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EXHIBIT 10.5
XXXXXXX CORPORATION
1998 STOCK INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
This is an INCENTIVE STOCK OPTION AGREEMENT between Xxxxxxx Corporation, a
Delaware corporation (the "Company"), and the optionee (the "Optionee")
identified on the Notice of Grant of Stock Options to which this Agreement is
attached and which is incorporated into this Agreement by reference (the
"Notice").
WHEREAS, the Company desires to carry out the purposes of the Xxxxxxx
Corporation 1998 Stock Incentive Plan (the "Plan") by affording the Optionee an
opportunity to purchase shares of Common Stock of the Company, par value $.01
per share ("Common Stock"), according to the terms set forth herein.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. Subject to the terms of the Plan, the Company
hereby grants to the Optionee the right and option (the "Option") to purchase
the number of shares of the Company's Common Stock specified in the Notice (the
"Shares") on the terms and conditions hereinafter set forth. Such Option is
intended by the Company and the Optionee to be an Incentive Stock Option as
defined in the Plan.
2. PURCHASE PRICE. The purchase price of each of the Shares subject
to the Option shall be the exercise price per share specified in the Notice,
which price has been specified in accordance with Section 5(a) of the Plan.
3. OPTION PERIOD.
(a) Subject to the provisions of Sections 5 and 6 of this
Agreement, the Option shall become exercisable as to the number of Shares
and on the dates specified in the exercise schedule in the Notice. The
exercise schedule shall be cumulative; thus, to the extent the Option has
not already been exercised and has not expired, terminated or been
canceled, the Optionee may at any time, and from time to time, purchase all
or any portion of the Shares then purchasable under the exercise schedule.
(b) The Option and all rights to purchase Shares thereunder
shall cease on the earliest of:
(i) the expiration date specified in the Notice (which date
shall not be more than ten years after the date of this
Agreement);
(ii) termination of the Optionee's employment for Cause (as
defined in the Plan);
(iii) the expiration of the period after the termination of
the Optionee's employment, other than a termination for
Cause, within which the Option is exercisable as specified
in Section 5(a) or 5(b) of this Agreement, whichever is
applicable; or
(iv) the date, if any, fixed for cancellation pursuant to
Section 6(b)(iii) of this Agreement.
Notwithstanding any other provision in this Agreement, in no event may anyone
exercise the Option, in whole or in part, after its original expiration date.
4. MANNER OF EXERCISING OPTION.
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(a) The Option may be exercised in whole or in part, by
delivering written notice of exercise to the Company, specifying the number
of shares to be purchased. Payment of the purchase price may be made by one
or more of the following methods:
(i) in cash, by certified or bank check or other instrument
acceptable to the committee under the Plan (the
"Committee"); or
(ii) in the form of shares of the Company's Common Stock
that are not then subject to restrictions, if permitted by
the Committee, in its discretion. Such surrendered shares
shall be valued at Fair Market Value (as defined in the
Plan) on the exercise date; or
(iii) by the Optionee delivering to the Company a properly
executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company
cash or a check payable and acceptable to the Company to pay
the purchase price; provided that in the event the Optionee
chooses to pay the purchase price as so provided, the
Optionee and the broker shall comply with such procedures
and enter into such agreements of indemnity and other
agreements as the Committee shall prescribe as a condition
of such payment procedure. The Company need not act upon
such exercise notice until the Company receives full payment
of the exercise price; or
(iv) by any other means, (including, without limitation, by
delivery of a promissory note of the Optionee, payable on
such terms as specified by the Committee) which the
Committee determines are consistent with the purpose of the
Plan and with applicable laws and regulations.
(b) The delivery of certificates representing shares of the
Company's Common Stock to be purchased pursuant to the exercise of the
Option will be contingent upon receipt by the Company of the full purchase
price for such shares from the Optionee or the Optionee's legal
representative, heirs or legatees and the fulfillment of any other
requirements contained in the Plan or imposed by applicable law.
5. EXERCISABILITY OF OPTION AFTER TERMINATION OF EMPLOYMENT.
(a) During the lifetime of the Optionee, the Option may be
exercised only while the Optionee is employed by the Company or a parent or
subsidiary thereof, and only if the Optionee has been continuously so
employed since the date of this Agreement, except that:
(i) the Option shall continue to be exercisable for three
months after termination of the Optionee's employment,
unless the Optionee's employment was terminated for Cause,
but only to the extent that the Option was exercisable
immediately prior to the Optionee's termination of
employment;
(ii) in the event the Optionee's employment terminates due
to Disability, the Optionee or his or her legal
representative may exercise the Option within one year after
the termination of the Optionee's employment;
(iii) in the event the Optionee's employment terminates due
to Normal Retirement, the Option shall continue to be
exercisable for three months after the date of such Normal
Retirement; and
(iv) if the Optionee's employment terminates after the
Committee notifies the Optionee pursuant to Section
6(b)(iii) of this Agreement that the Option shall be
canceled, the Optionee may exercise the Option at any time
permitted by Section 6(b)(iii).
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(b) In the event of the Optionee's death prior to expiration of
the Option, the legal representative, heirs or legatees of the Optionee's
estate or the personal who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option within five years after the
death of the Optionee.
(c) Neither the transfer of the Optionee between any combination
of the Company, its parent and any subsidiary of the Company, nor a leave
of absence granted to the Optionee and approved by the Committee, shall be
deemed a termination of employment. The terms "parent" and "subsidiary" as
used herein shall have the meaning ascribed to "parent corporation" and
"subsidiary corporation," respectively in Sections 424(e) and (f) (or
successor provisions) of the Internal Revenue Code of 1986, as amended.
6. ACCELERATION OF OPTION.
(a) DEATH, DISABILITY OR RETIREMENT. If any of Sections
(5)(a)(ii), 5(a)(iii) or 5(b) of this Agreement is applicable, the Option,
whether or not previously exercisable, shall become immediately exercisable
in full if the Optionee shall have been employed continuously by the
Company or a parent or subsidiary thereof between the date the Option was
granted and the date of such Disability or Normal Retirement or, in the
event of death, a date not more than three months prior to such death.
(b) CHANGE OF CONTROL. In the event of a Change of Control (as
defined in the Plan):
(i) SUBSTITUTE OPTIONS. Subject to the provisions of clause
(iii) below, after the effective date of such Change of
Control, the Optionee shall be entitled, upon exercise of
the Option, to receive, in lieu of shares of the Company's
Common Stock (or consideration based upon the Fair Market
Value of the Company's Common Stock), shares of such stock
or other securities, cash or property (or consideration
based upon shares of such stock or other securities, cash or
property) as the holders of shares of the Company's Common
Stock received in connection with the Change of Control.
(ii) PARTIAL ACCELERATION. Notwithstanding any other
provision of this Section 6, fifty-percent (50%) of the
Shares which are not then exercisable shall become
exercisable upon the occurrence of a Change of Control if
the Optionee is an employee of the Company immediately
before the occurrence of the Change of Control and (A) the
Optionee's employment with the Company is terminated by the
Company (including any successor or parent resulting from
the Change in Control) without Cause within six (6) months
after the Change in Control, or (2) the Company (or
successor) does not offer the Optionee a Comparable Position
upon the Change in Control, or (3), if the Optionee is
offered and accepts a Comparable Position, the Optionee is
involuntarily removed from such position within six (6)
months after the Change in Control. For the purpose of this
Section 6(b), the term "Comparable Position" shall mean a
position of employment with the Company or its successor
following a Change of Control (or if the Company or its
successor has a Parent following a Change of Control, its
Parent) (X) with substantially the same or superior title,
responsibilities, base salary, opportunity for incentive
compensation, and eligibility for stock options or other
equity incentives as the Optionee had prior to the Change of
Control, and (Y) at a location within 50 miles of the
Optionee's location prior to the Change of Control, without
the Optionee's express prior written consent.
(iii) ACCELERATION OF VESTING AND NOTICE OF CANCELLATION.
The Committee may cancel the Option as of the effective date
of any such Change of Control provided that (x) all Shares
that have not yet become exercisable shall become
exercisable in full immediately prior to such Change of
Control, (y) notice of such cancellation shall be given to
the Optionee and
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(z) the Optionee shall have the right to exercise the
Option, including exercising Shares that became exercisable
pursuant to the acceleration provisions of clause (x) above.
(c) EARLY EXERCISE FOR RESTRICTED SHARES. The Optionee may
exercise the Option in accordance with this Section 6(c) for shares of the
Company's Common Stock prior to the date or dates upon which such shares
become exercisable under Section 3(a), and the exercise schedule in the
Notice shall be deemed to have been accelerated for such purpose, provided,
however, that in no event shall the Optionee be permitted pursuant to this
Section 6(c) to exercise in any calendar year more than the $100,000
Limitation Amount. For these purposes, the "$100,000 Limitation Amount"
shall mean the number of shares of the Company's Common Stock equal to (i)
$100,000 less the Prior Grant Amount divided by (ii) the exercise price per
share specified in the Notice; and the "Prior Grant Amount" shall mean the
number of shares of the Company's Common Stock becoming exercisable in such
calendar year pursuant to incentive stock options granted to the Holder by
the Company (or a company acquired by the Company) prior to the date this
Option was granted multiplied by the exercise price of such options. The
shares issued upon such early exercise shall be subject to the restrictions
set forth in this subsection, and are referred to in this subsection as the
"Restricted Shares."
(i) REVERSE VESTING. Restricted Shares purchased under this
Section 6(c) prior to the Option becoming exercisable shall
"vest" according to the same schedule (i.e., on the same
dates and in the same amounts) as such shares would have
become purchasable upon exercise of the Option had the
exercise schedule not been accelerated in accordance with
this Section 6(c). In addition, Restricted Shares shall be
subject to accelerated "vesting" as set forth in Section
6(a), Section 6(b)(ii) and Section 6(b)(iii) if applicable,
to the same extent as the exercisability of such shares
would have been accelerated had the exercise schedule not
been previously accelerated in accordance with this Section
6(c). Restricted Shares that are not vested shall be subject
to repurchase by the Company under Sections 6(c)(ii) and
6(c)(iii) below. As Restricted Shares become vested they
shall no longer be subject to repurchase by the Company.
(ii) COMPANY REPURCHASE RIGHTS. In the event of termination
of the Optionee's employment by the Company for any reason
(including death, Disability, Normal Retirement and for
Cause), the Company shall have the option to purchase all or
any part of the Restricted Shares that were not vested prior
to termination of the Optionee's employment (after taking
into effect any accelerated vesting pursuant to Section
6(a), Section 6(b)(ii) and Section 6(b)(iii)) at a per share
price equal to the purchase paid by the Optionee upon
exercise of the Option (subject to equitable adjustment for
any stock split, stock dividend or combination of the
Restricted Shares).
(iii) TERMS OF COMPANY PURCHASE. If the Company intends to
repurchase the Restricted Shares subject to repurchase, then
it shall, within sixty (60) days after termination of the
Optionee's employment, mail written notice of its intent to
repurchase the Restricted Shares and the number of
Restricted Shares to be repurchased to the Optionee's last
known address appearing in the personnel records of the
Company. If the Company has not mailed notice within that
period, the Restricted Shares will no longer be subject to
repurchase by the Company. Upon receipt from the Optionee of
the certificate for the Restricted Shares, duly endorsed in
blank or accompanied by a duly endorsed blank stock power
suitable for transferring the Shares to the Company, the
Company shall send to the Optionee (or his or her heir
legatee, representative or guardian) the purchase price for
the Restricted Shares and a certificate for the shares which
are not subject to repurchase or are not being repurchased
by the Company. The purchase price for the Restricted Shares
being repurchased may be payable by check, by cancellation
of all or a portion of any outstanding indebtedness of the
Optionee to the Company, or both. If the Company has not
received the certificate for the Restricted Shares by the
time the Company is prepared to pay the purchased price for
such shares, then the Company, at its option, may coincident
with the payment of the purchase price and/or cancellation
of debt, make appropriate entries in the
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records of the Company to effect the transfer of the
Restricted Shares to the Company free and clear of any liens
or encumbrances.
(iv) OPTIONEE REPRESENTATIONS. By exercising the shares
under this subsection 6(c), the Optionee represents that (i)
he or she is acquiring the Restricted Shares for investment
and not with a view to, or for resale in connection with,
any distribution thereof; (ii) the Restricted Shares are
"restricted securities" within the meaning of Rule 144
promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), and that there is no assurance that
such Rule will apply to future resales of the Restricted
Shares; (iii) he or she will make no sale or other
distribution that would cause the Optionee to be deemed an
"underwriter" within the meaning of Section 2(11) of the
Securities Act; and (iv) he or she will make no sale,
pledge, transfer or other disposition of the Restricted
Shares received except in accordance with this Agreement
unless a registration statement with respect to the
Restricted Shares is then in effect under applicable federal
and state securities laws or unless he or she obtains an
opinion of counsel satisfactory to the Company that such
disposition may be effected without violation of applicable
federal or state securities laws.
(v) CERTIFICATES; LEGENDS. The certificates representing the
Restricted Shares will bear restrictive legends noting the
restrictions identified in the preceding clause, the
Company's repurchase rights and the restrictions on transfer
set forth in Section 7 of this Agreement.
7. LIMITATION ON TRANSFER. During the lifetime of the Optionee,
only the Optionee or his or her guardian or legal representative or
transferee of a transfer permitted by this Section may exercise the Option.
The Optionee shall not assign or transfer the Option or Restricted Shares
issued upon early exercise of the Option, except that the Optionee may
transfer the Option by will or the laws of descent and distribution. Any
attempt to assign, transfer, pledge, hypothecate or otherwise dispose of
the Option or any Restricted Shares contrary to the provisions hereof, and
the levy of any attachment or similar process upon the Option or any
Restricted Shares, shall be null and void.
8. SHAREHOLDER RIGHTS BEFORE EXERCISE. The Optionee shall have
none of the rights of a shareholder of the Company with respect to any
Share subject to the Option until the Share is actually issued to him or
her upon exercise of the Option.
9. ADJUSTMENTS. The Committee may in its sole discretion make
appropriate adjustments in the number of Shares subject to the Option and
in the purchase price per Share to give effect to any adjustments made in
the number of outstanding Shares of the Company through a merger or
consolidation (that is not a Change in Control) or a recapitalization,
stock dividend, stock split or other relevant change, provided that
fractional Shares shall be rounded to the nearest whole share.
10. DISQUALIFYING DISPOSITIONS. The Optionee agrees to notify
the Company in writing immediately after making a Disqualifying Disposition
of any shares of Common Stock received pursuant to the exercise of this
Option. A "Disqualifying Disposition" shall have the meaning specified in
Section 421(b) of the Internal Revenue Code of 1986, as amended, or any
successor provision. The Optionee also agrees to provide the Company with
any information that the Company shall request concerning any such
Disqualifying Disposition. The Optionee acknowledges that he or she will
forfeit the favorable income tax treatment otherwise available with respect
to the exercise of this Option if he or she makes a Disqualifying
Disposition of shares received upon exercise of this Option.
11. TAX WITHHOLDING. The Optionee agrees that if the Company in
its discretion determines that it is obligated to withhold tax with respect
to a Disqualifying Disposition of shares of Common Stock received upon
exercise of this Option, then the Company may withhold from the Optionee's
wages the appropriate amount of federal, state or local withholding taxes
attributable to such Disqualifying Disposition. If any portion of this
Option is treated as a Nonqualified Option (as defined in the Plan), the
Optionee hereby agrees that the Company may withhold from the Optionee's
wages the appropriate amount of federal, state and local withholding taxes
attributable to the Optionee's exercise of such Nonqualified Option. The
Optionee further agrees that, at the time he or she exercises the Option,
if the Company or a parent or subsidiary thereof is required to withhold
such taxes, he or she
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will promptly pay in cash upon demand to the Company, or the parent or
subsidiary having such obligation, such amounts as shall be necessary to
satisfy such obligation; provided, however, that in lieu of all or any part
of such a cash payment, the Board may, but shall not be required to, permit
the Optionee to elect to cover all or any part of the required
withholdings, and to cover any additional withholdings up to the amount
needed to cover the Optionee's full FICA and federal, state and local
income taxes with respect to income arising from the exercise of the
Option, through a reduction of the number of Shares delivered to the
Optionee.
12. LOCK UP AGREEMENT. Optionee agrees that, upon the request of
the Company or the managing underwriter(s) in connection with a
registration of shares of the Company's Common Stock pursuant to Section 12
of the Securities Exchange Act of 1934 (the "Exchange Act") for a period of
time (not to exceed 180 days) from the effective date of the Company's
registration under Section 12 of the Exchange Act, Optionee (or any
transferee permitted under this Agreement) shall not sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose
of any shares of the Company's Common Stock owned or controlled by it;
provided, however, that, at the time of the request, the Optionee is an
officer or a member of the board of directors of the Company or the
Optionee holds (assuming exercise of all options and warrants, and the
conversion of all convertible securities held by the Optionee, to the
extent then exercisable or convertible) an aggregate number of shares of
the Company's Common Stock (or equivalent) equal to at least one percent
(1%) of the total number of shares of the Company's Common Stock then
issued and outstanding.
13. INTERPRETATION OF THIS AGREEMENT. All decisions and
interpretations made by the Committee with regard to any question arising
hereunder or under the Plan shall be binding and conclusive upon the
Company and the Optionee. In the event that there is any inconsistency
between the provisions of this Agreement and the Plan, the provisions of
the Plan shall govern.
14. DISCONTINUANCE OF EMPLOYMENT. This Agreement shall not give
the Optionee a right to continued employment with the Company or any parent
or subsidiary thereof, and the Company or any such parent or subsidiary
thereof employing the Optionee may terminate his or her employment and
otherwise deal with the Optionee without regard to the effect it may have
upon him or her under this Agreement.
15. GENERAL. The Company shall at all times during the term of
this Option reserve and keep available such number of Shares as will be
sufficient to satisfy the requirements of this Agreement. This Agreement
shall be binding in all respects on the Optionee's heirs, representatives,
successors and assigns. This Agreement is entered into under the laws of
the State of Delaware, without regard to its principles of conflict of
laws, and shall be construed and interpreted thereunder.
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