consideration of the covenants herein set forth, the parties hereto
agree as follows:
1. Option Information.
(a) Date of Option: __________________________
(b) Optionee: __________________________
(c) Number of Shares: __________________________
(d) Exercise Price: __________________________
2. Acknowledgements.
(a) Optionee is a member of the Board of Directors of the Company.
(b) The Board of Directors (the "Board" which term shall include an
authorized committee of the Board of Directors) and shareholders of
the Company have heretofore adopted a 2005 Incentive Stock Plan (the
"Plan"), pursuant to which this Option is being granted; and
(c) The Board has authorized the granting to Optionee of a
nonstatutory stock option ("Option") to purchase shares of common
stock of the Company ("Stock") upon the terms and conditions
hereinafter stated and pursuant to an exemption from registration
under the Securities Act of 1933, as amended (the "Securities Act")
provided by Rule 701 thereunder.
3. Shares; Price. Company hereby grants to Optionee the right to purchase, upon
and subject to the terms and conditions herein stated, the number of shares of
Stock set forth in Section 1(c) above (the "Shares") for cash (or other
consideration as is authorized under the Plan and acceptable to the Board of
Directors of the Company, in their sole and absolute discretion) at the price
per Share set forth in Section 1(d) above (the "Exercise Price"), such price
being not less than eighty-five percent (85%) of the fair market value per share
of the Shares covered by this Option as of the date hereof.
4. Term of Option; Continuation of Service. This Option shall expire, and all
rights hereunder to purchase the Shares shall terminate, five (5) years from the
date hereof. This Option shall earlier terminate subject to Sections 7 and 8
hereof upon, and as of the date of, the termination of Optionee's service as a
Director if such termination occurs prior to the end of such five (5) year
period. Nothing contained herein shall confer upon Optionee the right to
continue as a Director of the Company or to interfere with the right of the
Company to terminate the service of such Director.
31
5. Vesting of Option. Subject to the provisions of Sections 7 and 8 hereof, this
Option shall become exercisable during the term that Optionee serves as a
Director of the Company in [three (3) equal annual installments of thirty-three
and one-third percent (33 1/3%) of the Shares covered by this Option, the first
installment to be exercisable on the first anniversary of the date of this
Option, with an additional thirty-three and one-third percent (33 1/3%) of such
Shares becoming exercisable on each of the two (2) successive anniversary dates.
The installments shall be cumulative (i.e., this option may be exercised, as to
any or all shares covered by an installment, at any time or times after an
installment becomes exercisable and until expiration or termination of this
Option)].
6. Exercise. This Option shall be exercised by delivery to the Company of (a)
written notice of exercise stating the number of Shares being purchased (in
whole shares only) and such other information set forth on the form of Notice of
Exercise attached hereto as Appendix A, (b) a check or cash in the amount of the
Exercise Price of the Shares covered by the notice (or such other consideration
as has been approved by the Board of Directors consistent with the Plan) and (c)
a written investment representation as provided for in Section 13 hereof. This
Option shall not be assignable or transferable, except by will or by the laws of
descent and distribution, and shall be exercisable only by Optionee during his
or her lifetime, except as provided in Section 8 hereof.
7. Termination of Service. If Optionee shall cease to serve as a Director of the
Company for any reason, no further installments shall vest pursuant to Section
5, and the maximum number of Shares that Optionee may purchase pursuant hereto
shall be limited to the number of Shares that were vested as of the date
Optionee ceases to be a Director (to the nearest whole Share). Thereupon,
Optionee shall have the right to exercise this Option, at any time during the
remaining term hereof, to the extent, but only to the extent, that this Option
was exercisable as of the date Optionee ceases to be a Director; provided,
however, if Optionee is removed as a Director pursuant to the Nevada corporation
law, the foregoing right to exercise shall automatically terminate on the date
Optionee ceases to be a Director as to all Shares covered by this Option not
exercised prior to termination. Unless earlier terminated, all rights under this
Option shall terminate in any event on the expiration date of this Option as
defined in Section 4 hereof.
8. Death of Optionee. If the Optionee shall die while in the employ of the
Company, Optionee's personal representative or the person entitled to Optionee's
rights hereunder may at any time within six (6) months after the date of
Optionee's death, or during the remaining term of this Option, whichever is the
lesser, exercise this Option and purchase Shares to the extent, but only to the
extent, that Optionee could have exercised this Option as of the date of
Optionee's death; provided, in any case, that this Option may be so exercised
only to the extent that this Option has not previously been exercised by
Optionee.
9. No Rights as Shareholder. Optionee shall have no rights as a shareholder with
respect to the Shares covered by any installment of this Option until the
effective date of issuance of the Shares following exercise of this Option, and
no adjustment will be made for dividends or other rights for which the record
date is prior to the date such stock certificate or certificates are issued
except as provided in Section 10 hereof.
10. Recapitalization. Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the Exercise Price
thereof, shall be proportionately adjusted for any increase or decrease in the
number of issued shares resulting from a subdivision or consolidation of shares
or the payment of a stock dividend, or any other increase or decrease in the
32
10. Recapitalization - continued
number of such shares effected without receipt of consideration by the Company;
provided however that the conversion of any convertible securities of the
Company shall not be deemed having been "effected without receipt of
consideration by the Company".
In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or a
sale of all or substantially all of the assets or capital stock of the Company
(collectively, a "Reorganization"), unless otherwise provided by the Board, this
Option shall terminate immediately prior to such date as is determined by the
Board, which date shall be no later than the consummation of such
Reorganization. In such event, if the entity which shall be the surviving entity
does not tender to Optionee an offer, for which it has no obligation to do so,
to substitute for any unexercised Option a stock option or capital stock of such
surviving entity, as applicable, which on an equitable basis shall provide the
Optionee with substantially the same economic benefit as such unexercised
Option, then the Board may grant to such Optionee, in its sole and absolute
discretion and without obligation, the right for a period commencing thirty (30)
days prior to and ending immediately prior to the date determined by the Board
pursuant hereto for termination of the Option or during the remaining term of
the Option, whichever is the lesser, to exercise any unexpired Option or Options
without regard to the installment provisions of Section 5; provided, however,
that such exercise shall be subject to the consummation of such Reorganization.
Subject to any required action by the shareholders of the Company, if the
Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the installment provisions of
Section 5 shall continue to apply.
In the event of a change in the shares of the Company as presently
constituted, which is limited to a change of all of its authorized Stock without
par value into the same number of shares of Stock with a par value, the shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Option.
To the extent that the foregoing adjustments relate to shares or securities
of the Company, such adjustments shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as hereinbefore
expressly provided, Optionee shall have no rights by reason of any subdivision
or consolidation of shares of Stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class, and the number and price of Shares subject to this Option shall not
be affected by, and no adjustments shall be made by reason of, any dissolution,
liquidation, merger, consolidation or sale of assets or capital stock, or any
issue by the Company of shares of stock of any class or securities convertible
into shares of stock of any class.
The grant of this Option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
in its capital or business structure or to merge, consolidate, dissolve or
liquidate or to sell or transfer all or any part of its business or assets.
11. Taxation upon Exercise of Option. Optionee understands that, upon exercise
of this Option, Optionee will recognize income, for Federal and state income tax
purposes, in an amount equal to the amount by which the fair market value of the
33
11. Taxation upon Exercise of Option - continued
Shares, determined as of the date of exercise, exceeds the Exercise Price. The
acceptance of the Shares by Optionee shall constitute an agreement by Optionee
to report such income in accordance with then applicable law and to cooperate
with Company in establishing the amount of such income and corresponding
deduction to the Company for its income tax purposes. Withholding for federal or
state income and employment tax purposes will be made, if and as required by
law, from Optionee's then current compensation, or, if such current compensation
is insufficient to satisfy withholding tax liability, the Company may require
Optionee to make a cash payment to cover such liability as a condition of the
exercise of this Option.
12. Modification, Extension and Renewal of Options. The Board or Committee, as
described in the Plan, may modify, extend or renew this Option or accept the
surrender thereof (to the extent not theretofore exercised) and authorize the
granting of a new option in substitution therefore (to the extent not
theretofore exercised), subject at all times to the Plan, the Code and the
Nevada Securities Rules. Notwithstanding the foregoing provisions of this
Section 12, no modification shall, without the consent of the Optionee, alter to
the Optionee's detriment or impair any rights of Optionee hereunder.
13. Investment Intent; Restrictions on Transfer.
(a) Optionee represents and agrees that if Optionee exercises this Option
in whole or in part, Optionee will in each case acquire the Shares upon
such exercise for the purpose of investment and not with a view to, or for
resale in connection with, any distribution thereof; and that upon such
exercise of this Option in whole or in part, Optionee (or any person or
persons entitled to exercise this Option under the provisions of Sections 7
and 8 hereof) shall furnish to the Company a written statement to such
effect, satisfactory to the Company in form and substance. If the Shares
represented by this Option are registered under the Securities Act, either
before or after the exercise of this Option in whole or in part, the
Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Company with the
foregoing written statement.
(b) Optionee further represents that Optionee has had access to the
financial statements or books and records of the Company, has had the
opportunity to ask questions of the Company concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information
(c) Unless and until the Shares represented by this Option are registered
under the Securities Act, all certificates representing the Shares and any
certificates subsequently issued in substitution therefor and any
certificate for any securities issued pursuant to any stock split, share
reclassification, stock dividend or other similar capital event shall bear
legends in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE
SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE
SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE
SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.
34
13. Investment Intent; Restrictions on Transfer - continued
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED ____________ BETWEEN
THE COMPANY AND THE ISSUER WHICH RESTRICTS THE TRANSFER OF THESE SHARES
WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.
and/or such other legend or legends as the Company and its counsel deem
necessary or appropriate. Appropriate stop transfer instructions with respect to
the Shares have been placed with the Company's transfer agent.
14. Stand-off Agreement. Optionee agrees that, in connection with any
registration of the Company's securities under the Securities Act, and upon the
request of the Company or any underwriter managing an underwritten offering of
the Company's securities, Optionee shall not sell, short any sale of, loan,
grant an option for, or otherwise dispose of any of the Shares (other than
Shares included in the offering) without the prior written consent of the
Company or such managing underwriter, as applicable, for a period of at least
one year following the effective date of registration of such offering.
15. Restriction Upon Transfer. The Shares may not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated by the
Optionee except as hereinafter provided.
(a) Repurchase Right on Termination Other Than by Removal. For the purposes
of this Section, a "Repurchase Event" shall mean an occurrence of one of
(i) termination of Optionee's service as a director; (ii) death of
Optionee; (iii) bankruptcy of Optionee, which shall be deemed to have
occurred as of the date on which a voluntary or involuntary petition in
bankruptcy is filed with a court of competent jurisdiction; (iv)
dissolution of the marriage of Optionee, to the extent that any of the
Shares are allocated as the sole and separate property of Optionee's spouse
pursuant thereto (in which case, this Section shall only apply to the
Shares so affected); or (v) any attempted transfer by the Optionee of
Shares, or any interest therein, in violation of this Agreement. Upon the
occurrence of a Repurchase Event, and upon mutual agreement of the Company
and Optionee, the Company may repurchase all or any portion of the Shares
of Optionee at a price equal to the fair value of the Shares as of the date
of the Repurchase Event.
(b) Repurchase Right on Removal. In the event Optionee is removed as a
director pursuant to the Nevada General Corporation Law, or Optionee
voluntarily resigns as a director prior to the date upon which the last
installment of Shares becomes exercisable pursuant to Section 5, then the
Company shall have the right (but not an obligation) to repurchase Shares
of Optionee at a price equal to the Exercise Price. Such right of the
Company to repurchase Shares shall apply to 100% of the Shares for one (1)
year from the date of this Agreement; and shall thereafter lapse ratably in
equal annual increments on each anniversary of the date of this Agreement
over the term of this Option specified in Section 4. In addition, the
Company shall have the right, in the sole discretion of the Board and
without obligation, to repurchase upon removal or resignation all or any
portion of the Shares of Optionee, at a price equal to the fair value of
the Shares as of the date of such removal or resignation, which right is
not subject to the foregoing lapsing of rights. In the event the Company
elects to repurchase the Shares, the stock certificates representing the
same shall forthwith be returned to the Company for cancellation.
(c) Exercise of Repurchase Right. Any Repurchase Right under Paragraphs
15(a) or 15(b) shall be exercised by giving notice of exercise as provided
35
15. Restriction Upon Transfer - continued
herein to Optionee or the estate of Optionee, as applicable. Such right
shall be exercised, and the repurchase price thereunder shall be paid, by
the Company within a ninety (90) day period beginning on the date of notice
to the Company of the occurrence of such Repurchase Event (except in the
case of termination or cessation of services as director, where such option
period shall begin upon the occurrence of the Repurchase Event). Such
repurchase price shall be payable only in the form of cash (including a
check drafted on immediately available funds) or cancellation of purchase
money indebtedness of the Optionee for the Shares. If the Company can not
purchase all such Shares because it is unable to meet the financial tests
set forth in the Nevada corporation law, the Company shall have the right
to purchase as many Shares as it is permitted to purchase under such
sections. Any Shares not purchased by the Company hereunder shall no longer
be subject to the provisions of this Section 15.
(d) Right of First Refusal. In the event Optionee desires to transfer any
Shares during his or her lifetime, Optionee shall first offer to sell such
Shares to the Company. Optionee shall deliver to the Company written notice
of the intended sale, such notice to specify the number of Shares to be
sold, the proposed purchase price and terms of payment, and grant the
Company an option for a period of thirty days following receipt of such
notice to purchase the offered Shares upon the same terms and conditions.
To exercise such option, the Company shall give notice of that fact to
Optionee within the thirty (30) day notice period and agree to pay the
purchase price in the manner provided in the notice. If the Company does
not purchase all of the Shares so offered during foregoing option period,
Optionee shall be under no obligation to sell any of the offered Shares to
the Company, but may dispose of such Shares in any lawful manner during a
period of one hundred and eighty (180) days following the end of such
notice period, except that Optionee shall not sell any such Shares to any
other person at a lower price or upon more favorable terms than those
offered to the Company.
(e) Acceptance of Restrictions. Acceptance of the Shares shall constitute
the Optionee's agreement to such restrictions and the legending of his
certificates with respect thereto. Notwithstanding such restrictions,
however, so long as the Optionee is the holder of the Shares, or any
portion thereof, he shall be entitled to receive all dividends declared on
and to vote the Shares and to all other rights of a shareholder with
respect thereto.
(f) Permitted Transfers. Notwithstanding any provisions in this Section 15
to the contrary, the Optionee may transfer Shares subject to this Agreement
to his or her parents, spouse, children, or grandchildren, or a trust for
the benefit of the Optionee or any such transferee(s); provided, that such
permitted transferee(s) shall hold the Shares subject to all the provisions
of this Agreement (all references to the Optionee herein shall in such
cases refer mutatis mutandis to the permitted transferee, except in the
case of clause (iv) of Section 15(a) wherein the permitted transfer shall
be deemed to be rescinded); and provided further, that notwithstanding any
other provisions in this Agreement, a permitted transferee may not, in
turn, make permitted transfers without the written consent of the Optionee
and the Company.
(g) Release of Restrictions on Shares. All other restrictions under this
Section 15 shall terminate five (5) years following the date of this
Agreement, or when the Company's securities are publicly traded, whichever
occurs earlier.
36
16. Notices. Any notice required to be given pursuant to this Option or the Plan
shall be in writing and shall be deemed to be delivered upon receipt or, in the
case of notices by the Company, five (5) days after deposit in the U.S. mail,
postage prepaid, addressed to Optionee at the address last provided by Optionee
for use in Company records related to Optionee.
17. Agreement Subject to Plan; Applicable Law. This Option is made pursuant to
the Plan and shall be interpreted to comply therewith. A copy of such Plan is
available to Optionee, at no charge, at the principal office of the Company. Any
provision of this Option inconsistent with the Plan shall be considered void and
replaced with the applicable provision of the Plan. This Option has been
granted, executed and delivered in the State of Nevada, and the interpretation
and enforcement shall be governed by the laws thereof and subject to the
exclusive jurisdiction of the courts therein.
IN WITNESS WHEREOF, the parties hereto have executed this Option as of the
date first above written.
COMPANY: VISUALANT, INCORPORATED
By:__________________________________
Name:________________________________
Title:_______________________________
OPTIONEE:
By:__________________________________
(signature)
Name:________________________________
(one of the following, as appropriate, shall be signed)
I certify that as of the date hereof I By his or her signature, the spouse
am unmarried of Optionee hereby agrees to be bound
by the provisions of the foregoing
INCENTIVE STOCK OPTION AGREEMENT
______________________________________ _____________________________________
Optionee Spouse of Optionee
37
================================================================================
Appendix A
----------
NOTICE OF EXERCISE
VISUALANT, INCORPORATED
Re: Nonstatutory Stock Option
Notice is hereby given pursuant to Section 6 of my Nonstatutory Stock
Option Agreement that I elect to purchase the number of shares set forth below
at the exercise price set forth in my option agreement:
Nonstatutory Stock Option Agreement dated: ____________
Number of shares being purchased: ____________
Exercise Price: $____________
A check in the amount of the aggregate price of the shares being purchased
is attached.
I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof. I will not sell or dispose of my
Shares in violation of the Securities Act of 1933, as amended, or any applicable
federal or state securities laws. Further, I understand that the exemption from
taxable income at the time of exercise is dependent upon my holding such stock
for a period of at least one year from the date of exercise and two years from
the date of grant of the Option.
I understand that the certificate representing the Option Shares will bear
a restrictive legend within the contemplation of the Securities Act and as
required by such other state or federal law or regulation applicable to the
issuance or delivery of the Option Shares.
I agree to provide to the Company such additional documents or information
as may be required pursuant to the Company's 2005 Incentive Stock Plan.
By:_____________________________
(signature)
Name:___________________________
38
================================================================================
EXHIBIT B-3
-----------
VISUALANT, INCORPORATED
CONSULTANT NONSTATUTORY STOCK OPTION AGREEMENT
================================================================================
This Consultant Nonstatutory Stock Option Agreement ("Agreement") is made
and entered into as of the date set forth below, by and between VISUALANT,
INCORPORATED, a Nevada corporation (the "Company"), and the following consultant
to the Company (herein, the "Optionee"):
In consideration of the covenants herein set forth, the parties hereto
agree as follows:
1. Option Information.
(a) Date of Option: __________________________
(b) Optionee: __________________________
(c) Number of Shares: __________________________
(d) Exercise Price: __________________________
2. Acknowledgements.
(a) Optionee is an independent consultant to the Company, not an employee;
(b) The Board of Directors (the "Board" which term shall include an
authorized committee of the Board of Directors) and shareholders of the
Company have heretofore adopted a 2005 Incentive Stock Plan (the "Plan"),
pursuant to which this Option is being granted; and
(c) The Board has authorized the granting to Optionee of a nonstatutory
stock option ("Option") to purchase shares of common stock of the Company
("Stock") upon the terms and conditions hereinafter stated and pursuant to
an exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act") provided by Rule 701 thereunder.
3. Shares; Price. The Company hereby grants to Optionee the right to purchase,
upon and subject to the terms and conditions herein stated, the number of shares
of Stock set forth in Section 1(c) above (the "Shares") for cash (or other
consideration as is authorized under the Plan and acceptable to the Board, in
their sole and absolute discretion) at the price per Share set forth in Section
1(d) above (the "Exercise Price"), such price being not less than eighty-five
85% of the fair market value per share of the Shares covered by this Option as
of the date hereof.
4. Term of Option. This Option shall expire, and all rights hereunder to
purchase the Shares, shall terminate five (5) years from the date hereof.
Nothing contained herein shall be construed to interfere in any way with the
right of the Company to terminate Optionee as a consultant to the Company, or to
increase or decrease the compensation paid to Optionee from the rate in effect
as of the date hereof.
5. Vesting of Option. Subject to the provisions of Sections 7 and 8 hereof, this
Option shall become exercisable during the period that Optionee serves as a
consultant of the Company in equal annual installments, each installment
covering a fraction of the Shares, the numerator of which is one (1) and the
denominator of which is the number of years in the term of this Option (not to
39
5. Vesting of Option - continued
exceed 5). The first installment shall become exercisable on the first
anniversary of the date of this Option, and an additional installment shall
become exercisable on each successive anniversary date during the term of this
Option, except the last such anniversary date. The final installment shall
become exercisable ninety days prior to the expiration of the term of this
Option. The installments shall be cumulative (i.e., this option may be
exercised, as to any or all shares covered by an installment, at any time or
times after an installment becomes exercisable and until expiration or
termination of this option).
6. Exercise. This Option shall be exercised by delivery to the Company of (a)
written notice of exercise stating the number of Shares being purchased (in
whole shares only) and such other information set forth on the form of Notice of
Exercise attached hereto as Appendix A, (b) a check or cash in the amount of the
Exercise Price of the Shares covered by the notice (or such other consideration
as has been approved by the Board of Directors consistent with the Plan) and (c)
a written investment representation as provided for in Section 13 hereof. This
Option shall not be assignable or transferable, except by will or by the laws of
descent and distribution, and shall be exercisable only by Optionee during his
or her lifetime.
7. Termination of Service. If Optionee's service as a consultant to the Company
terminates for any reason, no further installments shall vest pursuant to
Section 5, and Optionee shall have the right at any time within thirty (30) days
following such termination of services or the remaining term of this Option,
whichever is the lesser, to exercise in whole or in part this Option to the
extent, but only to the extent, that this Option was exercisable as of the date
Optionee ceased to be a consultant to the Company; provided, however, if
Optionee is terminated for reasons that would justify a termination of
employment "for cause" as contemplated by the Nevada Labor Code and case law
related thereto, the foregoing right to exercise shall automatically terminate
on the date Optionee ceases to be a consultant to the Company as to all Shares
covered by this Option not exercised prior to termination. Unless earlier
terminated, all rights under this Option shall terminate in any event on the
expiration date of this Option as defined in Section 4 hereof.
8. Death of Optionee. If the Optionee shall die while serving as a consultant to
the Company, Optionee's personal representative or the person entitled to
Optionee's rights hereunder may at any time within ninety (90) days after the
date of Optionee's death, or during the remaining term of this Option, whichever
is the lesser, exercise this Option and purchase Shares to the extent, but only
to the extent, that Optionee could have exercised this Option as of the date of
Optionee's death; provided, in any case, that this Option may be so exercised
only to the extent that this Option has not previously been exercised by
Optionee.
9. No Rights as Shareholder. Optionee shall have no rights as a shareholder with
respect to the Shares covered by any installment of this Option until the
effective date of the issuance of shares following exercise of this to Option,
and no adjustment will be made for dividends or other rights for which the
record date is prior to the date such stock certificate or certificates are
issued except as provided in Section 10 hereof.
10. Recapitalization. Subject to any required action by the shareholders of the
Company, the number of Shares covered by this Option, and the Exercise Price
thereof, shall be proportionately adjusted for any increase or decrease in the
number of issued shares resulting from a subdivision or consolidation of shares
or the payment of a stock dividend, or any other increase or decrease in the
40
10. Recapitalization - continued
number of such shares effected without receipt of consideration by the Company;
provided however that the conversion of any convertible securities of the
Company shall not be deemed having been "effected without receipt of
consideration by the Company."
In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or a
sale of all or substantially all of the assets or capital stock of the Company
(collectively, a "Reorganization"), this Option shall terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board; provided, however, if Optionee shall be a consultant at the time such
Reorganization is approved by the stockholders, Optionee shall have the right to
exercise this Option as to all or any part of the Shares, without regard to the
installment provisions of Section 5, for a period beginning 30 days prior to the
consummation of such Reorganization and ending as of the Reorganization or the
expiration of this Option, whichever is earlier, subject to the consummation of
the Reorganization. In any event, the Company shall notify Optionee, at least 30
days prior to the consummation of such Reorganization, of his exercise rights,
if any, and that the Option shall terminate upon the consummation of the
Reorganization.
Subject to any required action by the shareholders of the Company, if the
Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the installment provisions of
Section 5 shall continue to apply.
In the event of a change in the shares of the Company as presently
constituted, which is limited to a change of all of its authorized Stock without
par value into the same number of shares of Stock with a par value, the shares
resulting from any such change shall be deemed to be the Shares within the
meaning of this Option.
To the extent that the foregoing adjustments relate to shares or securities
of the Company, such adjustments shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as hereinbefore
expressly provided, Optionee shall have no rights by reason of any subdivision
or consolidation of shares of Stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class, and the number and price of Shares subject to this Option shall not
be affected by, and no adjustments shall be made by reason of, any dissolution,
liquidation, merger, consolidation or sale of assets or capital stock, or any
issue by the Company of shares of stock of any class or securities convertible
into shares of stock of any class.
The grant of this Option shall not affect in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
in its capital or business structure or to merge, consolidate, dissolve or
liquidate or to sell or transfer all or any part of its business or assets.
11. Taxation upon Exercise of Option. Optionee understands that, upon exercise
of this Option, Optionee will recognize income, for Federal and state income tax
purposes, in an amount equal to the amount by which the fair market value of the
Shares, determined as of the date of exercise, exceeds the Exercise Price. The
acceptance of the Shares by Optionee shall constitute an agreement by Optionee
to report such income in accordance with then applicable law and to cooperate
with Company in establishing the amount of such income and corresponding
41
11. Taxation upon Exercise of Option - continued
deduction to the Company for its income tax purposes. Withholding for federal or
state income and employment tax purposes will be made, if and as required by
law, from Optionee's then current compensation, or, if such current compensation
is insufficient to satisfy withholding tax liability, the Company may require
Optionee to make a cash payment to cover such liability as a condition of the
exercise of this Option.
12. Modification, Extension and Renewal of Options. The Board or Committee, as
described in the Plan, may modify, extend or renew this Option or accept the
surrender thereof (to the extent not theretofore exercised) and authorize the
granting of a new option in substitution therefore (to the extent not
theretofore exercised), subject at all times to the Plan, the Code.
Notwithstanding the foregoing provisions of this Section 12, no modification
shall, without the consent of the Optionee, alter to the Optionee's detriment or
impair any rights of Optionee hereunder.
13. Investment Intent; Restrictions on Transfer.
(a) Optionee represents and agrees that if Optionee exercises this Option
in whole or in part, Optionee will in each case acquire the Shares upon
such exercise for the purpose of investment and not with a view to, or for
resale in connection with, any distribution thereof; and that upon such
exercise of this Option in whole or in part, Optionee (or any person or
persons entitled to exercise this Option under the provisions of Sections 7
and 8 hereof) shall furnish to the Company a written statement to such
effect, satisfactory to the Company in form and substance. If the Shares
represented by this Option are registered under the Securities Act, either
before or after the exercise of this Option in whole or in part, the
Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Company with the
foregoing written statement.
(b) Optionee further represents that Optionee has had access to the
financial statements or books and records of the Company, has had the
opportunity to ask questions of the Company concerning its business,
operations and financial condition, and to obtain additional information
reasonably necessary to verify the accuracy of such information.
(c) Unless and until the Shares represented by this Option are registered
under the Securities Act, all certificates representing the Shares and any
certificates subsequently issued in substitution therefor and any
certificate for any securities issued pursuant to any stock split, share
reclassification, stock dividend or other similar capital event shall bear
legends in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE
SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE
SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE
SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED ___________ BETWEEN
THE COMPANY AND THE ISSUER WHICH RESTRICTS THE TRANSFER OF THESE SHARES
WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.
42
13. Investment Intent; Restrictions on Transfer - continued
and/or such other legend or legends as the Company and its counsel deem
necessary or appropriate. Appropriate stop transfer instructions with respect to
the Shares have been placed with the Company's transfer agent.
14. Stand-off Agreement. Optionee agrees that, in connection with any
registration of the Company's securities under the Securities Act, and upon the
request of the Company or any underwriter managing an underwritten offering of
the Company's securities, Optionee shall not sell, short any sale of, loan,
grant an option for, or otherwise dispose of any of the Shares (other than
Shares included in the offering) without the prior written consent of the
Company or such managing underwriter, as applicable, for a period of up to one
year following the effective date of registration of such offering.
15. Restriction Upon Transfer. The Shares may not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated by the
Optionee except as hereinafter provided.
(a) Repurchase Right on Termination Other Than for Cause. For the purposes
of this Section, a "Repurchase Event" shall mean an occurrence of one of
(i) termination of Optionee's service as a consultant, voluntary or
involuntary and with or without cause; (ii) retirement or death of
Optionee; (iii) bankruptcy of Optionee, which shall be deemed to have
occurred as of the date on which a voluntary or involuntary petition in
bankruptcy is filed with a court of competent jurisdiction; (iv)
dissolution of the marriage of Optionee, to the extent that any of the
Shares are allocated as the sole and separate property of Optionee's spouse
pursuant thereto (in which case, this Section shall only apply to the
Shares so affected); or (v) any attempted transfer by the Optionee of
Shares, or any interest therein, in violation of this Agreement. Upon the
occurrence of a Repurchase Event, the Company shall have the right (but not
an obligation) to repurchase all or any portion of the Shares of Optionee
at a price equal to the fair value of the Shares as of the date of the
Repurchase Event.
(b) Repurchase Right on Termination for Cause. In the event Optionee's
service as a consultant is terminated by the Company "for cause" (as
contemplated by Section 7), then the Company shall have the right (but not
an obligation) to repurchase Shares of Optionee at a price equal to the
Exercise Price. Such right of the Company to repurchase Shares shall apply
to 100% of the Shares for one (1) year from the date of this Agreement; and
shall thereafter lapse ratably in equal annual increments on each
anniversary of the date of this Agreement over the term of this Option
specified in Section 4. In addition, the Company shall have the right, in
the sole discretion of the Board and without obligation, to repurchase upon
any such termination of service for cause all or any portion of the Shares
of Optionee, at a price equal to the fair value of the Shares as of the
date of termination, which right is not subject to the foregoing lapsing of
rights. In the event the Company elects to repurchase the Shares, the stock
certificates representing the same shall forthwith be returned to the
Company for cancellation.
(c) Exercise of Repurchase Right. Any repurchase right under Paragraphs
15(a) or 15(b) shall be exercised by giving notice of exercise as provided
herein to Optionee or the estate of Optionee, as applicable. Such right
shall be exercised, and the repurchase price thereunder shall be paid, by
the Company within a ninety (90) day period beginning on the date of notice
to the Company of the occurrence of such Repurchase Event (except in the
case of termination of employment or retirement, where such option period
43
15. Restriction Upon Transfer - continued
shall begin upon the occurrence of the Repurchase Event). Such repurchase
price shall be payable only in the form of cash (including a check drafted
on immediately available funds) or cancellation of purchase money
indebtedness of the Optionee for the Shares. If the Company can not
purchase all such Shares because it is unable to meet the financial tests
set forth in the Nevada corporation law, the Company shall have the right
to purchase as many Shares as it is permitted to purchase under such
sections. Any Shares not purchased by the Company hereunder shall no longer
be subject to the provisions of this Section 15.
(d) Right of First Refusal. In the event Optionee desires to transfer any
Shares during his or her lifetime, Optionee shall first offer to sell such
Shares to the Company. Optionee shall deliver to the Company written notice
of the intended sale, such notice to specify the number of Shares to be
sold, the proposed purchase price and terms of payment, and grant the
Company an option for a period of thirty days following receipt of such
notice to purchase the offered Shares upon the same terms and conditions.
To exercise such option, the Company shall give notice of that fact to
Optionee within the thirty (30) day notice period and agree to pay the
purchase price in the manner provided in the notice. If the Company does
not purchase all of the Shares so offered during foregoing option period,
Optionee shall be under no obligation to sell any of the offered Shares to
the Company, but may dispose of such Shares in any lawful manner during a
period of one hundred and eighty (180) days following the end of such
notice period, except that Optionee shall not sell any such Shares to any
other person at a lower price or upon more favorable terms than those
offered to the Company.
(e) Acceptance of Restrictions. Acceptance of the Shares shall constitute
the Optionee's agreement to such restrictions and the legending of his
certificates with respect thereto. Notwithstanding such restrictions,
however, so long as the Optionee is the holder of the Shares, or any
portion thereof, he shall be entitled to receive all dividends declared on
and to vote the Shares and to all other rights of a shareholder with
respect thereto.
(f) Permitted Transfers. Notwithstanding any provisions in this Section 15
to the contrary, the Optionee may transfer Shares subject to this Agreement
to his or her parents, spouse, children, or grandchildren, or a trust for
the benefit of the Optionee or any such transferee(s); provided, that such
permitted transferee(s) shall hold the Shares subject to all the provisions
of this Agreement (all references to the Optionee herein shall in such
cases refer mutatis mutandis to the permitted transferee, except in the
case of clause (iv) of Section 15(a) wherein the permitted transfer shall
be deemed to be rescinded); and provided further, that notwithstanding any
other provisions in this Agreement, a permitted transferee may not, in
turn, make permitted transfers without the written consent of the Optionee
and the Company.
(g) Release of Restrictions on Shares. All rights and restrictions under
this Section 15 shall terminate five (5) years following the date of this
Agreement, or when the Company's securities are publicly traded, whichever
occurs earlier.
16. Notices. Any notice required to be given pursuant to this Option or the Plan
shall be in writing and shall be deemed to be delivered upon receipt or, in the
case of notices by the Company, five (5) days after deposit in the U.S. mail,
postage prepaid, addressed to Optionee at the address last provided by Optionee
for use in Company records related to Optionee.
44
17. Agreement Subject to Plan; Applicable Law. This Option is made pursuant to
the Plan and shall be interpreted to comply therewith. A copy of such Plan is
available to Optionee, at no charge, at the principal office of the Company. Any
provision of this Option inconsistent with the Plan shall be considered void and
replaced with the applicable provision of the Plan. This Option has been
granted, executed and delivered in the State of Nevada, and the interpretation
and enforcement shall be governed by the laws thereof and subject to the
exclusive jurisdiction of the courts therein.
In Witness Whereof, the parties hereto have executed this Option as of the
date first above written.
COMPANY: VISUALANT, INCORPORATED
By:______________________________
Name:____________________________
Title:___________________________
OPTIONEE:
By:______________________________
(signature)
Name:____________________________
(one of the following, as appropriate, shall be signed)
I certify that as of the date hereof I By his or her signature, the spouse
am unmarried of Optionee hereby agrees to be bound
by the provisions of the foregoing
INCENTIVE STOCK OPTION AGREEMENT
______________________________________ _____________________________________
Optionee Spouse of Optionee
45
================================================================================
Appendix A
----------
NOTICE OF EXERCISE
VISUALANT, INCORPORATED
Re: Nonstatutory Stock Option
Notice is hereby given pursuant to Section 6 of my Nonstatutory Stock
Option Agreement that I elect to purchase the number of shares set forth below
at the exercise price set forth in my option agreement:
Nonstatutory Stock Option Agreement dated: ____________
Number of shares being purchased: ____________
Exercise Price: $____________
A check in the amount of the aggregate price of the shares being purchased
is attached.
I hereby confirm that such shares are being acquired by me for my own
account for investment purposes, and not with a view to, or for resale in
connection with, any distribution thereof. I will not sell or dispose of my
Shares in violation of the Securities Act of 1933, as amended, or any applicable
federal or state securities laws. Further, I understand that the exemption from
taxable income at the time of exercise is dependent upon my holding such stock
for a period of at least one year from the date of exercise and two years from
the date of grant of the Option.
I understand that the certificate representing the Option Shares will bear
a restrictive legend within the contemplation of the Securities Act and as
required by such other state or federal law or regulation applicable to the
issuance or delivery of the Option Shares.
I agree to provide to the Company such additional documents or information
as may be required pursuant to the Company's 2005 Incentive Stock Plan.
By:_______________________________
(signature)
Name:_____________________________
46
================================================================================
EXHIBIT C
---------
VISUALANT, INCORPORATED
STOCK AWARD AGREEMENT
================================================================================
This Stock Award Agreement ("Agreement") is made and entered into as of the
date set forth below, by and between VISUALANT, INCORPORATED, a Nevada
corporation ("Company"), and the employee, director or consultant of the Company
named in Section 1(b). ("Grantee"):
In consideration of the covenants herein set forth, the parties hereto
agree as follows:
1. Stock Award Information.
(a) Date of Award: __________________________
(b) Grantee: __________________________
(c) Number of Shares: __________________________
(d) Original Value: __________________________
2. Acknowledgements.
(a) Grantee is a [employee/director/consultant] of the Company.
(b) The Company has adopted a 2005 Incentive Stock Plan (the "Plan") under
which the Company's common stock ("Stock") may be offered to directors,
officers, employees and consultants pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "Securities
Act") provided by Rule 701 thereunder.
3. Shares; Value. The Company hereby grants to Grantee, upon and subject to the
terms and conditions herein stated, the number of shares of Stock set forth in
Section 1(c) (the "Shares"), which Shares have a fair value per share ("Original
Value") equal to the amount set forth in Section 1(d). For the purpose of this
Agreement, the terms "Share" or "Shares" shall include the original Shares plus
any shares derived therefrom, regardless of the fact that the number, attributes
or par value of such Shares may have been altered by reason of any
recapitalization, subdivision, consolidation, stock dividend or amendment of the
corporate charter of the Company. The number of Shares covered by this Agreement
and the Original Value thereof shall be proportionately adjusted for any
increase or decrease in the number of issued shares resulting from a
recapitalization, subdivision or consolidation of shares or the payment of a
stock dividend, or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Company.
4. Investment Intent. Grantee represents and agrees that Grantee is accepting
the Shares for the purpose of investment and not with a view to, or for resale
in connection with, any distribution thereof; and that, if requested, Grantee
shall furnish to the Company a written statement to such effect, satisfactory to
the Company in form and substance. If the Shares are registered under the
Securities Act, Grantee shall be relieved of the foregoing investment
representation and agreement and shall not be required to furnish the Company
with the foregoing written statement.
47
5. Restriction Upon Transfer. The Shares may not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated by the
Grantee except as hereinafter provided.
(a) Repurchase Right on Termination Other Than for Cause. For the purposes
of this Section, a "Repurchase Event" shall mean an occurrence of one of
(i) termination of Grantee's employment [or service as a
director/consultant] by the Company, voluntary or involuntary and with or
without cause; (ii) retirement or death of Grantee; (iii) bankruptcy of
Grantee, which shall be deemed to have occurred as of the date on which a
voluntary or involuntary petition in bankruptcy is filed with a court of
competent jurisdiction; (iv) dissolution of the marriage of Grantee, to the
extent that any of the Shares are allocated as the sole and separate
property of Grantee's spouse pursuant thereto (in which case, this Section
shall only apply to the Shares so affected); or (v) any attempted transfer
by the Grantee of Shares, or any interest therein, in violation of this
Agreement. Upon the occurrence of a Repurchase Event, the Company shall
have the right (but not an obligation) to purchase all or any portion of
the Shares of Grantee, at a price equal to the fair value of the Shares as
of the date of the Repurchase Event.
(b) Repurchase Right on Termination for Cause. In the event Grantee's
employment [or service as a director/consultant] is terminated by the
Company "for cause" (as defined below), then the Company shall have the
right (but not an obligation) to purchase Shares of Grantee at a price
equal to the Original Value. Such right of the Company to purchase Shares
shall apply to 100% of the Shares for one (1) year from the date of this
Agreement; and shall thereafter lapse at the rate of twenty percent (20%)
of the Shares on each anniversary of the date of this Agreement. In
addition, the Company shall have the right, in the sole discretion of the
Board and without obligation, to repurchase upon termination for cause all
or any portion of the Shares of Grantee, at a price equal to the fair value
of the Shares as of the date of termination, which right is not subject to
the foregoing lapsing of rights. Termination of employment [or service as a
director/consultant] "for cause" means (i) as to employees or consultants,
termination for cause as contemplated by the Nevada Labor Code and case law
related thereto, or as defined in the Plan, this Agreement or in any
employment [or consulting] agreement between the Company and Grantee, or
(ii) as to directors, removal pursuant to the Nevada corporation law. In
the event the Company elects to purchase the Shares, the stock certificates
representing the same shall forthwith be returned to the Company for
cancellation.
(c) Exercise of Repurchase Right. Any Repurchase Right under Paragraphs
4(a) or 4(b) shall be exercised by giving notice of exercise as provided
herein to Grantee or the estate of Grantee, as applicable. Such right shall
be exercised, and the repurchase price thereunder shall be paid, by the
Company within a ninety (90) day period beginning on the date of notice to
the Company of the occurrence of such Repurchase Event (except in the case
of termination or cessation of services as director, where such option
period shall begin upon the occurrence of the Repurchase Event). Such
repurchase price shall be payable only in the form of cash (including a
check drafted on immediately available funds) or cancellation of purchase
money indebtedness of the Grantee for the Shares. If the Company can not
purchase all such Shares because it is unable to meet the financial tests
set forth in the Nevada corporation law, the Company shall have the right
to purchase as many Shares as it is permitted to purchase under such
sections. Any Shares not purchased by the Company hereunder shall no longer
be subject to the provisions of this Section 5.
48
5. Restriction Upon Transfer - continued
(d) Right of First Refusal. In the event Grantee desires to transfer any
Shares during his or her lifetime, Grantee shall first offer to sell such
Shares to the Company. Grantee shall deliver to the Company written notice
of the intended sale, such notice to specify the number of Shares to be
sold, the proposed purchase price and terms of payment, and grant the
Company an option for a period of thirty days following receipt of such
notice to purchase the offered Shares upon the same terms and conditions.
To exercise such option, the Company shall give notice of that fact to
Grantee within the thirty (30) day notice period and agree to pay the
purchase price in the manner provided in the notice. If the Company does
not purchase all of the Shares so offered during foregoing option period,
Grantee shall be under no obligation to sell any of the offered Shares to
the Company, but may dispose of such Shares in any lawful manner during a
period of one hundred and eighty (180) days following the end of such
notice period, except that Grantee shall not sell any such Shares to any
other person at a lower price or upon more favorable terms than those
offered to the Company.
(e) Acceptance of Restrictions. Acceptance of the Shares shall constitute
the Grantee's agreement to such restrictions and the legending of his
certificates with respect thereto. Notwithstanding such restrictions,
however, so long as the Grantee is the holder of the Shares, or any portion
thereof, he shall be entitled to receive all dividends declared on and to
vote the Shares and to all other rights of a shareholder with respect
thereto.
(f) Permitted Transfers. Notwithstanding any provisions in this Section 5
to the contrary, the Grantee may transfer Shares subject to this Agreement
to his or her parents, spouse, children, or grandchildren, or a trust for
the benefit of the Grantee or any such transferee(s); provided, that such
permitted transferee(s) shall hold the Shares subject to all the provisions
of this Agreement (all references to the Grantee herein shall in such cases
refer mutatis mutandis to the permitted transferee, except in the case of
clause (iv) of Section 5(a) wherein the permitted transfer shall be deemed
to be rescinded); and provided further, that notwithstanding any other
provisions in this Agreement, a permitted transferee may not, in turn, make
permitted transfers without the written consent of the Grantee and the
Company.
(g) Release of Restrictions on Shares. All rights and restrictions under
this Section 5 shall terminate five (5) years following the date of this
Agreement, or when the Company's securities are publicly traded, whichever
occurs earlier.
6. Representations and Warranties of the Grantee. This Agreement and the
issuance and grant of the Shares hereunder are made by the Company in reliance
upon the express representations and warranties of the Grantee, which by
acceptance hereof the Grantee confirms that:
(a) The Shares granted to him pursuant to this Agreement are being acquired
by him for his own account, for investment purposes, and not with a view
to, or for sale in connection with, any distribution of the Shares. It is
understood that the Shares have not been registered under the Act by reason
of a specific exemption from the registration provisions of the Act which
depends, among other things, upon the bona fide nature of his
representations as expressed herein;
49
6. Representations and Warranties of the Grantee - continued
(b) The Shares must be held by him indefinitely unless they are
subsequently registered under the Act and any applicable state securities
laws, or an exemption from such registration is available. The Company is
under no obligation to register the Shares or to make available any such
exemption; and
(c) Grantee further represents that Grantee has had access to the financial
statements or books and records of the Company, has had the opportunity to
ask questions of the Company concerning its business, operations and
financial condition and to obtain additional information reasonably
necessary to verify the accuracy of such information,
(d) Unless and until the Shares represented by this Grant are registered
under the Securities Act, all certificates representing the Shares and any
certificates subsequently issued in substitution therefor and any
certificate for any securities issued pursuant to any stock split, share
reclassification, stock dividend or other similar capital event shall bear
legends in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE
SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE
SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE
SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
THAT CERTAIN STOCK AWARD AGREEMENT DATED ____________ BETWEEN THE COMPANY
AND THE ISSUER WHICH RESTRICTS THE TRANSFER OF THESE SHARES WHICH ARE
SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.
and/or such other legend or legends as the Company and its counsel deem
necessary or appropriate. Appropriate stop transfer instructions with
respect to the Shares have been placed with the Company's transfer agent.
(e) Grantee understands that he or she will recognize income, for Federal
and state income tax purposes, in an amount equal to the amount by which
the fair market value of the Shares, as of the date of grant, exceeds the
price paid by Grantee, if any. The acceptance of the Shares by Grantee
shall constitute an agreement by Grantee to report such income in
accordance with then applicable law. Withholding for federal or state
income and employment tax purposes will be made, if and as required by law,
from Grantee's then current compensation, or, if such current compensation
is insufficient to satisfy withholding tax liability, the Company may
require Grantee to make a cash payment to cover such liability.
7. Stand-off Agreement. Grantee agrees that, in connection with any registration
of the Company's securities under the Securities Act, and upon the request of
the Company or any underwriter managing an underwritten offering of the
Company's securities, Grantee shall not sell, short any sale of, loan, grant an
option for, or otherwise dispose of any of the Shares (other than Shares
included in the offering) without the prior written consent of the Company or
such managing underwriter, as applicable, for a period of at least one year
following the effective date of registration of such offering. This Section 7
shall survive any termination of this Agreement.
50
8. Termination of Agreement. This Agreement shall terminate on the occurrence of
any one of the following events: (a) written agreement of all parties to that
effect; (b) a proposed dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving entity, or a sale of all
or substantially all of the assets of the Company; (c) the closing of any public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act; or (d) dissolution, bankruptcy, or
insolvency of the Company.
9. Agreement Subject to Plan; Applicable Law. This Grant is made pursuant to the
Plan and shall be interpreted to comply therewith. A copy of such Plan is
available to Grantee, at no charge, at the principal office of the Company. Any
provision of this Agreement inconsistent with the Plan shall be considered void
and replaced with the applicable provision of the Plan. This Grant shall be
governed by the laws of the State of Nevada.
10. Miscellaneous.
(a) Notices. Any notice required to be given pursuant to this Agreement or
the Plan shall be in writing and shall be deemed to have been duly
delivered upon receipt or, in the case of notices by the Company, five (5)
days after deposit in the U.S. mail, postage prepaid, addressed to Grantee
at the last address provided by Grantee for use in the Company's records.
(b) Entire Agreement. This instrument constitutes the sole agreement of the
parties hereto with respect to the Shares. Any prior agreements, promises
or representations concerning the Shares not included or reference herein
shall be of no force or effect. This Agreement shall be binding on, and
shall inure to the benefit of, the Parties hereto and their respective
transferees, heirs, legal representatives, successors, and assigns.
(c) Enforcement. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of Nevada. If Grantee attempts to
transfer any of the Shares subject to this Agreement, or any interest in
them in violation of the terms of this Agreement, the Company may apply to
any court having jurisdiction thereof for an injunctive order prohibiting
such proposed transaction, and the Company may institute and maintain
proceedings against Grantee to compel specific performance of this
Agreement without the necessity of proving the existence or extent of any
damages to the Company. Any such attempted transaction shares in violation
of this Agreement shall be null and void.
(d) Validity of Agreement. The provisions of this Agreement may be waived,
altered, amended, or repealed, in whole or in part, only on the written
consent of all parties hereto. It is intended that each Section of this
Agreement shall be viewed as separate and divisible, and in the event that
any Section shall be held to be invalid, the remaining Sections shall
continue to be in full force and effect.
51
In Witness Whereof, the parties have executed this Agreement as of the date
first above written.
COMPANY: VISUALANT, INCORPORATED
By:_______________________________
Name:_____________________________
Title:____________________________
GRANTEE:
By:_______________________________
(signature)
Name:_____________________________
(one of the following, as appropriate, shall be signed)
I certify that as of the date hereof I By his or her signature, the spouse
am unmarried of Grantee hereby agrees to be bound
by the provisions of the foregoing
STOCK AWARD AGREEMENT
______________________________________ _____________________________________
Grantee Spouse of Grantee
52
================================================================================
EXHIBIT D
---------
VISUALANT, INCORPORATED
RESTRICTED STOCK PURCHASE AGREEMENT
================================================================================
This Restricted Stock Purchase Agreement ("Agreement") is made and entered
into as of the date set forth below, by and between VISUALANT, INCORPORATED, a
Nevada corporation ("Company"), and the employee, director or consultant of the
Company named in Section 1(b). ("Grantee"):
In consideration of the covenants herein set forth, the parties hereto
agree as follows:
1. Stock Purchase Information.
(a) Date of Agreement: __________________________
(b) Grantee: __________________________
(c) Number of Shares: __________________________
(d) Purchase Price:
2. Acknowledgements.
(a) Grantee is a [employee/director/consultant] of the Company.
(b) The Company has adopted a 2005 Incentive Stock Plan (the "Plan") under
which the Company's common stock ("Stock") may be offered to officers,
employees, directors and consultants pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "Securities
Act") provided by Rule 701 thereunder.
(c) The Grantee desires to purchase shares of the Company's common stock on
the terms and conditions set forth herein.
3. Purchase of Shares. The Company hereby agrees to sell and Grantee hereby
agrees to purchase, upon and subject to the terms and conditions herein stated,
the number of shares of Stock set forth in Section 1(c) (the "Shares"), at the
price per Share set forth in Section 1(d) (the "Price"). For the purpose of this
Agreement, the terms "Share" or "Shares" shall include the original Shares plus
any shares derived therefrom, regardless of the fact that the number, attributes
or par value of such Shares may have been altered by reason of any
recapitalization, subdivision, consolidation, stock dividend or amendment of the
corporate charter of the Company. The number of Shares covered by this Agreement
shall be proportionately adjusted for any increase or decrease in the number of
issued shares resulting from a recapitalization, subdivision or consolidation of
shares or the payment of a stock dividend, or any other increase or decrease in
the number of such shares affected without receipt of consideration by the
Company.
4. Investment Intent. Grantee represents and agrees that Grantee is accepting
the Shares for the purpose of investment and not with a view to, or for resale
in connection with, any distribution thereof; and that, if requested, Grantee
shall furnish to the Company a written statement to such effect, satisfactory to
the Company in form and substance. If the Shares are registered under the
Securities Act, Grantee shall be relieved of the foregoing investment
representation and agreement and shall not be required to furnish the Company
with the foregoing written statement.
53
5. Restriction Upon Transfer. The Shares may not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated by the
Grantee except as hereinafter provided.
(a) Repurchase Right on Termination Other Than for Cause. For the purposes
of this Section, a "Repurchase Event" shall mean an occurrence of one of
(i) termination of Grantee's employment [or service as a
director/consultant] by the Company, voluntary or involuntary and with or
without cause; (ii) retirement or death of Grantee; (iii) bankruptcy of
Grantee, which shall be deemed to have occurred as of the date on which a
voluntary or involuntary petition in bankruptcy is filed with a court of
competent jurisdiction; (iv) dissolution of the marriage of Grantee, to the
extent that any of the Shares are allocated as the sole and separate
property of Grantee's spouse pursuant thereto (in which case, this Section
shall only apply to the Shares so affected); or (v) any attempted transfer
by the Grantee of Shares, or any interest therein, in violation of this
Agreement. Upon the occurrence of a Repurchase Event, the Company shall
have the right (but not an obligation) to repurchase all or any portion of
the Shares of Grantee at a price equal to the fair value of the Shares as
of the date of the Repurchase Event.
(b) Repurchase Right on Termination for Cause. In the event Grantee's
employment [or service as a director/consultant] is terminated by the
Company "for cause" (as defined below), then the Company shall have the
right (but not an obligation) to repurchase Shares of Grantee at a price
equal to the Price. Such right of the Company to repurchase Shares shall
apply to 100% of the Shares for one (1) year from the date of this
Agreement; and shall thereafter lapse at the rate of twenty percent (20%)
of the Shares on each anniversary of the date of this Agreement. In
addition, the Company shall have the right, in the sole discretion of the
Board and without obligation, to repurchase upon termination for cause all
or any portion of the Shares of Grantee, at a price equal to the fair value
of the Shares as of the date of termination, which right is not subject to
the foregoing lapsing of rights. Termination of employment [or service as a
director/consultant] "for cause" means (i) as to employees and consultants,
termination for cause as contemplated by the Nevada Labor Code and case law
related thereto, or as defined in the Plan, this Agreement or in any
employment [or consulting] agreement between the Company and Grantee, or
(ii) as to directors, removal pursuant to the Nevada corporation law. In
the event the Company elects to repurchase the Shares, the stock
certificates representing the same shall forthwith be returned to the
Company for cancellation.
(c) Exercise of Repurchase Right. Any Repurchase Right under Paragraphs
4(a) or 4(b) shall be exercised by giving notice of exercise as provided
herein to Grantee or the estate of Grantee, as applicable. Such right shall
be exercised, and the repurchase price thereunder shall be paid, by the
Company within a ninety (90) day period beginning on the date of notice to
the Company of the occurrence of such Repurchase Event (except in the case
of termination of employment or retirement, where such option period shall
begin upon the occurrence of the Repurchase Event). Such repurchase price
shall be payable only in the form of cash (including a check drafted on
immediately available funds) or cancellation of purchase money indebtedness
of the Grantee for the Shares. If the Company can not purchase all such
Shares because it is unable to meet the financial tests set forth in the
Nevada corporation law, the Company shall have the right to purchase as
many Shares as it is permitted to purchase under such sections. Any Shares
not purchased by the Company hereunder shall no longer be subject to the
provisions of this Section 5.
54
5. Restriction Upon Transfer - continued
(d) Right of First Refusal. In the event Grantee desires to transfer any
Shares during his or her lifetime, Grantee shall first offer to sell such
Shares to the Company. Grantee shall deliver to the Company written notice
of the intended sale, such notice to specify the number of Shares to be
sold, the proposed purchase price and terms of payment, and grant the
Company an option for a period of thirty days following receipt of such
notice to purchase the offered Shares upon the same terms and conditions.
To exercise such option, the Company shall give notice of that fact to
Grantee within the thirty (30) day notice period and agree to pay the
purchase price in the manner provided in the notice. If the Company does
not purchase all of the Shares so offered during foregoing option period,
Grantee shall be under no obligation to sell any of the offered Shares to
the Company, but may dispose of such Shares in any lawful manner during a
period of one hundred and eighty (180) days following the end of such
notice period, except that Grantee shall not sell any such Shares to any
other person at a lower price or upon more favorable terms than those
offered to the Company.
(e) Acceptance of Restrictions. Acceptance of the Shares shall constitute
the Grantee's agreement to such restrictions and the legending of his
certificates with respect thereto. Notwithstanding such restrictions,
however, so long as the Grantee is the holder of the Shares, or any portion
thereof, he shall be entitled to receive all dividends declared on and to
vote the Shares and to all other rights of a shareholder with respect
thereto.
(f) Permitted Transfers. Notwithstanding any provisions in this Section 5
to the contrary, the Grantee may transfer Shares subject to this Agreement
to his or her parents, spouse, children, or grandchildren, or a trust for
the benefit of the Grantee or any such transferee(s); provided, that such
permitted transferee(s) shall hold the Shares subject to all the provisions
of this Agreement (all references to the Grantee herein shall in such cases
refer mutatis mutandis to the permitted transferee, except in the case of
clause (iv) of Section 5(a) wherein the permitted transfer shall be deemed
to be rescinded); and provided further, that notwithstanding any other
provisions in this Agreement, a permitted transferee may not, in turn, make
permitted transfers without the written consent of the Grantee and the
Company.
(g) Release of Restrictions on Shares. All rights and restrictions under
this Section 5 shall terminate five (5) years following the date upon which
the Company receives the full Price as set forth in Section 3, or when the
Company's securities are publicly traded, whichever occurs earlier.
6. Representations and Warranties of the Grantee. This Agreement and the
issuance and grant of the Shares hereunder are made by the Company in reliance
upon the express representations and warranties of the Grantee, which by
acceptance hereof the Grantee confirms that:
(a) The Shares granted to him pursuant to this Agreement are being acquired
by him for his own account, for investment purposes, and not with a view
to, or for sale in connection with, any distribution of the Shares. It is
understood that the Shares have not been registered under the Act by reason
of a specific exemption from the registration provisions of the Act which
depends, among other things, upon the bona fide nature of his
representations as expressed herein;
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6. Representations and Warranties of the Grantee - continued
(b) The Shares must be held by him indefinitely unless they are
subsequently registered under the Act and any applicable state securities
laws, or an exemption from such registration is available. The Company is
under no obligation to register the Shares or to make available any such
exemption; and
(c) Grantee further represents that Grantee has had access to the financial
statements or books and records of the Company, has had the opportunity to
ask questions of the Company concerning its business, operations and
financial condition and to obtain additional information reasonably
necessary to verify the accuracy of such information;
(d) Unless and until the Shares represented by this Grant are registered
under the Securities Act, all certificates representing the Shares and any
certificates subsequently issued in substitution therefor and any
certificate for any securities issued pursuant to any stock split, share
reclassification, stock dividend or other similar capital event shall bear
legends in substantially the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE
SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE
SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE
SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO
THAT CERTAIN RESTRICTED STOCK PURCHASE AGREEMENT DATED ____________ BETWEEN
THE COMPANY AND THE ISSUER WHICH RESTRICTS THE TRANSFER OF THESE SHARES
WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.
and/or such other legend or legends as the Company and its counsel deem
necessary or appropriate. Appropriate stop transfer instructions with
respect to the Shares have been placed with the Company's transfer agent.
(e) Grantee understands that he or she will recognize income, for Federal
and state income tax purposes, in an amount equal to the amount by which
the fair market value of the Shares, as of the date of Grant, exceeds the
price paid by Grantee. The acceptance of the Shares by Grantee shall
constitute an agreement by Grantee to report such income in accordance with
then applicable law. Withholding for federal or state income and employment
tax purposes will be made, if and as required by law, from Grantee's then
current compensation, or, if such current compensation is insufficient to
satisfy withholding tax liability, the Company may require Grantee to make
a cash payment to cover such liability.
7. Stand-off Agreement. Grantee agrees that, in connection with any registration
of the Company's securities under the Securities Act, and upon the request of
the Company or any underwriter managing an underwritten offering of the
Company's securities, Grantee shall not sell, short any sale of, loan, grant an
option for, or otherwise dispose of any of the Shares (other than Shares
included in the offering) without the prior written consent of the Company or
such managing underwriter, as applicable, for a period of at least one year
following the effective date of registration of such offering. This Section 7
shall survive any termination of this Agreement.
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8. Termination of Agreement. This Agreement shall terminate on the occurrence of
any one of the following events: (a) written agreement of all parties to that
effect; (b) a proposed dissolution or liquidation of the Company, a merger or
consolidation in which the Company is not the surviving entity, or a sale of all
or substantially all of the assets of the Company; (c) the closing of any public
offering of common stock of the Company pursuant to an effective registration
statement under the Act; or (d) dissolution, bankruptcy, or insolvency of the
Company.
9. Agreement Subject to Plan; Applicable Law. This Grant is made pursuant to the
Plan and shall be interpreted to comply therewith. A copy of such Plan is
available to Grantee, at no charge, at the principal office of the Company. Any
provision of this Agreement inconsistent with the Plan shall be considered void
and replaced with the applicable provision of the Plan. This Grant shall be
governed by the laws of the State of Nevada.
10. Miscellaneous.
(a) Notices. Any notice required to be given pursuant to this Agreement or
the Plan shall be in writing and shall be deemed to have been duly
delivered upon receipt or, in the case of notices by the Company, five (5)
days after deposit in the U.S. mail, postage prepaid, addressed to Grantee
at the last address provided by Grantee for use in the Company's records.
(b) Entire Agreement. This instrument constitutes the sole agreement of the
parties hereto with respect to the Shares. Any prior agreements, promises
or representations concerning the Shares not included or reference herein
shall be of no force or effect. This Agreement shall be binding on, and
shall inure to the benefit of, the Parties hereto and their respective
transferees, heirs, legal representatives, successors, and assigns.
(c) Enforcement. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of Nevada. If Grantee attempts to
transfer any of the Shares subject to this Agreement, or any interest in
them in violation of the terms of this Agreement, the Company may apply to
any court having jurisdiction thereof for an injunctive order prohibiting
such proposed transaction, and the Company may institute and maintain
proceedings against Grantee to compel specific performance of this
Agreement without the necessity of proving the existence or extent of any
damages to the Company. Any such attempted transaction shares in violation
of this Agreement shall be null and void.
(d) Validity of Agreement. The provisions of this Agreement may be waived,
altered, amended, or repealed, in whole or in part, only on the written
consent of all parties hereto. It is intended that each Section of this
Agreement shall be viewed as separate and divisible, and in the event that
any Section shall be held to be invalid, the remaining Sections shall
continue to be in full force and effect.
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In Witness Whereof, the parties have executed this Agreement as of the date
first above written.
COMPANY: VISUALANT, INCORPORATED
By:_________________________________
Name:_______________________________
Title:______________________________
GRANTEE:
By:_________________________________
(signature)
Name:_______________________________
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