EXHIBIT 7B
[NETLOGIX LOGO]
000 XXXX XXXXXX
XXXXX XXXXXXX, XXXXXXXXXX 00000
(000) 000-0000
TO: XXXXX X. XXXXXX AGREEMENT NO. 98ISO - 10501
SOCIAL SECURITY NO:
ADDRESS: 0000 XXXXXXXXXX XXXX XXXX
XXXXX XXXXXXX, XX 00000
SUBJECT: NO. OF SHARES 400,000; DATE OF GRANT: APRIL 30, 2001
1998 STOCK INCENTIVE PLAN (THE "PLAN"); EMPLOYEE STOCK OPTION AGREEMENT
Congratulations, you have been awarded a stock option under the 1998
Stock Incentive Plan of NetLojix Communications, Inc.(the "Company"). This
letter is the Stock Option Agreement ("Agreement") dated as of the Date of Grant
set forth above by and between Company, and you ("Participant").
PLEASE NOTE:
A copy of the Plan is attached or has previously been furnished to you.
Unless otherwise explained, the definitions (noted by capitalized
words) that are used in the Plan are the same as those in this
Agreement. If there is any conflict between this Agreement and the
Plan, the terms of the Plan shall control. You have also been provided
a copy of the Company's Prospectus relating to the shares that may be
issued upon exercise of this Option.
Two sets of this Agreement are provided. You must SIGN BOTH, without
making any changes, and RETURN ONE to the Company within thirty (30)
days following receipt; the other should be kept by you with your other
important personal records.
The details of this Option are as follows:
TOTAL OPTION SHARES: 400,000
EXERCISE PRICE (PER SHARE): $0.11
FIRST VESTING DATE: APRIL 30, 2002
EXPIRATION DATE: APRIL 30, 2011
TYPE OF STOCK OPTION ISO (BUT SECTION 2.2 WILL APPLY)
1. GRANT OF OPTION. The Company hereby grants to Participant an option
(the "Option") to purchase the total number of shares of Common Stock
of the Company set forth above (the "Shares") at the Exercise Price per
share set forth above, subject to all of the terms and conditions of
this Agreement and the Plan. If designated as an Incentive Stock
Option, the Option is intended to qualify as an "Incentive Stock
Option" ("ISO") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. As of the Date of Grant, this Option
is not vested and may not be exercised. If Participant
continues to provide services to the Company as an employee,
the Option will, thereafter, become vested and exercisable as
follows:
DATE PERCENT VESTED
---- --------------
April 30, 2002 30%
April 30, 2003 30%
April 30, 2004 40%
In the event of a Change in Control, Participant shall immediately
become 100% vested in the Option awarded to him under this Agreement.
2.2 ISO LIMITATIONS. In the event that this Option shall become
exercisable at a time or times such that Shares having an
aggregate fair market value (determined as of the Date of
Grant) in excess of $100,000 shall first become available for
purchase during any calendar year, under this Option or any
other agreement between the Company and the Participant, then
that portion of the Option corresponding to the excess of such
aggregate fair market value over $100,000 shall not be treated
as an ISO pursuant to the Code.
2.3 EXPIRATION. The Option shall expire on the Expiration Date. It
must be exercised, if at all, on or before the Expiration Date,
unless earlier terminated pursuant to Section 3 hereof.
3. TERMINATION.
3.1 TERMINATION OTHER THAN DEATH OR DISABILITY. If Participant
ceases to be an employee (other than because of Termination for
cause, death or Disability), the Option, to the extent (and
only to the extent) that it would have been exercisable by
Participant on the date of cessation of Employee status, may be
exercised by Participant no later than ninety (90) days after
the date of cessation of Employee status, but, in any event, no
later than the Expiration Date. If Termination is for cause,
the Option immediately expires.
2
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If Participant dies
while employed or terminates his employment with the Company
because of Disability, the Option may be exercised by
Participant (or Participant's legal representative) no later
than twelve (12) months thereafter, but only to the extent it
was exercisable on the date of termination.
3.3 NO OBLIGATION TO EMPLOY. Nothing in the Plan or this Agreement
shall confer on Participant any right to continue in the employ
of, or other relationship with, the Company or any Subsidiary
of the Company, or limit in any way the right of the Company or
any Subsidiary of the Company to terminate Participant's
employment or other relationship at any time, with or without
cause.
4. MANNER OF EXERCISE.
4.1 EXERCISE NOTICE. To exercise this Option, Participant (or in
the case of exercise after Participant's death, Participant's
beneficiary or legal representative) must complete, sign and
deliver to the Company an Exercise Notice in the form attached
as EXHIBIT A. The Exercise Notice must set forth, among other
things, Participant's election to exercise the Option, the Date
of Grant of the Option, the number of Shares being purchased
and the aggregate purchase price due. If someone other than
Participant exercises the Option, then that person must submit
documentation reasonably acceptable to the Company that such
person has the right to exercise the Option.
4.2 LIMITATIONS ON EXERCISE. The Option may not be exercised unless
such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of
exercise. The Option may not be exercised as to fewer than 100
Shares, although if there are fewer than 100 shares remaining,
it can be exercised as to all such Shares.
4.3 PAYMENT. The Exercise Notice shall be accompanied by full
payment of the Exercise Price for all the Shares being
purchased. Payment must be in the form of a cashier's or
certified check. Alternatively, so long as a public market
exists for the Common Stock, payment may be through a "margin"
commitment from Participant and an NYSE Dealer whereby (a)
Participant irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NYSE Dealer in a margin
account as security for a loan from the NYSE Dealer in the
amount of the Exercise Price, and whereby (b) the NYSE Dealer
irrevocably commits to deliver, upon receipt of such Shares,
the Exercise Price directly to the Company in the form of a
check issued by such a NYSE Dealer together with payment of any
withholding taxes required by the Company.
4.4 TAX WITHHOLDING. Prior to the issuance of the Shares upon
exercise of the Option, Participant must pay or provide for any
applicable federal or state withholding obligations of the
Company. If the Committee permits, Participant may provide for
payment of withholding taxes upon exercise of the Option by
3
requesting that the Company retain Shares with a Fair Market
Value equal to the minimum amount of taxes required to be
withheld. In such case, the Company shall issue the net number
of Shares to the Participant by deducting the Shares retained
from the Shares issuable upon exercise.
4.5 ISSUANCE OF SHARES. Provided that the Exercise Notice and
payment are in form and substance satisfactory to counsel for
the Company, the Company shall issue the Shares registered in
the name of Participant, or, if applicable, Participant's legal
representative, and shall deliver certificates representing the
Shares with the appropriate legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option is an
ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (1) the
date two years after the Date of Grant, and (2) the date one year after
transfer of such Shares to Participant upon exercise of the Option,
Participant shall immediately notify the Company in writing of such
disposition. Participant agrees that Participant may be subject to
income tax withholding by the Company on the compensation income
recognized by Participant from the early disposition by payment in cash
or out of the current wages or other compensation payable to
Participant or by direct payment from an NYSE Dealer in the event of an
exercise contemplated by Section 4.3 hereof.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the Option and
the issuance of Shares are subject to compliance by the Company and
Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock
exchange on which the Company's Common Stock may be listed at the time
of such issuance or transfer. The Participant represents that the
Participant has received a copy of the Company's Prospectus relating to
the shares issuable upon exercise of this Option.
7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred in any
manner other than by will or by the laws of descent and distribution
and may be exercised during the lifetime of Participant only by
Participant. The terms of the Option shall be binding upon the
successors and assigns of Participant.
8. TAX CONSEQUENCES. Set forth below is a brief summary, as of the Date of
Grant, of some of the federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE
OPTION OR DISPOSING OF THE SHARES.
INCENTIVE STOCK OPTION. The grant of an ISO will not
result in any immediate tax consequences to the Company or the
Participant. An Participant will not realize taxable income,
and the Company will not be entitled to any deduction, upon the
timely exercise of an ISO, but the excess of the fair market
4
value of the Shares acquired over the Option price will be
includable in the Participant's "alternative minimum taxable
income" for purposes of the alternative minimum tax. If the
Participant does not dispose of the Shares acquired within one
(1) year after their receipt (and within two years after the
Date of Grant), gain or loss realized on the subsequent
disposition of the Shares will be treated as long-term capital
gain or loss. Capital losses of individuals are deductible only
against capital gains and a limited amount of ordinary income.
In the event of an earlier disposition, the Participant will
realize ordinary income in an amount equal to the lesser of (i)
the excess of the fair market value of the Shares on the date
of exercise over the Exercise Price or (ii) if the disposition
is a taxable sale or exchange, the amount of any gain realized.
Upon such a disqualifying disposition, the Company will be
entitled to a deduction in the same amount and at the same time
as the Participant realizes such ordinary income.
NONQUALIFIED STOCK OPTIONS. The grant of a Nonqualified
Stock Option will not result in any immediate tax consequences
to the Company or the Participant. Upon the exercise of a
Nonqualified Stock Option, the Participant will realize
ordinary income, and the Company will be entitled to a
deduction, equal to the difference between the Exercise Price
and the fair market value of the Shares acquired at the time of
exercise.
9. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of the
rights of a shareholder with respect to any Shares until Participant
exercises the Option and pays the Exercise Price.
10. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the
Committee for review. The resolution of such a dispute by the Committee
shall be final and binding on the Company and Participant.
11. ENTIRE AGREEMENT. The Plan is incorporated herein by reference. This
Agreement and the Plan constitute the entire agreement of the parties
and supersede all prior undertakings and agreements with respect to the
subject matter hereof.
12. NOTICES. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate
offices. Any notice required to be given or delivered to Participant
shall be in writing and addressed to Participant at the address
indicated above or to such other address as Participant may designate
in writing to the Company. All notices shall be deemed to have been
given or delivered as follows: (a) upon receipt if by personal
delivery; (b) if by mail, three (3) days after deposit in the United
States mail by certified or registered mail (return receipt requested);
or (c) if by express courier, one (1) business day after deposit with
any return receipt express courier (prepaid).
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the
benefit of the
5
successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
This Agreement has been executed in duplicate by the parties as of the
Date of Grant.
NETLOJIX COMMUNICATIONS, INC. PARTICIPANT
By /s/ XXXXXXX X. XXXX /s/ XXXXX X. XXXXXX
------------------------------------ -------------------------------
Its: Chairman and Chief Executive Officer Xxxxx X. Xxxxxx
6
EXHIBIT A
EXERCISE NOTICE - 1998 STOCK INCENTIVE PLAN
(EMPLOYEE - XXXXX X. XXXXXX)
TO: NETLOJIX COMMUNICATIONS, INC. DATE: _________________
000 XXXX XXXXXX
XXXXX XXXXXXX, XX 00000
ATTN: HUMAN RESOURCES
RE: 1998 STOCK INCENTIVE PLAN ("PLAN"), NETLOJIX COMMUNICATIONS, INC. (THE
"Company")
This Exercise Notice is made and given as of ______________, 20__ (the
"Effective Date") by the Participant named below ("Participant") and NetLojix
Communications, Inc. (the "Company"), in connection with the Stock Option
Agreement ("Agreement") referenced below. Capitalized terms not defined herein
shall have the meaning ascribed to them in the Plan.
[PLEASE FILL IN ALL BLANKS]
PARTICIPANT INFORMATION
Participant's Name: ___________________ SSN: ___________________
Address: _____________________________________________________________________
_____________________________________________________________________
STOCK OPTION INFORMATION
Date of Grant: APRIL 30, 2001 Agreement No. 98ISO - 10500
Original Number of Shares in Option: 400,000
Type of Option: [X] Incentive Stock Option [ ] Nonqualified Stock Option
Number of Shares being Purchased: _________ Exercise Price (per share): $ ____________
Total Purchase Price:______________________ (No. Of Shares Purchased x Exercise Price)
Manner of payment (to accompany Exercise Notice)
(a) Certified or cashier's check
Bank/Institution: _____________________________
Check No.: ____________________________________
(b) NYSE Dealer Name ______________________________
Check No. _____________________________________
A-1
1. EXERCISE OF OPTION.
1.1 EXERCISE. Subject to the terms and conditions of the Agreement and
the Plan, Participant hereby elects to and agrees to purchase from the
Company the total number of shares set forth above under "Number of
Shares Being Purchased" ("Shares") of the Company's Common Stock at the
Exercise Price and for the Total Purchase Price set forth above. As
used in this Agreement, the term "Shares" refers to the Shares
purchased under this Exercise Notice and includes all securities
received (a) in replacement of the Shares, (b) as a result of stock
dividends or stock splits with respect to the Shares, and (c) all
securities received in replacement of the Shares in a merger,
recapitalization, reorganization or similar corporate transaction.
1.2 TITLE TO SHARES. The exact spelling of the name(s) under which
Participant will take title to the Shares is:
-----------------------------------------------------------------------
Participant desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Alone or with spouse as trustee(s) of the following trust
(including date):
_____________________________________________________________
[ ] Other; please specify:
_____________________________________________________________
_____________________________________________________________
2. DELIVERY.
2.1 DELIVERIES BY PARTICIPANT. Participant hereby delivers to the
Company (i) this Exercise Notice, (ii) if Participant is married, the
Spousal Consent on the last page, signed by Participant's spouse, and
(iii) the Total Purchase Price.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the Total Purchase
Price and all the documents to be executed and delivered by Participant
to the Company under Section 2.1, the Company will issue a duly
executed stock certificate evidencing the Shares. Participant hereby
directs the Company to send the stock certificate to the following
address:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
3. REPRESENTATIONS AND WARRANTIES OF PARTICIPANT. Participant represents
and warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN. Participant has received a copy of the
Plan and the Agreement, has read and understands the terms of the Plan,
the Agreement and this
A-2
Exercise Notice, and agrees to be bound by their terms and conditions.
Participant acknowledges that there may be adverse tax consequences
upon exercise of the Option or disposition of the Shares, and that
Participant should consult a tax advisor prior to such exercise or
disposition.
3.2 RECEIPT OF PROSPECTUS. The Participant has received and read a the
Company's Prospectus relating to the Shares.
3.3 UNDERSTANDING OF RISKS. Participant is fully aware of: (i) the
speculative nature of the investment in the Shares; (ii) the financial
hazards involved; and (iii) the tax consequences of investment in the
Shares. Participant is capable of evaluating the merits and risks of
this investment.
3.4 NO GENERAL SOLICITATION. At no time was Participant presented with
or solicited by any publicly issued or circulated newspaper, mail,
radio, television or other form of general advertising or solicitation
in connection with the offer, sale and purchase of the Shares.
PARTICIPANT
---------------------------------
(SIGNATURE)
---------------------------------
(PLEASE PRINT NAME)
A-3
SPOUSAL CONSENT
The undersigned spouse of Participant has read, understands, and hereby
approves the Agreement and the foregoing Exercise Notice. In consideration of
the Company's granting my spouse the right to purchase the Shares as set forth
in the Agreement, the undersigned hereby agrees to be irrevocably bound by the
Agreement and the Exercise Notice and, further, agrees that any community
property interest shall similarly be bound by the Agreement and the Exercise
Notice. The undersigned hereby appoints Participant as my attorney-in-fact with
respect to any amendment or exercise of any rights under the Agreement and the
Exercise Notice.
Date: _______________ Participant's Spouse: _______________________________
Address: _______________________________
_______________________________
_______________________________
BENEFICIARY DESIGNATION
[NOTE: THIS MUST BE COMPLETED AND SIGNED WHEN THE AGREEMENT IS SIGNED
AND DELIVERED TO THE COMPANY.]
SEE ATTACHED
BENEFICIARY DESIGNATION
Name:___________________________________________________________________________
Social Security Number: ____-___-_____
If I die, any unexercised options that I hold under the NetLojix Communications,
Inc. 199_ Stock Incentive Plan (the "Plan") are to be transferred to those
beneficiaries designated below who survive me, subject to the provisions of the
Plan. The transfer is to be made as follows [CHECK ONE BOX ONLY]:
[ ] ENTIRELY TO THE SPOUSE TO WHOM I AM CURRENTLY MARRIED. [PLEASE PROVIDE
NAME AND ADDRESS BELOW.] IF MY SPOUSE DOES NOT SURVIVE ME, PAYMENT IS TO BE
MADE TO [CHECK ONE BOX ONLY]:
[ ] All of my children who survive me in equal shares.
[ ] All of the persons named below who survive me in equal shares.
[ ] TO ALL OF MY CHILDREN WHO SURVIVE ME IN EQUAL SHARES. [PLEASE PROVIDE
NAMES AND ADDRESSES BELOW.]
[ ] TO ALL OF MY SIBLINGS WHO SURVIVE ME IN EQUAL SHARES. [PLEASE PROVIDE
NAMES AND ADDRESSES BELOW.]
[ ] ENTIRELY TO THE FIRST PERSON NAMED BELOW WHO SURVIVES ME.
[ ] TO ALL OF THE PERSONS NAMED BELOW WHO SURVIVE ME IN EQUAL SHARES.
Other [PLEASE USE A SEPARATE SHEET IF NECESSARY]:
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
The term "children" means natural or legally adopted children but excludes
stepchildren (if not adopted). The term "siblings" means brothers and sisters,
whether natural or adoptive, but excludes stepbrothers and stepsisters.
The names and addresses of my beneficiaries are as follows [PLEASE USE A
SEPARATE SHEET IF NECESSARY]:
BD-1
--------------------------------------------------------------------------------
1. Name: ________________________ Relationship: ________________________
Address: Telephone: (____) ___________________
____________________
____________________
--------------------------------------------------------------------------------
2. Name: ________________________ Relationship: ________________________
Address: Telephone: (____) ___________________
____________________
____________________
--------------------------------------------------------------------------------
3. Name: ________________________ Relationship: ________________________
Address: Telephone: (____) ___________________
____________________
____________________
--------------------------------------------------------------------------------
4. Name: ________________________ Relationship: ________________________
Address: Telephone: (____) ___________________
____________________
____________________
--------------------------------------------------------------------------------
5. Name: ________________________ Relationship: ________________________
Address: Telephone: (____) ___________________
____________________
____________________
--------------------------------------------------------------------------------
This beneficiary designation is to take effect on the date when it is received
by the person responsible for administering the Plan at NetLojix Communications,
Inc., and it supersedes any prior designations that I may have made under the
Plan.
--------------------------------------------------------------------------------
________________ ___, 199__ ________________________
(Signature)
--------------------------------------------------------------------------------
Please file this form with _________________________.
--------------------------------------------------------------------------------
Received by: ___________________________________
Date of receipt: __________ __, 199__
BD-2
