EXHIBIT 10.4
FORM OF XXXXX OPTION GRANT #1
MODUS MEDIA INTERNATIONAL HOLDINGS, INC.
Incentive Stock Option Agreement
Granted Under 1997 Stock Incentive Plan
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1. Grant of Option.
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This agreement evidences the grant by Modus Media International Holdings,
Inc., a Delaware corporation (the "Company"), on April __, 1998 to Xxxxxxx X.
Xxxxx, an employee of the Company (the "Participant"), of an option to purchase,
in whole or in part, on the terms provided herein and in the Company's 1997
Stock Incentive Plan, as amended (the "Plan"), a total of [__________________]
shares of common stock, $.01 par value per share, of the Company ("Common
Stock") (the "Shares") at $[__________] per Share. Unless earlier terminated,
this option shall expire on April __, 2008 (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
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(a) Vesting. This option will become exercisable as to _____ Shares,
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representing 25% of the original number of Shares, on the first anniversary of
the date of the grant of this option (the "Grant Date"); _____ Shares,
representing 25% of the original number of Shares, on the second anniversary of
the Grant Date; _____ Shares, representing 20% of the original number of Shares,
on the third anniversary of the Grant Date; _____ Shares, representing 20% of
the original number of Shares, on the fourth anniversary of the Grant Date; and
_____ Shares, representing 10% of the original number of Shares, on the fifth
anniversary of the Grant Date.
(b) Right of Exercise Cumulative. The right of exercise shall be cumulative
----------------------------
so that to the extent the option is not exercised in any period to the maximum
extent permissible it shall continue to be exercisable, in whole or in part,
with respect to all Shares for which it is exercisable until the earlier of the
Final Exercise Date or the termination of this option under Section 3 hereof or
the Plan.
(c) Accelerated Vesting. Notwithstanding Section 2(a) above, upon the
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termination of the Participant's employment within six (6) months following an
"Acquisition Event" (as defined in the Plan) for any reason other than by the
Company for Cause (as defined in the Participant's Employment Agreement with the
Company dated as of January 1, 1998 (the "Employment Agreement")) or by the
Participant without Good Reason (as defined in the Employment Agreement), this
option will become exercisable as to 50% of the original number of Shares that
would have otherwise become exercisable on each anniversary of the Grant Date
subsequent to such termination.
(d) Expiration. This option shall expire upon, and will not be exercisable
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after, the Final Exercise Date.
3. Exercise of Option.
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(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement and payment in full for the Shares
purchased upon such exercise. Common Stock purchased upon the exercise of this
option shall be paid for as follows: (i) in cash or by check, payable to the
order of the Company; (ii) by delivery of an irrevocable and unconditional
undertaking by a credit worthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or delivery by the Participant to
the Company of a copy of irrevocable and unconditional instructions to a credit
worthy broker to deliver promptly to the Company cash or a check sufficient to
pay the exercise price; (iii) by delivery of shares of Common Stock owned by the
Participant valued at their Fair Value (as defined below), which Common Stock
was owned by the Participant at least six months prior to such delivery; (iv) if
permitted by the Board, by delivery of a promissory note of the Participant to
the Company on terms determined by the Board (and payment to the Company by the
Participant of cash in an amount equal to the par value of the Shares
purchased); or (v) any combination of the above permitted forms of payment. The
Participant 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
fewer than ten whole Shares.
(b) Continuous Relationship with the Company Required. Except as otherwise
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provided in this Section 3, this option may not be exercised unless the
Participant, at the time he exercises this option, is, and has been at all times
since the date of grant of this option, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant ceases
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to be an Eligible Participant for any reason, then, except as provided in
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paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
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the Participant was entitled to exercise this option on the date of such
cessation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
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becomes "disabled" (as defined in the Employment Agreement) prior to the Final
Exercise Date while he is an Eligible Participant and the Company has not
terminated such relationship for "Cause" (as defined in the Employment
Agreement), this option shall be exercisable, within the period of one year
following the date of death or disability of the Participant, provided that this
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option shall be exercisable only to the extent that this option was exercisable
by the Participant on the date of his or her death or disability, and further
provided that this option shall not be exercisable after the Final Exercise
Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
-------------------
Date, is discharged by the Company for "Cause" (as defined in the Employment
Agreement), the right to exercise this option shall terminate immediately upon
the effective date of such discharge.
4. Repurchase Rights.
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(a) Repurchase. Upon any termination of employment or service of the
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Participant with the Company, the Company shall have the right to purchase, for
cash, Shares issued upon exercise of this option, upon the following terms:
(i) Termination for Any Reason Other Than Cause. If the termination
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of employment or service of the Participant is for any reason
other than Cause (as defined in the Employment Agreement), the
Company shall have the right to purchase all or any portion of
the Shares issued upon exercise of this option at a price equal
to the Fair Value (as defined below) thereof at the time of
termination.
(ii) Termination for Cause. If the termination of employment or
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service of the Participant is for Cause (as defined in the
Employment Agreement), the Company shall have the right to
purchase all or any portion of the Shares issued upon exercise of
this option at a price equal to the lesser of (x) Fair Value and
(y) the amount paid by the Participant for such Shares.
(b) Termination. The repurchase rights of the Company set forth in Section
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4(a) shall terminate upon the earliest of (i) the registration of any class
of equity securities of the Company under the Securities Exchange Act of
1934, as amended
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(the "Exchange Act"), (ii) the closing of the initial public offering of equity
securities of the Company under the Securities Act of 1933, as amended (the
"Securities Act"), or (iii) the closing of an Acquisition Event.
(c) Exercise. The Company must exercise its repurchase rights under this
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Section 4, by written notice to the Participant, within 90 days after the
termination of this option. The closing of any purchase pursuant to this Section
4 shall take place as soon as reasonably practicable at the principal office of
the Company, or at such other time and location as the parties to such purchase
may mutually determine. At the closing, the holder of the Shares to be sold
shall deliver to the Company an instrument representing such Shares, duly
endorsed for transfer, and the Company shall pay the purchase price therefor, by
check or wire transfer.
(d) Fair Value. As used in this agreement, the term "Fair Value" shall mean
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the fair value of the Shares as of the applicable date as determined in good
faith by the Board of Directors of the Company, which determination shall be
conclusive; provided, however, that, solely for purposes of this Section 4, in
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the event of a repurchase by the Company of an aggregate of 100,000 or more
Shares purchased upon the exercise of the Participant's options (as adjusted for
stock splits, stock dividends and similar events), the determination of Fair
Value shall be subject to mutual agreement of the Company and the Participant.
Absent such an agreement, Fair Value shall be determined by calculating the
average of the sum of the determinations of Fair Value made by two independent
investment banking firms, one of which shall be retained by the Company and one
of which shall be retained by the Participant. However, if the determinations of
Fair Value of such two firms differ from one another by more than 15%, the
Company and the Participant shall mutually select a third independent investment
banking firm to make a final determination of Fair Value with respect to the
Shares then being repurchased by the Company.
(e) Legend. The Company may require that each certificate representing
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Shares of Common Stock subject to the repurchase rights set forth in this
Section 4 shall bear a legend referencing such repurchase rights.
5. Agreement in Connection with Public Offering.
--------------------------------------------
The Participant agrees, in connection with an initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause
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(i) above as may be requested by the Company or the managing underwriters at the
time of such offering.
6. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option. Any such withholding
tax requirements may be satisfied by (i) making a payment in cash or by personal
check, certified check, bank draft or money order payable to the order of the
Company, (ii) delivery of an unconditional and irrevocable undertaking by a
broker to deliver to the Company promptly upon the settlement of the sale of the
Shares to be issued sufficient funds to pay the exercise price, (iii) delivery
of whole shares of Common Stock of the Company (which the Participant has held
for at least six months prior to the delivery of such shares or acquired on the
open market and for which the Participant has good title, free and clear of all
liens and encumbrances) having a Fair Value, determined as of the date on which
such withholding obligation must be satisfied, equal to such withholding
obligation or (iv) requesting that the Company withhold from the Shares to be
delivered upon the exercise a number of shares of Common Stock having a Fair
Value, determined as of the date on which such withholding obligation must be
satisfied, equal to such withholding obligation; provided, however, that the
Company shall have sole discretion to disapprove of an election pursuant to any
of clauses (ii), (iii) or (iv), and that in event the Participant is subject to
Section 16 of the Exchange Act, the Company may require that the method of
satisfying such an obligation be in compliance with Section 16 of the Exchange
Act and the rules and regulations thereunder. Shares of Common Stock may be
delivered or withheld having an aggregate Fair Value in excess of the minimum
amount required to be withheld, but not in excess of the amount determined by
applying the Participant's maximum marginal tax rate. Any fraction of a Share
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the Participant.
7. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
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8. Disqualifying Disposition.
-------------------------
If the Participant disposes of Shares acquired upon exercise of this option
within two years from the date of grant of the option or one year after such
Shares were acquired pursuant to exercise of this option, the Participant shall
notify the Company in writing of such disposition.
9. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
10. Termination of Management Retention Agreements.
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This agreement supersedes in its entirety any Management Retention Agreement
between the Participant and the Company, and, upon the effectiveness of this
agreement, any such Management Retention Agreement shall be of no further force
and effect.
[signature on following page]
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IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
MODUS MEDIA INTERNATIONAL
HOLDINGS, INC.
Dated: April __, 1998 By:
-----------------------------------
Name:
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Title:
-----------------------------
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PARTICIPANT'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 1997 Stock Incentive Plan.
PARTICIPANT:
-----------------------------
Address:
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-8-
NOTICE OF STOCK OPTION EXERCISE
Date: ____________
Modus Media International Holdings, Inc.
0 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Treasurer
Dear Sir or Madam:
I am the holder of an Incentive Stock Option granted to me under the Modus Media
International Holdings, Inc. (the "Company") 1997 Stock Incentive Plan on
__________ for the purchase of __________ shares of Common Stock of the Company
at a purchase price of $__________ per share.
I hereby exercise my option to purchase _________ shares of Common Stock (the
"Shares"), for which I have enclosed __________ in the amount of ________.
Please register my stock certificate as follows:
Name(s): _______________________
_______________________
Address: _______________________
Tax I.D. #: _______________________
I represent, warrant and covenant as follows:
1. I am purchasing the Shares for my own 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 (the "Securities Act"), or any rule
or regulation under the Securities Act.
2. I have had such opportunity as I have deemed adequate to obtain from
representatives of the Company such information as is necessary to permit me to
evaluate the merits and risks of my investment in the Company.
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3. I have sufficient experience in business, financial and investment matters
to be able to evaluate the risks involved in the purchase of the Shares and to
make an informed investment decision with respect to such purchase.
4. I can afford a complete loss of the value of the Shares and am able to bear
the economic risk of holding such Shares for an indefinite period.
5. I understand that (i) the Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act, (ii) the 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; (iii) in any
event, the exemption from registration under Rule 144 will not be available for
at least two years 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 (iv) 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 the Shares under
the Securities Act.
Very truly yours,
_____________________________
(Signature)
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EXHIBIT 10.6
FORM OF XXXXX OPTION GRANT #2
MODUS MEDIA INTERNATIONAL HOLDINGS, INC.
Incentive Stock Option Agreement
Granted Under 1997 Stock Incentive Plan
---------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Modus Media International Holdings,
Inc., a Delaware corporation (the "Company"), on April __, 1998 to Xxxxxxx X.
Xxxxx, an employee of the Company (the "Participant"), of an option to purchase,
in whole or in part, on the terms provided herein and in the Company's 1997
Stock Incentive Plan, as amended (the "Plan"), a total of [__________________]
shares of common stock, $.01 par value per share, of the Company ("Common
Stock") (the "Shares") at $[__________] per Share. Unless earlier terminated,
this option shall expire on April __, 2008 (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
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(a) Vesting Upon Liquidity Condition. This option will become exercisable
--------------------------------
("vest") as to (i) _____ Shares, representing 25% of the original number of
Shares, on the first anniversary of the date of the grant of this option (the
"Grant Date"), (ii) _____ Shares, representing 25% of the original number of
Shares, on the second anniversary of the Grant Date, (iii) _____ Shares,
representing 20% of the original number of Shares, on the third anniversary of
the Grant Date, (iv) _____ Shares, representing 20% of the original number of
Shares, on the fourth anniversary of the Grant Date and (v) _____ Shares,
representing 10% of the original number of Shares, on the fifth anniversary of
the Grant Date; provided, however, that this option may be exercised as to
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shares that are vested under this Section 2(a) only if the Liquidity Condition
---- --
is met prior to such exercise. The "Liquidity Condition" shall be deemed to have
been met (x) at such time on or after an "Acquisition Event" (as defined in the
Plan) that the holders of shares of, or options for, the Company's Common Stock
and Non-Voting Common Stock, $.01 par value per share ("Non-Voting Common
Stock"), immediately prior to the Acquisition Event receive Liquid Consideration
(as
defined below) totalling at least $100,000,000 in exchange for their shares of,
or options for, the Company's Common Stock and Non-Voting Common Stock or as a
result of the sale of the shares of capital stock received by such holders in
such Acquisition Event or (y) at such time after the closing of the initial
underwritten public offering of the Company that the value of the outstanding
shares of, or options for, the Company's Common Stock held by holders prior to
the closing is at least $100,000,000. For this purpose, any options for the
Company's Common Stock and Non-Voting Common Stock, and any options issued in
substitution for such options pursuant to an Acquisition Event, shall be valued
net of the applicable option exercise price. "Liquid Consideration" shall mean
cash or shares of capital stock registered under the Securities Act of 1933, as
amended (the "Securities Act"), or eligible for resale pursuant to Rule 144
under the Securities Act.
(b) Right of Exercise Cumulative. The right of exercise pursuant to
----------------------------
Section 2(a) above shall be cumulative so that to the extent the option is not
exercised in any period to the maximum extent permissible it shall continue to
be exercisable, in whole or in part, with respect to all Shares for which it is
vested until the earlier of the Final Exercise Date or the termination of this
option under Section 3 hereof or the Plan.
(c) Other Vesting. Notwithstanding Section 2(a) above, this option will
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become vested and exercisable as to 100% of the original number of Shares upon
the earlier of (i) December 31, 2004, provided that the Participant is employed
by the Company on such date, and (ii) the termination of the Participant's
employment following an Acquisition Event for any reason other than by the
Company for Cause (as defined in the Participant's Employment Agreement with the
Company dated as of January 1, 1998 (the "Employment Agreement")) or by the
Participant without Good Reason (as defined in the Employment Agreement).
(d) Expiration. This option shall expire upon, and will not be
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exercisable after, the Final Exercise Date.
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement and payment in full for the Shares
purchased upon such exercise. Common Stock purchased upon the exercise of this
option shall be paid for as follows: (i) in cash or by check, payable to the
order of the Company; (ii) by delivery of an irrevocable and unconditional
undertaking by a credit worthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or delivery by the Participant to
the Company of a copy of irrevocable and unconditional instructions to a credit
worthy broker to deliver promptly to the Company cash or a check sufficient to
pay the exercise price; (iii) by delivery of
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shares of Common Stock owned by the Participant valued at their Fair Value (as
defined below), which Common Stock was owned by the Participant at least six
months prior to such delivery; (iv) if permitted by the Board, by delivery of a
promissory note of the Participant to the Company on terms determined by the
Board (and payment to the Company by the Participant of cash in an amount equal
to the par value of the Shares purchased); or (v) any combination of the above
permitted forms of payment. The Participant 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 fewer than ten whole Shares.
(b) Continuous Relationship with the Company Required. Except as
-------------------------------------------------
otherwise provided in this Section 3, this option may not be exercised unless
the Participant, at the time he exercises this option, is, and has been at all
times since the date of grant of this option, an employee, officer or director
of, or consultant or advisor to, the Company or any parent or subsidiary of the
Company as defined in Section 424(e) or (f) of the Code (an "Eligible
Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
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the Participant was entitled to exercise this option on the date of such
cessation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes "disabled" (as defined in the Employment Agreement) prior to the Final
Exercise Date while he is an Eligible Participant and the Company has not
terminated such relationship for "Cause" (as defined in the Employment
Agreement), this option shall be exercisable within the period of one year
following the date of death or disability of the Participant, provided that this
-------- ----
option shall be exercisable only to the extent that this option was exercisable
by the Participant on the date of his or her death or disability, and further
provided that this option shall not be exercisable after the Final Exercise
Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
-------------------
Date, is discharged by the Company for "Cause" (as defined in the Employment
Agreement), the right to exercise this option shall terminate immediately upon
the effective date of such discharge.
4. Repurchase Rights.
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(a) Repurchase. Upon any termination of employment or service of the
----------
Participant with the Company, the Company shall have the right to purchase, for
cash, Shares issued upon exercise of this option, upon the following terms:
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(i) Termination for Any Reason Other Than Cause. If the termination
-------------------------------------------
of employment or service of the Participant is for any reason
other than Cause (as defined in the Employment Agreement), the
Company shall have the right to purchase all or any portion of
the Shares issued upon exercise of this option at a price equal
to the Fair Value (as defined below) thereof at the time of
termination.
(ii) Termination for Cause. If the termination of employment or
---------------------
service of the Participant is for Cause (as defined in the
Employment Agreement), the Company shall have the right to
purchase all or any portion of the Shares issued upon exercise of
this option at a price equal to the lesser of (x) Fair Value and
(y) the amount paid by the Participant for such Shares.
(b) Termination. The repurchase rights of the Company set forth in
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Section 4(a) shall terminate upon the earliest of (i) the registration of any
class of equity securities of the Company under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (ii) the closing of the initial public
offering of equity securities of the Company under the Securities Act of 1933,
as amended (the "Securities Act"), or (iii) the closing of an Acquisition Event.
(c) Exercise. The Company must exercise its repurchase rights under this
--------
Section 4, by written notice to the Participant, within 90 days after the
termination of this option. The closing of any purchase pursuant to this Section
4 shall take place as soon as reasonably practicable at the principal office of
the Company, or at such other time and location as the parties to such purchase
may mutually determine. At the closing, the holder of the Shares to be sold
shall deliver to the Company an instrument representing such Shares, duly
endorsed for transfer, and the Company shall pay the purchase price therefor, by
check or wire transfer.
(d) Fair Value. As used in this agreement, the term "Fair Value" shall
----------
mean the fair value of the Shares as of the applicable date as determined in
good faith by the Board of Directors of the Company, which determination shall
be conclusive; provided, however, that, solely for purposes of this Section 4,
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in the event of a repurchase by the Company of an aggregate of 100,000 or more
Shares purchased upon the exercise of the Participant's options (as adjusted for
stock splits, stock dividends and similar events), the determination of Fair
Value shall be subject to mutual agreement of the Company and the Participant.
Absent such an agreement, Fair Value shall be determined by calculating the
average of the sum of the determinations of Fair Value made by two independent
investment banking firms, one of which shall be retained by the Company and one
of which shall be retained by the Participant. However, if the determinations of
Fair Value of such two firms differ
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from one another by more than 15%, the Company and the Participant shall
mutually select a third independent investment banking firm to make a final
determination of Fair Value with respect to the Shares then being repurchased by
the Company.
(e) Legend. The Company may require that each certificate representing
------
Shares of Common Stock subject to the repurchase rights set forth in this
Section 4 shall bear a legend referencing such repurchase rights.
5. Agreement in Connection with Public Offering.
--------------------------------------------
The Participant agrees, in connection with an initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
6. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option. Any such withholding
tax requirements may be satisfied by (i) making a payment in cash or by personal
check, certified check, bank draft or money order payable to the order of the
Company, (ii) delivery of an unconditional and irrevocable undertaking by a
broker to deliver to the Company promptly upon the settlement of the sale of the
Shares to be issued sufficient funds to pay the exercise price, (iii) delivery
of whole shares of Common Stock of the Company (which the Participant has held
for at least six months prior to the delivery of such shares or acquired on the
open market and for which the Participant has good title, free and clear of all
liens and encumbrances) having a Fair Value, determined as of the date on which
such withholding obligation must be satisfied, equal to such withholding
obligation or (iv) requesting that the Company withhold from the Shares to be
delivered upon the exercise a number of shares of Common Stock having a Fair
Value, determined as of the date on which such withholding obligation must be
satisfied, equal to such withholding obligation; provided, however, that the
Company shall have sole discretion to disapprove of an election pursuant to any
of clauses (ii), (iii) or (iv), and that in event the Participant is subject to
Section 16 of the Exchange Act, the Company may require that the method of
satisfying such an obligation be in compliance with Section 16 of the Exchange
Act
-5-
and the rules and regulations thereunder. Shares of Common Stock may be
delivered or withheld having an aggregate Fair Value in excess of the minimum
amount required to be withheld, but not in excess of the amount determined by
applying the Participant's maximum marginal tax rate. Any fraction of a Share
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the Participant.
7. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. Disqualifying Disposition.
-------------------------
If the Participant disposes of Shares acquired upon exercise of this option
within two years from the date of grant of the option or one year after such
Shares were acquired pursuant to exercise of this option, the Participant shall
notify the Company in writing of such disposition.
9. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
10. Termination of Management Retention Agreements.
----------------------------------------------
This agreement supersedes in its entirety any Management Retention
Agreement between the Participant and the Company, and, upon the effectiveness
of this agreement, any such Management Retention Agreement shall be of no
further force and effect.
[signature on following page]
-6-
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
MODUS MEDIA INTERNATIONAL
HOLDINGS, INC.
Dated: April __, 1998 By: _____________________________
Name: ______________________
Title: _____________________
-7-
PARTICIPANT'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 1997 Stock Incentive Plan.
PARTICIPANT:
_____________________________
Address: ____________________
____________________
-8-
NOTICE OF STOCK OPTION EXERCISE
Date: ____________
Modus Media International Holdings, Inc.
0 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Treasurer
Dear Sir or Madam:
I am the holder of an Incentive Stock Option granted to me under the Modus Media
International Holdings, Inc. (the "Company") 1997 Stock Incentive Plan on
__________ for the purchase of __________ shares of Common Stock of the Company
at a purchase price of $__________ per share.
I hereby exercise my option to purchase _________ shares of Common Stock (the
"Shares"), for which I have enclosed __________ in the amount of ________.
Please register my stock certificate as follows:
Name(s): _______________________
_______________________
Address: _______________________
Tax I.D. #: _______________________
I represent, warrant and covenant as follows:
1. I am purchasing the Shares for my own 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 (the "Securities Act"), or any rule
or regulation under the Securities Act.
2. I have had such opportunity as I have deemed adequate to obtain from
representatives of the Company such information as is necessary to permit me to
evaluate the merits and risks of my investment in the Company.
-9-
3. I have sufficient experience in business, financial and investment matters to
be able to evaluate the risks involved in the purchase of the Shares and to make
an informed investment decision with respect to such purchase.
4. I can afford a complete loss of the value of the Shares and am able to bear
the economic risk of holding such Shares for an indefinite period.
5. I understand that (i) the Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act, (ii) the 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; (iii) in any
event, the exemption from registration under Rule 144 will not be available for
at least two years 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 (iv) 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 the Shares under
the Securities Act.
Very truly yours,
_____________________________
(Signature)
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EXHIBIT 10.6
FORM OF XXXXX OPTION GRANT #3
MODUS MEDIA INTERNATIONAL HOLDINGS, INC.
Incentive Stock Option Agreement
Granted Under 1997 Stock Incentive Plan
---------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Modus Media International Holdings,
Inc., a Delaware corporation (the "Company"), on April __, 1998 to Xxxxxxx X.
Xxxxx, an employee of the Company (the "Participant"), of an option to purchase,
in whole or in part, on the terms provided herein and in the Company's 1997
Stock Incentive Plan, as amended (the "Plan"), a total of [__________________]
shares of common stock, $.01 par value per share, of the Company ("Common
Stock") (the "Shares") at $[__________] per Share. Unless earlier terminated,
this option shall expire on April __, 2008 (the "Final Exercise Date").
It is intended that the option evidenced by this agreement shall be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
----------------
(a) Vesting Upon Liquidity Condition. This option will become exercisable
--------------------------------
("vest") as to (i) _____ Shares, representing 25% of the original number of
Shares, on the first anniversary of the date of the grant of this option (the
"Grant Date"), (ii) _____ Shares, representing 25% of the original number of
Shares, on the second anniversary of the Grant Date, (iii) _____ Shares,
representing 20% of the original number of Shares, on the third anniversary of
the Grant Date, (iv) _____ Shares, representing 20% of the original number of
Shares, on the fourth anniversary of the Grant Date and (v) _____ Shares,
representing 10% of the original number of Shares, on the fifth anniversary of
the Grant Date; provided, however, that this option may be exercised as to
-------- -------
shares that are vested under this Section 2(a) only if the Liquidity Condition
---- --
is met prior to such exercise. The "Liquidity Condition" shall be deemed to have
been met (x) at such time on or after an "Acquisition Event" (as defined in the
Plan) that the holders of shares of, or options for, the Company's Common Stock
and Non-Voting Common Stock, $.01 par value per share ("Non-Voting Common
Stock"), immediately prior to the Acquisition Event receive Liquid Consideration
(as
defined below) totalling at least $200,000,000 in exchange for their shares of,
or options for, the Company's Common Stock and Non-Voting Common Stock or as a
result of the sale of the shares of capital stock received by such holders in
such Acquisition Event or (y) at such time after the closing of the initial
underwritten public offering of the Company that the value of the outstanding
shares of, or options for, the Company's Common Stock held by holders prior to
the closing is at least $200,000,000. For this purpose, any options for the
Company's Common Stock and Non-Voting Common Stock, and any options issued in
substitution for such options pursuant to an Acquisition Event, shall be valued
net of the applicable option exercise price. "Liquid Consideration" shall mean
cash or shares of capital stock registered under the Securities Act of 1933, as
amended (the "Securities Act"), or eligible for resale pursuant to Rule 144
under the Securities Act.
(b) Right of Exercise Cumulative. The right of exercise pursuant to
----------------------------
Section 2(a) above shall be cumulative so that to the extent the option is not
exercised in any period to the maximum extent permissible it shall continue to
be exercisable, in whole or in part, with respect to all Shares for which it is
vested until the earlier of the Final Exercise Date or the termination of this
option under Section 3 hereof or the Plan.
(c) Other Vesting. Notwithstanding Section 2(a) above, this option will
-------------
become vested and exercisable as to 100% of the original number of Shares upon
the earlier of (i) December 31, 2004, provided that the Participant is employed
by the Company on such date, and (ii) the termination of the Participant's
employment following an Acquisition Event for any reason other than by the
Company for Cause (as defined in the Participant's Employment Agreement with the
Company dated as of January 1, 1998 (the "Employment Agreement")) or by the
Participant without Good Reason (as defined in the Employment Agreement).
(d) Expiration. This option shall expire upon, and will not be exercisable
----------
after, the Final Exercise Date.
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement and payment in full for the Shares
purchased upon such exercise. Common Stock purchased upon the exercise of this
option shall be paid for as follows: (i) in cash or by check, payable to the
order of the Company; (ii) by delivery of an irrevocable and unconditional
undertaking by a credit worthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or delivery by the Participant to
the Company of a copy of irrevocable and unconditional instructions to a credit
worthy broker to deliver promptly to the Company cash or a check sufficient to
pay the exercise price; (iii) by delivery of
-2-
shares of Common Stock owned by the Participant valued at their Fair Value (as
defined below), which Common Stock was owned by the Participant at least six
months prior to such delivery; (iv) if permitted by the Board, by delivery of a
promissory note of the Participant to the Company on terms determined by the
Board (and payment to the Company by the Participant of cash in an amount equal
to the par value of the Shares purchased); or (v) any combination of the above
permitted forms of payment. The Participant 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 fewer than ten whole Shares.
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he exercises this option, is, and has been at all times
since the date of grant of this option, an employee, officer or director of, or
consultant or advisor to, the Company or any parent or subsidiary of the Company
as defined in Section 424(e) or (f) of the Code (an "Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
-------- ----
the Participant was entitled to exercise this option on the date of such
cessation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes "disabled" (as defined in the Employment Agreement) prior to the Final
Exercise Date while he is an Eligible Participant and the Company has not
terminated such relationship for "Cause" (as defined in the Employment
Agreement), this option shall be exercisable within the period of one year
following the date of death or disability of the Participant, provided that
-------- ----
this option shall be exercisable only to the extent that this option was
exercisable by the Participant on the date of his or her death or disability,
and further provided that this option shall not be exercisable after the Final
Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
-------------------
Date, is discharged by the Company for "Cause" (as defined in the Employment
Agreement), the right to exercise this option shall terminate immediately upon
the effective date of such discharge.
4. Repurchase Rights.
-----------------
(a) Repurchase. Upon any termination of employment or service of the
----------
Participant with the Company, the Company shall have the right to purchase, for
cash, Shares issued upon exercise of this option, upon the following terms:
-3-
(i) Termination for Any Reason Other Than Cause. If the termination
-------------------------------------------
of employment or service of the Participant is for any reason
other than Cause (as defined in the Employment Agreement), the
Company shall have the right to purchase all or any portion of
the Shares issued upon exercise of this option at a price equal
to the Fair Value (as defined below) thereof at the time of
termination.
(ii) Termination for Cause. If the termination of employment or
---------------------
service of the Participant is for Cause (as defined in the
Employment Agreement), the Company shall have the right to
purchase all or any portion of the Shares issued upon exercise of
this option at a price equal to the lesser of (x) Fair Value and
(y) the amount paid by the Participant for such Shares.
(b) Termination. The repurchase rights of the Company set forth in Section
-----------
4(a) shall terminate upon the earliest of (i) the registration of any class of
equity securities of the Company under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) the closing of the initial public offering of
equity securities of the Company under the Securities Act of 1933, as amended
(the "Securities Act"), or (iii) the closing of an Acquisition Event.
(c) Exercise. The Company must exercise its repurchase rights under this
--------
Section 4, by written notice to the Participant, within 90 days after the
termination of this option. The closing of any purchase pursuant to this Section
4 shall take place as soon as reasonably practicable at the principal office of
the Company, or at such other time and location as the parties to such purchase
may mutually determine. At the closing, the holder of the Shares to be sold
shall deliver to the Company an instrument representing such Shares, duly
endorsed for transfer, and the Company shall pay the purchase price therefor, by
check or wire transfer.
(d) Fair Value. As used in this agreement, the term "Fair Value" shall
----------
mean the fair value of the Shares as of the applicable date as determined in
good faith by the Board of Directors of the Company, which determination shall
be conclusive; provided, however, that, solely for purposes of this Section 4,
-------- -------
in the event of a repurchase by the Company of an aggregate of 100,000 or more
Shares purchased upon the exercise of the Participant's options (as adjusted for
stock splits, stock dividends and similar events), the determination of Fair
Value shall be subject to mutual agreement of the Company and the Participant.
Absent such an agreement, Fair Value shall be determined by calculating the
average of the sum of the determinations of Fair Value made by two independent
investment banking firms, one of which shall be retained by the Company and one
of which shall be retained by the Participant. However, if the determinations of
Fair Value of such two firms differ
-4-
from one another by more than 15%, the Company and the Participant shall
mutually select a third independent investment banking firm to make a final
determination of Fair Value with respect to the Shares then being repurchased by
the Company.
(e) Legend. The Company may require that each certificate representing
------
Shares of Common Stock subject to the repurchase rights set forth in this
Section 4 shall bear a legend referencing such repurchase rights.
5. Agreement in Connection with Public Offering.
--------------------------------------------
The Participant agrees, in connection with an initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
6. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option. Any such withholding
tax requirements may be satisfied by (i) making a payment in cash or by personal
check, certified check, bank draft or money order payable to the order of the
Company, (ii) delivery of an unconditional and irrevocable undertaking by a
broker to deliver to the Company promptly upon the settlement of the sale of the
Shares to be issued sufficient funds to pay the exercise price, (iii) delivery
of whole shares of Common Stock of the Company (which the Participant has held
for at least six months prior to the delivery of such shares or acquired on the
open market and for which the Participant has good title, free and clear of all
liens and encumbrances) having a Fair Value, determined as of the date on which
such withholding obligation must be satisfied, equal to such withholding
obligation or (iv) requesting that the Company withhold from the Shares to be
delivered upon the exercise a number of shares of Common Stock having a Fair
Value, determined as of the date on which such withholding obligation must be
satisfied, equal to such withholding obligation; provided, however, that the
Company shall have sole discretion to disapprove of an election pursuant to any
of clauses (ii), (iii) or (iv), and that in event the Participant is subject to
Section 16 of the Exchange Act, the Company may require that the method of
satisfying such an obligation be in compliance with Section 16 of the Exchange
Act
-5-
and the rules and regulations thereunder. Shares of Common Stock may be
delivered or withheld having an aggregate Fair Value in excess of the minimum
amount required to be withheld, but not in excess of the amount determined by
applying the Participant's maximum marginal tax rate. Any fraction of a Share
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the Participant.
7. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. Disqualifying Disposition.
-------------------------
If the Participant disposes of Shares acquired upon exercise of this option
within two years from the date of grant of the option or one year after such
Shares were acquired pursuant to exercise of this option, the Participant shall
notify the Company in writing of such disposition.
9. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
10. Termination of Management Retention Agreements.
----------------------------------------------
This agreement supersedes in its entirety any Management Retention Agreement
between the Participant and the Company, and, upon the effectiveness of this
agreement, any such Management Retention Agreement shall be of no further force
and effect.
[signature on following page]
-6-
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
MODUS MEDIA INTERNATIONAL
HOLDINGS, INC.
Dated: April __, 1998 By:__________________________
Name:_____________________
Title:____________________
-7-
PARTICIPANT'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 1997 Stock Incentive Plan.
PARTICIPANT:
__________________________________
Address:__________________________
__________________________
-8-
NOTICE OF STOCK OPTION EXERCISE
Date: ____________
Modus Media International Holdings, Inc.
0 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Treasurer
Dear Sir or Madam:
I am the holder of an Incentive Stock Option granted to me under the Modus Media
International Holdings, Inc. (the "Company") 1997 Stock Incentive Plan on
__________ for the purchase of __________ shares of Common Stock of the Company
at a purchase price of $__________ per share.
I hereby exercise my option to purchase _________ shares of Common Stock (the
"Shares"), for which I have enclosed __________ in the amount of ________.
Please register my stock certificate as follows:
Name(s): _______________________
_______________________
Address: _______________________
Tax I.D. #: _______________________
I represent, warrant and covenant as follows:
1. I am purchasing the Shares for my own 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 (the "Securities Act"), or any
rule or regulation under the Securities Act.
2. I have had such opportunity as I have deemed adequate to obtain from
representatives of the Company such information as is necessary to permit me to
evaluate the merits and risks of my investment in the Company.
-9-
3. I have sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the purchase of the Shares
and to make an informed investment decision with respect to such purchase.
4. I can afford a complete loss of the value of the Shares and am able to
bear the economic risk of holding such Shares for an indefinite period.
5. I understand that (i) the Shares have not been registered under the
Securities Act and are "restricted securities" within the meaning of Rule 144
under the Securities Act, (ii) the 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; (iii) in any
event, the exemption from registration under Rule 144 will not be available for
at least two years 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 (iv) 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 the Shares under
the Securities Act.
Very truly yours,
_____________________________
(Signature)
-10-
