SMARTVIDEO TECHNOLOGIES, INC. INCENTIVE STOCK OPTION AGREEMENT
SMARTVIDEO
TECHNOLOGIES, INC.
| 1. |
Grant
of Option.
SmartVideo Technologies, Inc., a Delaware corporation, whose principal
place of business is at 0000 Xxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx,
XX 00000
(the “Company”) hereby grants to Xxxxx Xxxx,
an individual whose address is set forth below the optionee signature
line
(the “Optionee”), an option, pursuant to the Company’s 2005 Equity
Incentive Plan (the “Plan”), to purchase the number of shares of common
stock, par value $.001 per share, of the Company (“Common Stock”) set
forth on Exhibit
A attached
hereto at the exercise price per share set forth on Exhibit
A
attached hereto, purchasable as set forth in and subject to the terms
and
conditions of this option and the Plan. The Plan has been approved
by the
stockholders of the Company. No rights and obligations of the parties
pursuant to this option agreement (this “Agreement”) shall conflict with
such stockholder approval.
|
| 2. |
Incentive
Stock Option.
This option is intended to qualify as an incentive stock option
(“Incentive Stock Option”) within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended or replaced from time to
time
(the “Code”). Any provision of this Agreement or the Plan which conflicts
with the requirements of qualification as an Incentive Stock Option
under
the Code is null and void to the extent of such conflict and any
ambiguities shall be resolved so that this option qualifies as an
Incentive Stock Option.
|
| 3. |
Exercise
of Option; Provisions for
Termination
|
| a. |
Vesting
Schedule.
The shares of Common Stock subject to this Agreement shall vest in
accordance with Exhibit
A
attached hereto.
|
| b. |
Change
In Control.
Upon a Change in Control (as such term is defined in the Plan), all
of the
unvested option will accelerate and be exercisable for a period of
five
(5) business days immediately prior to the scheduled consummation
of a
Change in Control; provided, however, that any such acceleration
and any
exercise of the option during such five (5) day period shall be (i)
conditioned on the consummation of the Change in Control and (ii)
effective only immediately before the consummation of the Change
in
Control.
|
Upon
consummation of any Change in Control, the Plan and any outstanding portion
of
the option that remains unexercised shall terminate. Notwithstanding the
foregoing, to the extent provision is made in writing in connection with such
Change in Control for the continuation of the Plan and the assumption of options
under the Plan theretofore granted, or for the substitution for such options
of
new options covering the stock of a successor company, or a parent or a
subsidiary thereof, with appropriate adjustments as to the number and kinds
of
shares or units and exercise prices, then the Plan and the option granted
hereunder shall continue in the manner and under the terms so provided, and
the
acceleration and termination provisions set forth in this Section 3 shall be
of
no effect. The Company will send written notice of a Change in Control to the
Employee not later than a time at which the Company gives notice thereof to
its
stockholders.
| c. |
Expiration
Date.
This option may be exercised as to the number of shares that have
vested
in accordance with Section 3(a) above prior to the 10th
anniversary of the date of grant (hereinafter, the “Expiration Date”),
provided that
no
option may be exercised until it has fully vested in accordance with
the
vesting schedule set forth on Exhibit
A
attached hereto.
|
| d. |
Exercise
Procedure.
Subject to the conditions set forth in this Agreement, this option
once
vested shall be exercised by the Optionee’s delivery of written notice of
exercise to the Company, specifying the number of shares to be purchased
and the purchase price to be paid therefor and accompanied by payment
in
full in accordance with Section 4. Such exercise shall be effective
upon
receipt by the Company of such written notice together with the required
payment. The Optionee may purchase less than the number of shares
covered
hereby, provided that no partial exercise of this option may be for
any
fractional share or for less than one whole
share.
|
| e. |
Continuous
Employment Required.
Except as otherwise provided in this Section 3, this option may not
be
exercised unless the Optionee, at the time he or she exercises this
option, is, and has been at all times since the date of grant of
this
option, an employee of the Company. For all purposes of this option,
(i)
“employment” shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations or any successor regulations,
and
(ii) if this option shall be assumed or a new option substituted
therefor
in a transaction to which Section 424(a) of the Code applies, employment
by such assuming or substituting corporation (hereinafter called
the
“Successor Corporation”) shall be considered for all purposes of this
option to be employment by the
Company.
|
| f. |
Exercise
Period Upon Termination of Employment.
If the Optionee ceases to be employed by the Company for any reason,
then,
except as provided in paragraphs (f) and (g) below, the right to
exercise
this option shall terminate three months after such cessation (but
in no
event after the Expiration Date); provided that
this option shall be exercisable only to the extent that the Optionee
was
entitled to exercise this option on the date of such cessation.
Notwithstanding the foregoing, if the Optionee, prior to the Expiration
Date, materially violates any non-competition or confidentiality
provisions of any agreement between the Optionee and the Company,
the
right to exercise this option shall terminate immediately upon such
violation.
|
| g. |
Exercise
Period Upon Death or Disability.
If the Optionee dies or becomes disabled (within the meaning of Section
22(e)(3) of the Code) prior to the Expiration Date while he or she
is an
employee of the Company, or if the Optionee dies or becomes disabled
or
while on leave within three months after the Optionee ceases to be
an
employee of the Company (other than as the result of a discharge
for
“Cause” as specified in paragraph (g) below), this option shall be
exercisable, within the period of one-year following the date of
death or
disability of the Optionee (but in no event after the Expiration
Date), by
the Optionee or by the person to whom this option is transferred
by will
or the laws of descent and distribution; provided that
this option shall be exercisable only to the extent that this option
was
exercisable by the Optionee on the date of his or her death or disability.
Except as otherwise indicated by the context, the term “Optionee”, as used
in this option, shall be deemed to include the estate of the Optionee
or
any person who acquires the right to exercise this option by bequest
or
inheritance or otherwise by reason of the death of the
Optionee.
|
-2-
| h. |
Voluntary
Resignation; Discharge for Cause.
If the Optionee, prior to the Expiration Date, ceases his or her
employment with the Company because he or she voluntarily resigns
or is
discharged for “Cause” (as defined below), the right to exercise this
option shall terminate immediately upon such cessation of employment.
“Cause” is conduct, as determined by the Board of Directors, involving one
or more of the following: (i) the commission of an act in deliberate
disregard of the rules or policies of the Company which results in
loss,
damage or injury to the Company or any of its subsidiaries or adversely
affects the business activities, reputation, goodwill or image of
the
Company or any of its subsidiaries; or (ii) the commission of any
material
act of disloyalty, dishonesty or breach of fiduciary duty to the
Company,
or(iii) the commission of an act of embezzlement, fraud; or (iv)
the
unauthorized disclosure of any trade secret or confidential information
of
the Company or any third party who has a business relationship with
the
Company or the violation of any noncompetition covenant or assignment
of
inventions obligation with the Company; or (v) the commission of
any act
which induces any customer or prospective customer of the Company
to break
a contract with the Company or to decline to do business with the
Company;
or (vi) the charge by indictment or information with the commission
of a
felony involving charges of dishonesty or moral turpitude or the
conviction of a felony of any kind; or (vii) the failure of the Optionee
to perform in a material respect his or her employment obligations
without
proper cause. In making such determination, the Board of Directors
shall
act fairly and in utmost good faith. For the purposes of this subsection
(g), termination of employment shall be deemed to occur when the
Optionee
receives notice that his or her employment is
terminated.
|
| 4. |
Payment
of Purchase Price
|
| a. |
Method
of Payment.
Payment of the purchase price for shares purchased upon exercise
of this
option shall be made (i) by delivery to the Company of cash or a
certified
or bank check to the order of the Company in an amount equal to the
purchase price of such shares, (ii) subject to the consent of the
Company,
by delivery to the Company of shares of Common Stock of the Company
then
owned for at least six months prior to the delivery of such Common
Stock
by the Optionee and having a fair market value equal in amount to
the
purchase price of such shares, (iii) by payment, in whole or in part,
through the surrender of shares of Common Stock then issuable upon
exercise of this option having a fair market value as determined
in
accordance with Section 4(b) hereof, (iv) subject to the consent
of the
Company, by the delivery of an assignment to the Company of a sufficient
amount of the proceeds from the sale of the Common Stock acquired
upon
exercise of this option and an authorization to the broker or selling
agent to pay that amount to the Company, which sale shall be at the
Optionee’s direction at the time of exercise; (v) by any other means
(including, without limitation, by delivery of a promissory note
of the
Optionee payable on such terms as are specified by the Board of Directors
which the Board of Directors determines are consistent with the purpose
of
the Plan and with applicable laws and regulations (including, without
limitation, the provisions of Rule 16b-3 under the Securities Exchange
Act
of 1934 and Regulation T promulgated by the Federal Reserve Board)),
or
(vi) by any combination of such methods of
payment.
|
| b. |
Valuation
of Shares or Other Non-Cash Consideration Tendered in Payment of
Purchase
Price.
For the purposes hereof, unless a recognized market value is available,
the fair market value of any share of the Company’s Common Stock or other
non-cash consideration which may be delivered to the Company in exercise
of this option shall be determined in good faith by the Board of
Directors
of the Company.
|
| c. |
Delivery
of Shares Tendered in Payment of Purchase Price.
If the Optionee exercises this option by delivery of shares of Common
Stock of the Company, the certificate or certificates representing
the
shares of Common Stock of the Company to be delivered shall be duly
executed in blank by the Optionee or shall be accompanied by a stock
power
duly executed in blank suitable for purposes of transferring such
shares
to the Company. Fractional shares of Common Stock of the Company
will not
be accepted in payment of the purchase price of shares acquired upon
exercise of this option.
|
| d. |
Restrictions
on Use of Option Stock.
Notwithstanding the foregoing, no shares of Common Stock of the Company
may be tendered in payment of the purchase price of shares purchased
upon
exercise of this option if the shares to be so tendered were acquired
within twelve (12) months before the date of such tender through
the
exercise of an option granted under the Plan or any other stock option
or
restricted stock plan of the
Company.
|
| 5. |
Delivery
of Shares; Compliance With Securities Laws,
Etc.
|
| a. |
General.
Upon payment of the option price for the number of shares purchased
and
paid for, Optionee may request prompt delivery of such shares,
provided that
if
any law or regulation requires the Company to take any action with
respect
to such shares before the issuance thereof, then the date of delivery
of
such shares shall be extended for the period necessary to complete
such
action.
|
| b. |
Listing,
Qualification, Etc.
This option shall be subject to the requirement that if, at any time,
counsel to the Company shall determine that the listing, registration
or
qualification of the shares subject hereto upon any securities exchange
or
under any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary
as a
condition of, or in connection with, the issuance or purchase of
shares
hereunder, this option may not be exercised, in whole or in part,
unless
such listing, registration, qualification, consent or approval, disclosure
or satisfaction of such other condition shall have been effected
or
obtained on terms acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for, effect or obtain
such
listing, registration, qualification, or disclosure, or to satisfy
such
other condition.
|
| 6. |
Nontransferability
of Option.
This option is personal and no rights granted hereunder may be
transferred, assigned, pledged or hypothecated in any way (whether
by
operation of law or otherwise), except by will or the laws of descent
and
distribution, nor shall any such rights be subject to execution,
attachment or similar process except that this option may be transferred
as provided in paragraph (f) of Section 3 above. Upon any attempt
to
transfer, assign, pledge, hypothecate or otherwise dispose of this
option
or of such rights contrary to the provisions hereof, or upon the
levy of
any attachment or similar process upon this option or such rights,
this
option and such rights shall, at the election of the Company, become
null
and void.
|
-3-
| 7. |
No
Special Employment Rights.
Nothing contained in the Plan or this option shall be construed or
deemed
by any person under any circumstances to bind the Company to continue
the
employment of the Optionee for the period within which this option
may be
exercised, or for any other period.
|
| 8. |
Rights
as a Shareholder.
The Optionee shall have no rights as a shareholder with respect to
any
shares covered by this option (including, without limitation, any
rights
to receive dividends or non-cash distributions with respect to such
shares) until the date the Optionee has exercised this option and
delivered payment of the purchase price for such shares to the Company
in
accordance with the terms hereof. No adjustment shall be made for
dividends or other rights for which the record date is prior to the
date
such stock certificate is issued. The Optionee acknowledges that
he has no
rights to the grant of any equity interest, either at present or
in the
future, in the Company other than this option and any previously
issued
options, and that the grant of this option satisfies all obligations,
including all contingent obligations, of the Company to the
Optionee.
|
| 9. |
Adjustment
Provisions
|
| a. |
General.
If, through or as a result of any reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split
or
other similar transaction, (A) the outstanding shares of Common Stock
are
increased, decreased or exchanged for a different number or kind
of shares
or other securities of the Company, or (B) additional shares or new
or
different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Common Stock
or
other securities, an appropriate and proportionate adjustment may
be made
in (i) the maximum number and kind of shares reserved for issuance
under
the Plan, (ii) the number and kind of shares or other securities
subject
to this option, and (iii) the price for each share subject to this
option,
without changing the aggregate purchase price as to which this option
remains exercisable. Notwithstanding the foregoing, no adjustment
shall be
made pursuant to this Section 9 if such adjustment would cause this
option
to fail to comply with Rule 16b-3.
|
| b. |
Board
Authority to Make Adjustments.
Any adjustments under this Section 9 will be made by the Board of
Directors, whose determination as to what adjustments, if any will
be made
and the extent thereof will be final, binding and conclusive. Upon
exercise of this option, the Company may at the discretion of the
Board of
Directors, pay to the Optionee cash equal to the fair market value
of any
fractional shares created by any such
adjustments.
|
| c. |
Limits
on Adjustments.
No adjustment shall be made under this Section 9 which would, within
the
meaning of any applicable provision of the Code, constitute a
modification, extension or renewal of this option or a grant of additional
benefits to the Optionee.
|
| 10. |
Withholding
Taxes.
The Company’s obligation to deliver shares of Common Stock upon the
exercise of this option shall be subject to the Optionee’s satisfaction of
all applicable federal, state, local and foreign taxes of any kind
required by law to be withheld with respect to any shares issued
upon
exercise of this option. If the Company, in its discretion, determines
that it must or should withhold or pay over tax with respect to the
exercise of this option or a Disqualifying Disposition (as defined
in
Section 11 below) of shares of Common Stock acquired by the Optionee
on
exercise of this option, the Optionee hereby agrees that, at the
option of
the Company, Optionee will pay to the Company or the Company may
withhold
from the Optionee’s wages the appropriate amount of federal, state, local
and foreign taxes attributable to such Disqualifying Disposition.
If any
portion of this option is treated as a non-qualified option, the
Optionee
hereby agrees that, at the option of the Company, Optionee will pay
to the
Company or the Company may withhold from the Optionee’s wages the
appropriate amount of federal, state, local and foreign taxes attributable
to the Optionee’s exercise of such non-qualified option. At the Company’s
discretion, the amount required to be withheld may be withheld in
cash
from such wages, or (with respect to compensation income attributable
to
the exercise of this option) in kind from the Common Stock otherwise
deliverable to the Optionee on exercise of this option. The Optionee
further agrees that, if the Company does not withhold an amount from
the
Optionee’s wages sufficient to satisfy the Company’s withholding
obligation, the Optionee will reimburse the Company on demand, in
cash,
for the amount under withheld.
|
-4-
| 11. |
Disqualifying
Disposition.
Although the parties intend that this option shall qualify as an
Incentive
Stock Option, if this option is determined not to be an Incentive
Stock
Option, the Optionee understands that the Company is not responsible
to
compensate the Optionee or otherwise make up for the treatment of
this
option as a non-qualified stock option. The Optionee should consult
with
the Optionee’s own tax advisors regarding the tax effects of this option
and the requirements necessary to obtain favorable treatment under
the
Code, including, but not limited to, holding period requirements.
The
Optionee agrees to notify the Company in writing immediately after
the
Optionee makes a Disqualifying Disposition of any shares of Common
Stock
acquired pursuant to the exercise of this option. Generally, a
Disqualifying Disposition is any disposition (whether by sale, exchange,
gift, transfer, or otherwise) of such shares before the later of
(a) two
years after the date the Optionee was granted this option or (b)
one-year
after the date the Optionee acquired shares by exercising this option.
If
the Optionee dies before such shares are sold, these holding period
requirements do not apply and no Disqualifying Disposition would
occur.
The Optionee also agrees to provide the Company with any information
which
it shall request concerning any such disposition. The Optionee
acknowledges that he or she will forfeit the favorable income tax
treatment otherwise available with respect to the exercise of this
Incentive Stock Option if he or she makes a Disqualifying Disposition
of
the shares acquired on exercise of this
option.
|
| 12. |
Investment
Representations; Legends; Limitations on Certain
Dispositions
|
| a. |
Representations.
The Optionee represents, warrants and covenants
that:
|
| (i) |
Any
shares purchased upon exercise of this option shall be acquired for
the
Optionee’s account for investment only and not with a view to, or for sale
in connection with, any distribution of the shares in violation of
the
Securities Act of 1933, as amended (the “Securities Act”), or any rule or
regulation under the Securities
Act.
|
| (ii) |
The
Optionee has had such opportunity as he or she has deemed adequate
to
obtain from representatives of the Company such information as is
necessary to permit the Optionee to evaluate the merits and risks
of his
or her investment in the Company.
|
-5-
| (iii) |
The
Optionee is able to bear the economic risk of holding shares acquired
pursuant to the exercise of this option for an indefinite
period.
|
| (iv) |
The
Optionee understands that (A) the shares acquired pursuant to the
exercise
of this option will not be registered under the Securities Act and
are
“restricted securities” within the meaning of Rule 144 under the
Securities Act; (B) such shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the Securities
Act or an exemption from registration is then available; (C) in any
event,
an exemption from registration under Rule 144 or otherwise under
the
Securities Act may not be available for at least one-year and even
then
will not be available unless a public market then exists for the
Common
Stock, adequate information concerning the Company is then available
to
the public and other terms and conditions of Rule 144 are complied
with;
and (D) there is now no registration statement on file with the Securities
and Exchange Commission with respect to any stock of the Company
and the
Company has no obligation or current intention to register any shares
acquired pursuant to the exercise of this option under the Securities
Act.
|
By
making
payment upon exercise of this option, the Optionee shall be deemed to have
reaffirmed, as of the date of such payment, the representations made in this
Section 12.
| c. |
Limitations
on Certain Dispositions.
The Optionee agrees, by accepting this option, that if the Company
offers
any of its Common Stock for sale pursuant to a registration statement
under the Securities Act, the Optionee will not, directly or indirectly,
without the prior written consent of the Company, sell, offer or
agree to
sell, grant any option to purchase or otherwise transfer or dispose
of any
shares of Common Stock purchased upon exercise of this option for
a period
of 90 days after the effective date of such registration
statement.
|
| 13. |
Interpretation
of this Agreement.
All decisions and interpretations made by the Committee (as defined
in
Section 2 of the Plan) with regard to any question arising under
the Plan
or this Agreement shall be binding and conclusive on the Company
and the
Optionee and any other person entitled to exercise this option as
provided
herein. In the event there is any inconsistency between the provisions
of
this Agreement and of the Plan, the provisions of the Plan shall
govern,
subject to the provisions of Section 2
above.
|
| 14. |
Miscellaneous
|
| a. |
Except
as provided herein, this Option Agreement may not be amended or otherwise
modified unless evidenced in writing and signed by the Company and
the
Optionee.
|
| b. |
All
notices under this Option Agreement shall be mailed or delivered
by hand
to the parties at their respective addresses set forth beneath their
names
below or at such other address as may be designated in writing by
either
of the parties to one another.
|
| c. |
This
Option shall be governed by and construed in accordance with the
laws of
the State of Delaware.
|
-6-
Date
of Grant: July 6,
2006
|
SMARTVIDEO
TECHNOLOGIES, INC.
By:__________________________
Name:
Xxxxxx
X. Xxxxxx
Title:
Corporate
Secretary
|
OPTIONEE’S
ACCEPTANCE
The
undersigned hereby accepts the foregoing option and agrees to the terms and
conditions thereof. The undersigned hereby acknowledges receipt of a copy of
the
Company’s 2005 Equity Incentive Plan.
OPTIONEE:
________________________________
| Name: |
Xxxxx Xxxx
|
| Address: |
000
X. Xxxx Xxx
|
Xxxx
Xxxxx,
XX 00000
Corporate
Seal
-7-
EXHIBIT
A
|
Name
of Employee (the “Employee”):
|
Xxxxx Xxxx
|
|
Date
of this option grant:
|
July 6,
2006
|
|
Number
of shares of the Company’s Common Stock subject to this option
(“Option
Shares”):
|
One
Hundred Fifty Thousand
|
|
Option
exercise price per share: $1.40
|
Vesting
Start Date: October
1, 2006
|
|
Percent
of Shares Vesting Annually: 50%
|
Number
of Shares Vesting Annually: 75,000
|
Vesting
Schedule
| Vesting Date | Shares Vested | Percent Vested |
|
October
1, 2006
|
18,750
|
12.5 % |
|
January
1, 2007
|
18,750
|
12.5 % |
|
April
1, 2007
|
18,750
|
12.5 % |
|
July
1, 2007
|
18.750
|
12.5 % |
|
October
1, 2007
|
18.750
|
12.5 % |
|
January
1, 2008
|
18,750
|
12.5 % |
|
April
1, 2008
|
18,750
|
12.5 % |
|
July
1, 2008
|
18,750
|
12.5 % |
-8-
