**EXHIBIT4.26**

 

 

THIS OPTION HAS BEEN ISSUED PURSUANT TO EXEMPTIONS FROM THEREGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE“ACT”), AND THE QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS(THE “LAWS”).  IT IS UNLAWFUL TOEXERCISE, SELL, PLEDGE OR OTHERWISE DISPOSE OF THIS OPTION, OR ANY INTERESTTHEREIN, OR RECEIVE ANY CONSIDERATION THEREFOR, IN THE ABSENCE OF AN EFFECTIVEREGISTRATION STATEMENT UNDER THE ACT AND QUALIFICATION UNDER THE LAWS, UNLESSEXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENTS ARE AVAILABLE.

 

THIS OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMSOF THIS STOCK OPTION AGREEMENT.

 

 

THE RICEX COMPANY

 

BOARD MEMBER -NONSTATUTORY STOCK OPTION AGREEMENT

 

 

The RiceX Company, a Delaware corporation (the“Company”), hereby grants to STEVEN W. SAUNDERS, Trustee or SuccessorTrustee(s) of the TRUST OF STEVEN W. SAUNDERS dated February 26, 2002 (the“Optionee”), an option (the “Option”) to purchase a total of 50,000 shares ofcommon stock, par value $.001, of the Company (the “Common Stock”) at anexercise price (the “Exercise Price”) equal to $0.26 per share, which is equalto the fair market value of the Company’s Common Stock on the date of thegrant, in all respects subject to the terms, definitions and provisions of thisNonstatutory Stock Option Agreement (the ”Agreement”).

 

1.             Natureof the Option.  The Option isintended to be a nonstatutory option and not an incentive stock optionwithin the meaning of Section 422 of the Internal Revenue Code of 1986, asamended (the “Code”).

 

2.             Paymentof Exercise Price.

 

(a)           Methodof Payment.  Payment of the ExercisePrice for shares purchased upon exercise of the Option shall be made (i) bydelivery to the Company of cash or a check to the order of the Company in anamount equal to the purchase price of such shares; (ii) subject to theconsent of the Company, by delivery to the Company of shares of Common Stock ofthe Company then owned by the Optionee having a fair market value equal inamount to the purchase price of such shares in accordance with Section 2(b);or, (iii) by any other means approved by the Board of Directors and whichis consistent with applicable laws and regulations (including, withoutlimitation, the provisions of Rule 16b-3 under the Securities Exchange Act of1934 and Regulation T promulgated by the Federal Reserve Board); or(iv) by any combination

 

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of such methods of payment.

 

(b)           Methodof Payment — Public Market.  In theevent there exists a public market for the Company’s Common Stock on the dateof exercise, payment of the exercise price may be made by surrender of sharesof the Company’s Common Stock.  In thiscase payment shall be made as follows:

 

(i)            Optioneeshall deliver to the Secretary of the Company a written notice which shall setforth the portion of the purchase price the Optionee wishes to pay with CommonStock, and the number of shares of such Common Stock the Optionee intends tosurrender pursuant to the exercise of this Option, which shall be determined bydividing the aforementioned portion of the purchase price by the average of thelast reported bid and asked prices per share of Common Stock of the Company, asreported in The Wall Street Journal (or, if not so reported, asotherwise reported by the National Association of Securities Dealers AutomatedQuotation (NASDAQ) System or, in the event the Common Stock is listed on anational securities exchange, or on the NASDAQ Small-Cap Market of anysuccessor national market system, the closing price of Common Stock of theCompany on such exchange as reported in The Wall Street Journal) for theday on which the notice of exercise is sent or delivered;

 

(ii)           Fractionalshares shall be disregarded and the Optionee shall pay in cash an amount equalto such fraction multiplied by the price determined under subparagraph (i);

 

(iii)          Thewritten notice shall be accompanied by a duly endorsed blank stock power withrespect to the number of Shares set forth in the notice, and the certificate(s)representing said Shares shall be delivered to the Company at its principaloffices within three (3) working days from the date of the notice of exercise;

 

(iv)          TheOptionee hereby authorizes and directs the Secretary of the Company to transferso many of the Shares represented by such certificate(s) as are necessary topay the purchase price in accordance with the provisions herein;

 

(v)           Ifany such transfer of Shares requires the consent of the California Commissionerof Corporations or of some other agency under the securities laws of any otherstate, or an opinion of counsel for the Company or Optionee that such transfermay be effected under applicable federal and state securities laws, the timeperiods specified herein shall be extended for such periods as the necessary requestfor consent to transfer is pending before said commissioner or other agency, oruntil counsel renders such an opinion, as the case may be.  All parties agree to cooperate in makingsuch request for transfer, or in obtaining such opinion of counsel, and notransfer shall be effected without such consent or opinion if required by law;and

 

(vi)          Notwithstandingany other provisions herein, the Optionee shall only be permitted to pay thepurchase price with shares of the Company’s Common Stock owned by him as of theexercise date in the manner and within the time periods allowed under

 

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Rule 16b-3 promulgated under the Securities Exchange Act of 1934 assuch regulation is presently constituted, as it is amended from time to time,and as it is interpreted now or hereafter by the Securities and ExchangeCommission and any such shares have been held by the Optionee for not less thansix (6) months.

 

3.             Exerciseof Option.  The Option shall vestand become exercisable during its term, subject to the provisions of Section 5below, as follows:

 

(a)           Vestingand Right to Exercise.

 

(i)            TheOption hereby granted shall vest and become exercisable on a prorated basisover a twelve-month period beginning September 23, 2002.  The option will be fully vested on September23, 2003.

 

Subject to the provisions of subparagraph (ii) and(iii) below, the Optionee can exercise any portion of the Option, which hasvested until the expiration of the Option term.

 

If a “change of control” of the Company should occur,as defined below, then the Option shall immediately vest and become exercisablein full.  For purposes of the foregoingprovision, a “change in control” means the occurrence of any of the following:

 

(A)          any“person,” as such term is used in Sections 13(d) and 14(d) of theSecurities Exchange Act of 1934, as emended (the “Exchange Act”) (other thanthe Company or its existing shareholders) is or becomes the “beneficial owner”(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, ofsecurities of the Company (or a successor to the Company) representing 50% ormore of the combined voting power of the then outstanding securities of theCompany or such successor;

 

(B)           thedissolution of the Company or liquidation of more than 50% or more in value ofthe assets of the Company, (ii) or any merger or reorganization of the Companywhether or not another entity is the survivor, (iii) a transaction (other thanthe initial public offering of the Company’s shares) pursuant to which holders,as a group, of all of the shares of the Company outstanding before thetransaction, hold, as a group, less than 50% of the combined voting power ofthe Company or any successor company outstanding after the transaction, or (iv)any other event or series of events which the Optionee determines, in hisdiscretion, would materially alter the structure of the Company or itsownership.

 

(ii)           Inthe event of the Optionee’s death, disability, other termination of employmentor ceases to be a member of the Board prior to exercise, the exercisability ofthe Option shall be governed by Section 5 below.

 

(iii)          TheOption may be exercised in whole or in part but may not be exercised as tofractional shares.

 

(b)           Methodof Exercise.  In order to exerciseany portion of the Option, the Optionee shall execute and deliver to the ChiefFinancial Officer of the Company the

 

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Notice of Exercise of Stock Option in the form attached hereto asExhibit “A,” together with the Consent of Spouse.  The Notice of Exercise must be accompanied by payment in full ofthe aggregate purchase price for the Shares to be purchased in the type ofconsideration set forth in Section 2. The Notice of Exercise may be delivered to the Company at any time.  The certificate(s) for the Shares as towhich the Option has been exercised shall be registered in the name of Optioneeor his designee.

 

(c)           Restrictionson Exercise.  This Option may not beexercised if the issuance of the shares upon such exercise or the method ofpayment of consideration for such shares would constitute a violation of anyapplicable federal or state securities law or any other law or regulation.  As a condition to the exercise of theOption, the Company may require the Optionee to make any representation orwarranty to the Company at the time of exercise of the Option as in the opinionof legal counsel for the Company may be required by any applicable law orregulation, including the execution and delivery of an appropriaterepresentation statement.  The stockcertificate(s) for the Shares issued upon exercise of the Option may bearappropriate legends restricting transfer.

 

(d)           Deliveryof Certificates.  The Company shalldeliver the certificate(s) for the Shares issued upon exercise of the Option tothe Optionee as soon as is practicable; provided, however, that if any law orregulation requires the Company to take action with respect to such sharesbefore the issuance thereof, including, without limitation, actions takenpursuant to Section 6 below, then the date of delivery of such Shares shall beextended for a period necessary to take such action.

 

4.             Non-Transferabilityof Option.  This Option may beexercised during the lifetime of the Optionee only by the Optionee and may notbe transferred in any manner other than by will or by the laws of descent anddistribution.  The terms of this Optionshall be binding upon the executors, administrators, heirs and successors ofthe Optionee.

 

5.             Termof the Option.  Except as otherwiseprovided in this Agreement, to the extent not previously exercised, the rightto exercise the Option shall terminate on the tenth (10th) anniversary of thedate of grant.  Notwithstanding theforegoing, if an Optionee ceases to be a Board Member of the Company for anyreason, except death and disability, he or she may, but only within ninety (90)days after the date he or she ceases to be a Board Member of the Company,exercise his or her Option to the extent that he or she was entitled toexercise it at the date of such termination, and in the case of the Optionee’sdeath or disability, the Optionee (or the Administrator or Executor or otherRepresentative of the Optionee’s estate) may, but only within one (1) yearafter the date he or she ceases to be a Board Member of the Company due todeath or disability, exercise his or her Option to the extent that he or shewas entitled to exercise it at the date of such termination; provided, howeverthat in no event may the Option be exercised after the ten (10) year term hasexpired.  To the extent that theOptionee was not entitled to exercise an Option at the date of suchtermination, or if he or she does not exercise such Option (which he or she wasentitled to exercise) within the time specified herein, the Option shallterminate.

 

6.             AdjustmentsUpon /Changes in Capitalization; Other Adjustments.  Subject to any required action by theshareholders of the Company, the number of Shares and the

 

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Exercise Price shall be proportionately adjusted for any increase ordecrease in the number of issued shares of Common Stock resulting from a stocksplit, reverse stock split, combination, reclassification, the payment of astock dividend on the Common Stock or any other increase or decrease in thenumber of shares of Common Stock of the Company effected without receipt ofconsideration by the Company; provided, however, that conversion of anyconvertible securities of the Company shall not be deemed to have been“effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in thatrespect shall be final, binding and conclusive.  Except as expressly provided herein, no issue by the Company ofshares of stock of any class, or securities convertible into shares of stock ofany class, shall affect and no adjustment by reason thereof shall be made withrespect to, the number of shares subject to, or the Exercise Price of, thisOption.

 

The Board may, if it so determines in the exercise ofits sole discretion, also make provision for adjusting the number of shares, aswell as the Exercise Price, in the event that the Company effects one or morereorganizations, recapitalizations, rights offerings, or other increases orreductions of shares of its outstanding common stock, and in the event of theCompany being consolidated with or merged into any other corporation; provided,however, that in no event shall the Optionee be adversely affected by suchadjustment.

 

The Board may, if it so determines in the exercise ofits sole discretion, also make provision for changing, modifying, amending oradjusting any of the terms of this Option solely in order for the Company toperfect a significant financing; provided, however, that in no event shall theOptionee be adversely affected by such adjustment.

 

7.             Rightsof Shareholder.  Optionee shall haveno rights as a shareholder with respect to the shares until the date of theissuance or the transfer to the Optionee of the certificate(s) for such sharesand only after the Exercise Price for such shares has been paid in full.

 

8.             Amendment.  Except as set forth in Section 6, thisAgreement may not be amended without the written consent of the Optionee.

 

9.             IncomeTax Withholding.  The Optioneeauthorizes the Company to withhold, in accordance with applicable law from anycompensation payable to him or her, any taxes required to be withheld byfederal, state or local laws as a result of the exercise of this Option.  Furthermore, in the event of anydetermination that the Company has failed to withhold a sum sufficient to payall withholding taxes due in connection with the exercise of this Option, theOptionee agrees to pay the Company the amount of such deficiency in cash withinfive (5) days after receiving a written demand from the Company to do so,whether or not Optionee is an employee or director of the Company at that time.

 

10.           InvestmentRepresentations; Legends.

 

(a)           Representations.  The Optionee represents, warrants andcovenants that:

 

(i)            Anyshares purchased upon exercise of this Option shall be acquired for theOptionee’s account for investment only, and not with a view to, or for sale in

 

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connection with, any distribution of the shares in violation of theSecurities Act of 1933 (the “Securities Act”), or any rule or regulation underthe Securities Act.

 

(ii)           TheOptionee has had such opportunity as he or she has deemed adequate to obtainfrom representatives of the Company such information as is necessary to permitthe Optionee to evaluate the merits and risks of his or her investment in theCompany.

 

(iii)          TheOptionee is able to bear the economic risk of the holding of such sharesacquired pursuant to the exercise of this Option for an indefinite period.

 

(iv)          TheOptionee understands that the Shares acquired pursuant to the exercise of thisOption are not registered under the Securities Act and are “restrictedsecurities” within the meaning of Rule 144 under the Securities Act and may notbe transferred, sold or otherwise disposed of in the absence of an effectiveregistration statement with respect to the Shares filed and made effectiveunder the Securities Act of 1933, or an opinion of counsel satisfactory to theCompany to the effect that registration under such Act is not required.

 

By making payment upon exercise of this Option, the Optionee shall bedeemed to have reaffirmed, as of the date of such payment, the representationsmade in this Section 10.

 

(b)           Legendsof Stock Certificate.  All stockcertificates representing share of Common Stock issued to the Optionee uponexercise of this Option shall have affixed thereto legend(s) substantially inthe following forms, in addition to any other legends required by applicablestate law:

 

“THE SHARES OF STOCKREPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIESACT OF 1933 AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THEABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SHARESEVIDENCED BY THIS CERTIFICATE, FILED AND MADE EFFECTIVE UNDER THE SECURITIESACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECTTHAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED.”

 

DATE OF GRANT:  September 23,2002

 

The RiceX Company

 
|   |   |                                           |
|--------|--------|------------------------------------------------|
|   | By:    |                                           | /s/ Daniel L. McPeak, Sr. |   |
|   |   | Daniel L. McPeak, Sr., Chief Executive Officer |
|        |        |                                                |  |  |

 

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|   |   |                                  |
|--------|--------|---------------------------------------|
|   | By:    |                                  | /s/ Todd C. Crow |
|   |   | Todd C. Crow, Chief Financial Officer |
|        |        |                                       |  |

 

The Optionee acknowledges receipt of a copy of thePlan, and represents that he or she is familiar with the terms and provisionsthereof, and hereby accepts this Option subject to all of the terms andprovisions thereof.  The Optionee herebyagrees to accept as binding, conclusive and final all decisions orinterpretations of the Board of Directors of The RiceX Company upon anyquestions arising under such Agreement.

 
| Dated: | 9/23/03 |   |                                                    |   |
|--------|---------|--------|---------------------------------------------------------|--------|
|   |    |   |                                                    |   |
|   |    |   | /s/ Steven W. Saunders                                  |
|   |    |   | STEVEN W. SAUNDERS, Trustee or Successor                |   |
|   |    |   | Trustee(s) of the TRUST OF STEVEN W.                    |   |
|   |    |   | SAUNDERS dated February 26, 2002 (“Optionee”) |   |

 

 

CONSENT OF SPOUSE

 

I,                            ,spouse of the Optionee who executed the foregoing Agreement attached hereto,hereby agree that my spouse’s interest in the shares of Common Stock of TheRiceX Company subject to said Agreement shall be irrevocably bound by theAgreement’s terms.  I agree to accept asbinding, conclusive and final all decisions or interpretations of the Board ofDirectors of The RiceX Company upon any questions arising under suchAgreement.  I further agree that mycommunity property interest in such Shares, if any, shall similarly be bound bysaid Agreement and that such consent is binding upon my executors,administrators, heirs and assigns.  Iagree to execute and deliver such documents as may be necessary to carry outthe intent of said Agreement and this consent.

 
| Dated: |   |   |       |   |
|--------|--------|--------|------------|--------|
|   |   |   |       |   |
|   |   |   |       |
|   |   |   | Signature  |   |
|   |   |   |       |   |
|   |   |   |       |
|   |   |   | Print Name |   |

 

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**EXHIBIT A**

 
| TO:      | The RiceX Company                   |
|----------|-------------------------------------|
|     | 1241 Hawks Flight Court, Suite 103  |
|     | El Dorado Hills, CA   95762    |
|     |                                |
|     |                                |
| SUBJECT: | NOTICE OF EXERCISE OF STOCK OPTIONS |

 

 

 

With respect to the stock option granted to the undersigned by TheRiceX Company, (the “Company”) on (grant date)                            ,to purchase an aggregate of                             shares of the Company’s Common Stock, this is official notice that theundersigned hereby elects to exercise such option to purchase shares asfollows:

 

Number of Shares                            

 

Date of Purchase:                            

 

Mode of Payment:                                                                                                                       (certifiedcheck or cash)

 

 

The shares should be issued as follows:
|                    |   |   |
|-------------------------|--------|--------|
| Name:                   |   |   |
|                    |   |   |
| Address:                |   |   |
|                    |   |   |
|                    |   |   |
|                    |   |   |
| Signed by (print name): |   |   |
|                    |   |   |
| Signature:              |   |   |
|                    |   |   |
| Dated:                  |   |   |

 

 

Please send this notice of exercise to:

 

The RiceX Company

1241 Hawks Flight Court, Suite 103

El Dorado Hills, CA 95762

 

Phone: 916-933-3000

 

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