STOCK OPTION AGREEMENT
EXHIBIT
4.2
This
Stock Option Agreement (the “Agreement”)
is
entered into as of ______, 2005 by and between Xxxxxx Systems, Inc., a Delaware
corporation (the “Company”),
and___________ (the “Option
Holder”).
NOTICE
OF GRANT
The
undersigned Participant has been granted an Option to purchase $0.001 par
value
Common Stock of Xxxxxx Systems, Inc., a Delaware corporation, (the “Company”)
subject to the terms and conditions of the Plan and this Option Agreement,
as
follows:
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Participant:
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____________________
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Date
of Grant:
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______,
2005
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Exercise
Price per Share:
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$_____
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Total
Number of Shares Granted (“Shares”):
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______
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Type
of Option:
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Incentive
Qualified Stock Option
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Term/Expiration
Date:
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______,
201_
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Vesting
Commencement Date:
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______,
2005
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Stock
Option Number
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__
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Vesting
Schedule:
This
Option shall be exercisable, in whole or in part, with respect to the following
number of Shares according to the following vesting schedule: the shares
shall
vest over a ______ month period with ____th
vesting
each month, so long as the Participant is still providing services to the
Company (or any parent or subsidiary) as an employee, a non-employee member
of
the board of directors, or a consultant or independent advisor on such date.
RECITALS
A. The
Company has adopted the 2005 Stock Incentive Plan (the “Plan”).
The
Option Holder has had an opportunity to review the Plan.
1
B. The
Option Holder is a director, officer and/or employee of the Company or of
one of
its subsidiaries and, therefore, is eligible to receive option grants under
the
Plan. This Agreement is intended by the parties to evidence the Company’s grant
to the Option Holder of an option to purchase shares of its common
stock.
NOW,
THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
the
Company and the Option Holder hereby agree as follows:
1. Option
Grant and Exercise Price.
(a) Effective
as of the date set forth in the first paragraph of this Agreement, the Company
hereby grants to the Option Holder the right and option (the “Option”)
to
purchase, on the terms and conditions set forth in this Agreement and in
the
Plan, _______________ (__,000) shares of its common stock, par value $0.001
per
share (“Common
Stock”),
at an
exercise price of _________ Dollars ($____) per share. The Option exercise
price
is equal to or in excess of the fair market value of the Common Stock on
the
trading day preceding the Option grant date as determined in accordance with
Section 6.1.9 of the Plan.
(b) The
Option is not intended by the Company and the Option Holder to be an incentive
stock option within the meaning of Section 422 of the Internal Revenue Code
of
1986, as amended.
2. Vesting
and Term of the Option.
(a) Option
Vesting.
Subject
to the terms and conditions of this Agreement, the Option shall vest and
become
exercisable in twelve monthly installments. The vesting of this Option shall
commence on ______, 2005, and shall continue on the same calendar day of
each
succeeding month provided that on such date the Option Holder is still providing
services to the Company as an employee, a non-employee member of the Board
of
Directors, or as a consultant or advisor. At the end of each monthly
installment, the Option Holder shall become entitled to purchase ___ thousand
(_,000) shares of Common Stock that are covered by the Option. At the end
of the
_______ monthly installment, the Option shall fully vest and the Option Holder
shall become entitled to purchase the ______ thousand (___000) shares of
Common
Stock that are covered by the Option. The Option Holder shall at no time
be
allowed to exercise the unvested portion of the Option.
(b) Option
Term.
Subject
to the possibility of earlier termination as described in Section 2(c), the
vested portion of the Option shall be exercisable in whole or in part prior
to
______, 20__. The Option shall terminate on _______ 20__, and no portion
of the
Option may be exercised on or after ______, 20__.
(c) Early
Option Termination.
If for
any reason the Option Holder ceases to be a director, officer or employee
of the
Company or of a subsidiary of the Company, any portion of the Option that
has
vested and is unexercised at the date of the termination of the Option Holder’s
service may be exercised in whole or in part at any time within ninety days
after the date of the Option Holder’s service termination but not thereafter,
provided that the Option may in no event be exercised on or after the Option
termination date described in Section 2(b). Any portion of the Option that
has
not vested as of the date that the Option Holder’s service terminates shall
cease to vest and shall at no time be exercisable by the Option Holder. The
Option is also subject to early termination upon the occurrence of a “Corporate
Transaction” that is described in Section 6.1.2 of the Plan.
2
(d) Shareholder
Approval Required.
Notwithstanding anything to the contrary in this Agreement, no portion of
the
Option shall become exercisable unless and until the Company’s shareholders have
approved the Plan.
3. Manner
of Exercising the Option.
The
Option Holder may exercise the vested portion of the Option in whole or in
part
prior to the Option’s termination, provided that a partial exercise of the
Option may not be for fewer than one hundred (100) shares of Common Stock
unless
fewer than one hundred (100) shares subject to the vested portion of the
Option
remain unexercised, in which event the entire remaining vested portion of
the
Option must be exercised at one time. The Option shall not be exercisable
with
respect to a fraction of a share of Common Stock. The Option Holder may exercise
the vested portion of the Option, in whole or in part, by delivering to the
Company's Chief Financial Officer written notice of exercise in the form
of the
notice attached to this Agreement. Such notice shall specify the number of
shares of Common Stock to be purchased and shall be accompanied by payment
of
the purchase price of the shares. No shares shall be issued by the Company
until
full payment of the purchase price has been made.
4. Payment
of the Option Exercise Price.
Unless
the Company’s Board of Directors (the “Board”)
elects
in its discretion to allow one of the alternative methods of payment described
in Section 6.1.6 of the Plan (including, without limitation, a so-called
cashless Option exercise conducted through a broker), payment of the exercise
price of the shares of Common Stock subject to the exercised portion of the
Option shall be made by the Option Holder’s delivery to the Company of a check
payable to the order of the Company. As provided in Section 6.1.7 of the
Plan,
the Company has the right to require the Option Holder to satisfy any applicable
withholding obligations at the time of the exercise of the Option.
5. Transferability
of the Option.
(a) Except
as
provided in this Section 5, the Option Holder may not assign or otherwise
transfer the Option, either voluntarily or by operation of law, other than
by
will or the laws of descent and distribution, and the Option shall be
exercisable during the Option Holder’s lifetime only by the Option Holder or by
the Option Holder’s legal representative. Following the death of the Option
Holder, the Option shall be exercisable by the Option Holder’s legal
representative, executor and beneficiaries.
(b) The
Option Holder may assign and transfer part or all of the Option to a family
member or family trust during the Option Holder’s lifetime but only if: (i) the
transfer is made by a gift and not for consideration; (ii) the transferee
is a
“family member” (including, without limitation, a family trust) as defined in
General Instruction A.1(a)(5) of Form S-8 under the Securities Act of 1933,
as
amended (the “Securities
Act”);
(iii)
the Option Holder gives the Company at least ten days’ prior written notice of
the proposed transfer; and (iv) the transferee executes and delivers to the
Company any documents requested by the Company (including, without limitation,
a
counterpart of this Agreement) in order to document the transfer. Any such
transferee of all or part of the Option shall be bound by all of the terms
and
conditions of the Plan and this Agreement, and the Option Holder shall be
personally liable to the Company for any breach by the transferee of any
of the
terms of the Plan or this Agreement.
3
6. Securities
Law Compliance. As
provided in Section 10.1 of the Plan, no shares of Common Stock shall be
issued
or delivered upon exercise of the Option unless and until the Board determines
that the exercise of the Option and the issuance and delivery of such shares
pursuant thereto will comply with all relevant provisions of law, including,
without limitation, the Securities Act, applicable state and foreign securities
laws and the requirements of any stock exchange, Nasdaq market system, or
over-the-counter trading system upon which the Common Stock may be
listed.
7. Incorporation
by Reference of the Plan. The
Plan
and all of its terms and conditions, as amended from time to time, are
incorporated by reference into this Agreement. The Option Holder acknowledges
that he or she has received and reviewed a copy of the Plan. This Agreement
is
not a complete restatement of all of the terms and conditions of the Plan.
The
Company and the Option Holder agree to be bound by the Plan, as amended from
time to time, and agree that the terms and conditions of the Plan shall govern
if and to the extent that there are any inconsistencies between the Plan
and
this Agreement. If the Plan is administered by a committee as permitted by
Section 4.1 of the Plan, references in this Agreement to the Board shall,
as
appropriate, apply instead to such committee.
8. Option
Holder’s Representations and Warranties. In
connection with the receipt of the Option pursuant to this Agreement and
in
contemplation of the Option Holder’s purchase of shares of Common Stock upon
exercise of the Option, the Option Holder hereby agrees, represents and warrants
as follows; provided that all of the following agreements, representations
and
warranties shall be deemed to have been given again by the Option Holder
as of
the date that he or she exercises the Option:
(a) Access
to Information.
The
Option Holder has had a sufficient opportunity to review (i) the Plan, (ii)
the
Prospectus that the Company has distributed regarding the Plan, and (iii)
all
registration statements, annual and periodic reports and proxy and information
statements that the Company has filed with the Securities and Exchange
Commission (the “SEC”)
during
the preceding twelve months. Neither the Company nor any of its officers,
directors, employees or other agents has made any representation or
recommendation to the Option Holder about the advisability of the Option
Holder’s purchase of the shares of Common Stock that are subject to the Option.
(b) Ability
to Bear Investment Risk.
The
Option Holder is aware that any purchase of stock involves an element of
risk.
The Option Holder can afford to bear the risks of an investment in the Company.
The Option Holder has sufficient knowledge and experience in financial and
investment matters to enable him or her to evaluate the merits and risks
of the
proposed purchase of the shares of Common Stock subject to the Option and
to
make an informed investment decision. The Option Holder has had a sufficient
opportunity to consult with his or her advisers about the merits and legal
implications of the proposed transaction.
4
(c) Resale
Restrictions.
The
Option Holder understands that: (i) neither the SEC nor any state or other
regulatory authority has made any recommendation or finding concerning the
value
of the shares of Common Stock subject to the Option; and (ii) the shares
may be
offered, sold or otherwise transferred by the Option Holder only if the
transaction is registered and qualified under the applicable provisions of
federal and state securities laws or if exemptions from such registration
and
qualification are available. The Option Holder agrees not to sell, pledge
or
otherwise transfer any of the shares of Common Stock acquired upon exercise
of
the Option except in full compliance with all applicable federal and state
securities laws, rules and regulations.
(d) Applicability
to Transferees.
If the
Option Holder transfers part or all of the Option to a family member or family
trust pursuant to Section 5(b), the transferee shall be deemed to have made
all
of the representations, warranties and agreements that are set forth in this
Section 8, and the Option Holder shall be personally liable to the Company
for
any and all losses, damages, expenses and liabilities (including, but not
limited to, court costs and reasonable attorneys' fees) that the Company
may
incur as a result of any breach of such representations, warranties and
agreements by the transferee.
(e) No
Continuing Employment Right.
The
Option Holder understands that nothing in the Plan or this Agreement gives
the
Option Holder a right to continue in the employment of the Company or a
subsidiary and that, if the Option Holder is a director, nothing in the Plan
or
this Agreement gives the Option Holder a right to continue to serve as a
director of the Company.
9. Miscellaneous
Provisions.
(a) Further
Instruments. The
Company and the Option Holder agree to execute such further instruments and
to
take such further actions as may be reasonably necessary to carry out the
intent
of this Agreement.
(b) Provisions
Subject to Applicable Law. If
any provision of this Agreement is held by an arbitrator or a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired
or
invalidated in any way and shall be construed in accordance with the purposes
and intent of this Agreement.
(c) Complete
Agreement. This
Agreement and the Plan constitute the complete and exclusive agreement between
the Company and the Option Holder with respect to the subject matter herein
and
replace and supersede any and all other prior written and oral agreements
or
statements by the parties relating to such subject matter.
(d) Successors
and Assigns. Subject
to the provisions of this Agreement and the Plan relating to the transferability
of the Option and the shares of Common Stock acquired upon exercise of the
Option, this Agreement shall be binding upon and inure to the benefit of
the
Company and the Option Holder and their respective successors and assigns.
Whenever appropriate in this Agreement, references to the Company or the
Option
Holder shall be deemed to refer to such person’s legal representative, estate or
other transferees, successors or assigns, as applicable.
5
(e) Notices. Any
notice required or permitted to be given to the Company or the Option Holder
must be in writing and personally delivered or sent by registered or certified
United States mail (postage prepaid and return receipt requested), by overnight
delivery service or by facsimile transmission, addressed to the address
hereinafter shown below such party’s signature or to such other address as the
party may designate in the foregoing manner to the other party. Any such
notice
that is sent by the Company or the Option Holder in the foregoing manner
shall
be deemed to have been delivered upon (i) personal delivery, (ii) actual
receipt
by facsimile transmission, (iii) three days after deposit in the United States
mail, or (iv) one day after delivery to an overnight delivery
service.
(f) Amendment
and Termination. This
Agreement may be amended or terminated only by a writing executed by both
the
Company and the Option Holder.
(g) Counterparts. This
Agreement may be executed by facsimile and in two counterparts, each of which
shall be deemed an original, but both of which shall constitute one and the
same
instrument.
(h) Governing
Law.
This
Agreement shall be governed by, and construed and enforced in accordance
with,
the internal laws of the State of California without giving effect to such
state’s conflict-of-law principles.
[signature
page follows]
6
IN
WITNESS WHEREOF, the Company and the Option Holder have executed and delivered
this Agreement as of the day and year first written above.
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XXXXXX
SYSTEMS, INC.
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By:
________________________________
Name:______________________________
Title: Chief
Executive Officer
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Address:
0000
Xxxxxxx Xxxxxxxxx, #000
Xxx
Xxxxxxx, XX 00000
Attention:
Chief Financial Officer
Fax:
(000) 000-0000
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____________________________________
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Address:
____________________________________
____________________________________
Fax:
________________
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7
OPTION
EXERCISE NOTICE
Xxxxxx
Systems, Inc.
0000
Xxxxxxx Xxxxxxxxx, #000
Xxx
Xxxxxxx, XX 00000
Attention:
Chief Financial Officer
I
hereby
notify Xxxxxx Systems, Inc. (the "Company")
of my
election to purchase _____ shares of the Company's common stock at a purchase
price of $______ per share pursuant to an option that was granted under the
Stock Option Agreement dated as of _________________ (the "Agreement")
between the Company and _____________________.
If
the
Option Holder named above assigned part or all of the option to a family
member
or family trust pursuant to Section 5(b) of the Agreement, this Option Exercise
Notice is being executed by the transferee instead of the Option Holder.
Concurrently
with the delivery to the Company of this notice, I have delivered to the
Company
the purchase price of the shares in the manner provided in the Agreement.
I
agree
to execute whatever additional documents are requested by the Company in
order
to complete the exercise of my option. All of the representations and warranties
that I made in Section 8 of the Agreement remain accurate as of the date
of this
notice.
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Dated:
_________________
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_____________________________
Signature
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_____________________________
Print
Name
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8
