IT IS UNLAWFUL TO CONSUMMATE A SALE
OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE
ANY CONSIDERATION THEREFORE,
WITHOUT PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF
THE STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S
RULES.
INCENTIVE STOCK OPTION
AGREEMENT
XXXXXX XXXXXXX, Optionee:
Xxxx Systems Inc. (the "Company"), pursuant to its 1996 Stock Option Plan
("The Plan"), has this day granted to you the optionee named above, an option to
purchase shares of the common stock of the Company ("Common Stock"). This option
is intended to qualify as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
This option is granted to you solely in order to incentivise you as a
senior executive in the Company to exert your maximum efforts to position the
Company (hopefully within thirty-six (36) months after the date of this
option) either for a sale of more than fifty-one percent (51%) of the issued
and outstanding shares of the Company's voting Common Stock on terms
satisfactory to the Board of Directors and the Shareholders of the Company,
in their respective sole discretions, or for a conversion of the Company to a
public Company, as determined by the Board of Directors and Shareholders of
the Company in their respective sole discretions. Anything herein to the
contrary notwithstanding, this option shall not vest any beneficial or legal
rights in you as an Optionee with respect to the Company's stock until the
sale of more than fifty-one (51%) percent of the issued and outstanding shares
of the Company' s voting Common stock or until the conversion of the Company
to a public Company. The Company makes no representation that any such sale
or conversion will ever take place. The grant hereunder is intended to comply
with the provisions of Rule 701 promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"). The
Board of Directors of the Company may decide to grant vested legal and
beneficial status to the options granted in this Agreement in the event of a
substantial recapitalization of the Company.
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
two hundred sixty-nine (269). Subject to the limitations contained herein, this
option shall be one hundred percent exercisable after the date of vesting as
described above.
2. (a) The exercise price of this option is Three Hundred Seventy-One
Dollars and Forty-Three Cent ($371.43) per share, being not less than the fair
market value of the Common Stock on the date of grant of this option.
(b) The Company may, at the discretion of the Board of Directors,
permit financing with respect to the payment of the exercise price.
3. The minimum number of shares with respect to which this option may be
exercised at any one time is one hundred (100).
4. Notwithstanding anything to the contrary contained herein, this option
may not be exercised unless the shares issuable upon exercise of this option are
then registered under the Act, or, if such shares are not then so registered,
the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Act.
5. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on November 25,
2006 (which date shall be no more than ten (10) years from date this option is
granted). In no event may this option be exercised on or after the date on which
it terminates. This option shall terminate prior to the expiration of its term
as follows thirty (30) days after the termination of your employment with the
Company or an affiliate of the Company (as defined in the Plan) for any reason
or for no reason unless:
(a) such termination of employment is due to your permanent and total
disability (within the meaning of Section 422 (c) (6) of the Code), in which
event the option shall terminate on the earlier of the termination date set
forth above or twelve (12) months following such permanent and total disability;
or
(b) such termination of employment is due to your death, in which
event the option shall terminate on the earlier of the termination date set
forth above or twelve (12) months after your death; or
(c) during any part of such thirty (30) day period the option is not
exercisable solely because of the condition set forth in paragraph 4 above, in
which event the option shall not terminate until the earlier of the termination
date set forth above or until it shall have been exercisable for an aggregate
period of thirty (30) days after the termination of employment; or
(d) exercise of the option within thirty (30) days after termination
of your employment with the Company or with an affiliate would result in
liability under section 16 (b) of the Securities Exchange Act of 1934, in which
case the option will terminate on the earlier of (i) the thirtieth (30th) day
after the last date upon which exercise would result in such liability or (ii)
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six (6) months and thirty (30) days after the termination of your employment
with the Company or an Affiliate.
However this option may be exercised following termination 9f employment only as
to that number as shares as to which it was exercisable on the date of
termination of employment under the provisions of paragraph 1 of this option.
6. (A) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to subparagraph
6(f) of the Plan.
(B) By exercising this option you agree that:
(i) the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise;
(ii) you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of this option that occurs within two (2) years after
the date of this option grant or within one (1) year after such shares of Common
stock are transferred upon exercise of this option; and
(iii) the Company (or a representative of the underwriters)
may, in connection with the first underwritten registration of the offering of
any securities of the Company under the Act, require that you not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Act as may be requested by the Company
or the representative of the underwriters; provided, however, that such
restriction shall apply only if, on the Effective Date, you are an officer,
director, or owner of more than one percent (1%) of the outstanding securities
of the Company. For purposes of this restriction you will be deemed to own
securities which (i) are owned directly or indirectly by you, including
securities held for your benefit by nominees, custodians, brokers or pledgees;
(ii) may be acquired by you within sixty (60) days of the Effective Date; (iii)
are owned directly or indirectly, by or for your brothers or sisters (whether by
whole or half blood) spouse, ancestors and lineal descendants; or (iv) are
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust of which you are a shareholder, partner or beneficiary, but only to the
extent of your proportionate interest therein as a shareholder, partner or
beneficiary thereof. You further agree that the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
3
7. This option is not transferable, except by will or by the laws of
descent and distribution, and is exercisable during your life only by you.
8. This option is not an employment contract and nothing in this option
shall be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company, or of the Company to continue your
employment with the Company.
9. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
10. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of paragraph 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated the 27th day of November, 1996.
Very truly yours,
By /s/ Xxxxxxx X. Xxxx
--------------------------------
President
Duly authorized on behalf of the
Board of Directors
4
OPTIONEE RECEIPT
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments below
and understands that all rights and liabilities with respect to this option are
set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of a certain non-competition agreement.
(c) Acknowledges receipt of a copy of Section 260.141.11 of Title 10 of
the California Code of Regulations;
/s/ Xxxxxx X. Xxxxxxx
------------------------------
XXXXXX XXXXXXX
Attachments:
XXXX SYSTEMS INC. 1996 Stock Option Plan
Regulation 260.141.11
5
CONFORMING AMENDMENT TO
INCENTIVE STOCK OPTION AGREEMENT
The Incentive Stock Option Agreement issued to Xxxxxx Xxxxxxx on
November 27, 1996 (the "Agreement"), is hereby amended as follows:
The second sentence in the second paragraph of the first page of
the Agreement shall be changed to read as follows:
"Anything herein to the contrary notwithstanding, this option
shall not vest any beneficial or legal rights in you as an Optionee
with respect to the Company's stock until November 24, 2006 or
until the earlier of either the sale of more than fifty-one (51%)
percent of the issued and outstanding shares of the Company's
voting Common stock or the conversion of the Company to a public
Company."
AGREED: February 6, 1998 XXXX SYSTEMS INC.
By: /s/ Xxxxxxx X. Dirk
-----------------------------
Xxxxxxx X. Xxxx, Chairman
/s/ Xxxxxx Xxxxxxx
-----------------------------
Xxxxxx Xxxxxxx
