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EXHIBIT 4.3
DONLAR CORPORATION
1994 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Donlar
Corporation 1994 Stock Option Plan (the "Plan") shall have the same defined
meanings in this Stock Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
Optionee's Name and Address:
_______________________
_______________________
_______________________
_______________ (the "Optionee") has been granted an option to purchase
______ Stock of the Company, subject to the terms and conditions of the Plan and
this Stock Option Agreement, as follows:
DATE OF GRANT: ________
VESTING COMMENCEMENT DATE: ________
EXERCISE PRICE PER SHARE: $ ________
TOTAL NUMBER OF SHARES GRANTED: ________
TOTAL EXERCISE PRICE: $ ________
TYPE OF OPTION: Incentive Stock Option
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- Nonstatutory Stock Option
TERM/EXPIRATION DATE: ________
VESTING SCHEDULE: Subject to Optionee's continued employment or
consulting relationship with the Company, this Option shall vest and may be
exercised, in whole or in part, in accordance with the following schedule:
______ Shares - ________
______ Shares - ________
______ Shares - ________
______ Shares - ________
______ Shares - ________
______ Shares - ________
______ Shares - ________
______ Shares - ________
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TERMINATION PERIOD: This Option may be exercised for three months
after termination of employment or consulting relationship, except as set
out in Sections 6, 7 and 8 of this Stock Option Agreement and as provided
in the Plan, but in no event later than the Term/Expiration Date as
provided above.
II AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant in Section I of this
Agreement (the "Notice of Grant") an option (the "Option") to purchase a
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share set forth in the Notice of Grant
(the "Exercise Price") subject to the terms, definitions and provisions of
the Plan, which is incorporated herein by reference. In the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Stock Option Agreement, the terms and conditions of the
Plan shall prevail.
If designated an Incentive Stock Option ("ISO"), this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422
of the Code. However, if this Option is intended to be an Incentive Stock
Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION. This Option shall be exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a
share.
(b) In the event of Optionee's death, disability or other
termination of employment or consulting relationship, the exercisability of
the Option is governed by Sections 6, 7 and 8 below, subject to the
limitation contained in subsection 2(i)(c) below.
(c) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which
the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such shares
of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The written notice shall be accompanied by
payment of the Exercise Price. The Option shall be deemed to be exercised
upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange or national
market system upon which the Shares may then be traded. Assuming such
compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised
with respect to such Shares.
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3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), at the time this
Option is exercised, Optionee shall, if required by the Company, concurrently
with the exercise of all or any portion of this Option, deliver to the Company
his Investment Representation Statement in the form attached hereto as Exhibit
B.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
stock option, have been owned by the Optionee for more than six (6) months on
the date of surrender and (B) have a fair market value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised; or
(iv) to the extent authorized by the Company, delivery of a
properly executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations (Regulation G) as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee,
Optionee may, to the extent otherwise so entitled at the date of such
termination (the "Termination Date"), exercise this Option during the
Termination Period set out in the Notice of Grant. To the extent that Optionee
was not entitled to exercise this Option at the date of such termination, or if
Optionee does not exercise this Option within the time specified herein, the
Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of his or her total and permanent disability
(as defined in Section 22(e)(3) of the Code), Optionee may, but only within
twelve (12) months from the date of such termination (but in no event later
than the expiration date of the term of such Option as set forth in the Notice
of Grant), exercise the Option to the extent he is otherwise entitled to
exercise it at the date of such termination. If such disability is not a
"disability" as such term is defined in Section 22(e)(3) of the Code, in the
case of an ISO such ISO shall cease to be treated as an ISO and will be treated
for tax purposes as an NSO on the ninety-first (91st) day following such
termination. To the extent that Optionee is not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate.
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8. Death of Optionee. In the event of the termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the Term/Expiration
Date of this Option set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent the Optionee was entitled to
exercise the Option at the date of death. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if
Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of
descent or distribution and my be exercised during the lifetime of Optionee
only by him. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option. The
limitations set out in Section 7 of the Plan regarding Options designated as
Incentive Stock Options granted to more than ten percent (10%) shareholders
shall apply to this Option.
11. Tax Consequences. Some of the federal tax consequences relating
to this Option, as of the date of this Option, are set forth below. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) Exercising the Option.
(a) Exercise of an NSO. If this Option does not qualify as
an ISO, the Optionee may incur regular federal income tax liability upon
exercise. The Optionee will be treated as having received compensation
income (taxable at ordinary income tax rates) equal to the excess, if any,
of the fair market value of the Exercised Shares on the date of exercise
over their aggregate Exercise Price. If the Optionee is an employee, the
Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal
to a percentage of this compensation income at the time of exercise.
(b) Exercise of an ISO. If this Option qualifies as an
ISO, the Optionee will have no regular federal income tax liability upon
its exercise, although the excess, if any, of the fair market value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal
tax purposes and may subject the Optionee to alternative minimum tax in the
year of exercise.
(ii) Disposition of Shares.
(a) NSO. If the Optionee holds NSO Shares for at least
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(b) ISO. If the Optionee holds ISO Shares (I) for at least
one year after exercise and (II) two years after the grant date, then any
gain realized on disposition of the Shares will be treated as long-
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term capital gain for federal income tax purposes. If the Optionee disposes of
ISO Shares within one year after exercise or two years after the grant date,
any gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess, if any, of the
LESSER OF (A) the difference between the FAIR MARKET VALUE OF THE SHARES
ACQUIRED ON THE DATE OF EXERCISE and the aggregate Exercise Price or (B) the
difference between the SALE PRICE of such Shares and the aggregate Exercise
Price.
(iii) Notice of Disqualifying Disposition of ISO Shares. If
the Optionee sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (a) two years after the grant date or (b)
one year after the exercise date, then the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THIS OPTION IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT BY THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS STOCK OPTION AGREEMENT, NOR IN THE PLAN WHICH IS INCORPORATED
HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT
INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
By Optionee's signature and the signature of the Company's
representative below, Optionee and the Company agree that this Option is
granted under and governed by the terms and conditions of the Plan and this
Stock Option Agreement. Optionee has reviewed the Plan and this Stock Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Stock Option
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Agreement and fully understands all provisions of the Plan and this Stock Option
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
relating to the Plan and this Stock Option Agreement.
Dated:
---------
DONLAR CORPORATION,
an Illinois corporation
By:
--------------------------------
Its:
--------------------------------
OPTIONEE
--------------------------------
(Signature)
--------------------------------
(Please Print Name)
--------------------------------
(Please Print Address)
--------------------------------
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CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Stock Option Agreement. In consideration
of the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and the Stock Option Agreement, the undersigned hereby
agrees to be irrevocably bound by the terms and conditions of the Plan and this
Stock Option Agreement and further agrees that any community property interest
shall be similarly bound. The undersigned hereby appoints the undersigned's
spouse as the attorney-in-fact for the undersigned with respect to any
amendment or exercise of rights under the Plan or this Stock Option Agreement.
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(Spouse of Optionee Signature)
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(Please Print Spouse's Name)
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EXHIBIT A
STOCK OPTION AGREEMENT
EXERCISE NOTICE
Donlar Corporation
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Attention: Chief Financial Officer
1. EXERCISE OF OPTION. Effective as of today, ______________, 19__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option
to purchase ___________ shares of the Common Stock (the "Shares") of Donlar
Corporation (the "Company") under and pursuant to the Company's 1994 Stock
Option Plan, as amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory
Stock Option Agreement dated _________________ (the "Stock Option Agreement").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee
has received, read and understood the Plan and the Stock Option Agreement and
agrees to abide by and be bound by their terms and conditions. Optionee
represents that Optionee is purchasing the Shares for Optionee's own account
for investment and not with a view to, or for sale in connection with, a
distribution of any of such Shares.
3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have
no further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions
of this Agreement, and Optionee shall forthwith cause the certificate(s)
evidencing the Shares so purchased to be surrendered to the Company for
transfer or cancellation.
4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii)
the name of each proposed purchaser or other transferee ("Proposed
Transferee"); (iii) the number of Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Shares (the "Offered Price"), and the
Holder shall offer the Shares at the Offered Price to the Company or its
assignee(s).
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(b) Exercise of Right of First Refusal. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation
of all or a portion of any outstanding indebtedness of the Holder to the
Company (or, in the case of repurchase by an assignee, to the assignee), or by
any combination thereof within 30 days after receipt of the Notice or in the
manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer
is consummated within 120 days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any
or all of the Shares during the Optionee's lifetime or on the Optionee's death
by will or intestacy to the Optionee's immediate family or a trust for the
benefit of the Optionee's immediate family shall be exempt from the provisions
of this Section. "Immediate Family" as used herein shall mean spouse, lineal
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares 90 days after the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act").
5. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
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▇. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the
Shares together with any other legends that may be required by state or federal
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY
THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY
OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING
ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
7. MARKET STANDOFF AGREEMENT. Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters in
connection with any registration of the offering of any securities of the
Company under the 1933 Act, Optionee shall not sell or otherwise transfer any
Shares or other securities of the Company during the 180-day period following
the effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall only apply to
the first two registration statements of the Company to become effective under
the Securities Act which include securities to be sold on behalf of the Company
to the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
8. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
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9. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
10. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
11. NOTICES. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States mail by certified mail, with
postage and fees prepaid, addressed to the other party at its address as shown
below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.
12. FURTHER INSTRUMENTS. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
13. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
14. ENTIRE AGREEMENT. The Plan and Stock Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Stock Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and is governed by Illinois law except
for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: DONLAR CORPORATION
By:
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(Signature)
Its:
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(Print Name)
Address: Address:
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: DONLAR CORPORATION
SECURITY: ____ STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
securities. Optionee is acquiring these securities for investment for
Optionee's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona
fide nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to
register the Securities. Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of exercise of the Option by the Optionee,
such exercise will be exempt from registration under the Securities Act. In the
event the Company later becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the securities exempt under Rule 701
may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including among other things: (1) the
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sale being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Exchange Act); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, and the amount of securities
being sold during any three month period not exceeding the limitations
specified in Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of exercise of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the resale occurring not less than two years after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than three years, (2) the
availability of certain public information about the Company, (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Exchange Act) and (4) the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable.
(d) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise
dispose of any shares of Common Stock of the Company held by Optionee (other
than those shares included in the registration) without the prior written
consent of the Company or the underwriters managing such initial underwritten
public offering of the Company's securities for one hundred eighty (180) days
from the effective date of such registration and (2) further agrees to execute
any agreement reflecting (1) above as may be requested by the underwriters at
the time of the public offering. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers
or sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.
Signature of Optionee:
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Date:
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