EXHIBIT 10.12
XXXX, XXXXXX & ASSOCIATES, INC.
STOCK OPTION AGREEMENT
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THIS AGREEMENT is entered into as of October 18, 1996, by and between
XXXX XXXXXXXX (the "Optionee") and XXXX, XXXXXX & ASSOCIATES, INC., a California
corporation (the "Corporation").
WHEREAS Optionee and the Corporation have entered into an Employment
Agreement as of October 18, 1996, which provides that the Corporation shall
grant Optionee a Non-Statutory Option covering 974,000 shares of Common Stock.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
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of the Grant Date, an option to purchase up to 974,000 Option Shares. The
Option Shares shall be purchasable from time to time during the option term
specified in Paragraph 2 at the Exercise Price of $4.00 per share. This option
is not intended to qualify as an Incentive Option.
2. OPTION TERM. This option shall have a term of ten (10) years
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measured from the Grant Date and shall accordingly expire at the close of
business on October 17, 2006, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither
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transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, this option may be assigned in
whole or in part during Optionee's lifetime in accordance with the terms of a
Qualified Domestic Relations Order. The assigned portion shall be exercisable
only by the person or persons who acquire a proprietary interest in the option
pursuant to such Qualified Domestic Relations Order. The terms applicable to
the assigned portion shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Administrator may deem appropriate.
4. DATES OF EXERCISE. All or part of this option may be exercised
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at any time before the Expiration Date (or the earlier termination of the option
term under Paragraph 5 or 6).
5. DEATH AND OTHER CESSATION OF SERVICE. Should Optionee die while
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this option is outstanding, then the option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date and the personal representative of Optionee's estate or the
person or persons to whom the option is transferred pursuant to Optionee's will
or in accordance with the laws of descent and distribution shall have the right
to exercise this option. Such right shall lapse and this option shall cease to
be outstanding upon the earlier of (i) the expiration of the twelve (12)-month
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period measured from the date of Optionee's death or (ii) the Expiration Date.
During the limited period of post-death exercisability, this option may not be
exercised in the aggregate for more than the number of vested Option Shares for
which the option is exercisable at the time of Optionee's death. To the extent
Optionee is not
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vested in the Option Shares at the time of Optionee's death, this option shall
immediately terminate and cease to be outstanding with respect to those shares.
Should Optionee cease to remain in Service for any reason other than death while
this option is outstanding, then Optionee shall have the entire period prior to
the Expiration Date during which to exercise this option.
6. SPECIAL TERMINATION OF OPTION.
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(a) In the event of a Corporate Transaction, the unexercised
portion of this option shall either (i) be assumed by the successor corporation
or parent thereof or (ii) terminate and cease to be outstanding in consideration
of a cash payment to Optionee in an amount equal to (A) the Fair Market Value of
the Option Shares subject to the unexercised portion of this option, determined
as of the effective time of such Corporate Transaction, minus (B) the aggregate
Exercise Price of such Option Shares.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
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(c) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
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Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
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stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
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(a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:
(i) Execute and deliver to the Corporation a Purchase
Agreement for the Option Shares for which the option is exercised.
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(ii) Pay the aggregate Exercise Price for the purchased
shares in cash or with a check made payable to the Corporation. Should the
Common Stock be registered under Section 12(g) of the 1934 Act at the time the
option is exercised, then the Exercise Price may also be paid as follows:
(A) in shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
(B) to the extent the option is exercised for vested Option
Shares, through a special sale and remittance procedure pursuant to which
Optionee (or any other person or persons exercising the option) shall
concurrently provide irrevocable written instructions (a) to a Corporation-
designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of such
exercise and (b) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is utilized in connection
with the option exercise, payment of the Exercise Price must accompany the
Purchase Agreement delivered to the Corporation in connection with the option
exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
(iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to comply
with the applicable requirements of Federal and state securities laws.
(v) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all Federal, state and local income and employment tax withholding requirements
applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE EXERCISE
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OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION AND ITS
ASSIGNS TO REPURCHASE THOSE
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SHARES IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
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(a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or The Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
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in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
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Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Grant Notice.
All notices shall be deemed effective upon personal delivery or upon deposit in
the U.S. mail, postage prepaid and properly addressed to the party to be
notified.
14. CONSTRUCTION. All decisions of the Administrator with respect to
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any question or issue arising under this Agreement shall be conclusive and
binding on all persons having an interest in this option.
15. GOVERNING LAW. The interpretation, performance and enforcement
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of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first indicated above.
XXXX, XXXXXX & ASSOCIATES, INC.
By:____________________________
Title:_________________________
_______________________________
OPTIONEE
Address:_______________________
_______________________________
APPENDIX
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The following definitions shall be in effect under the Agreement:
A. ADMINISTRATOR shall mean either the Board or a committee of Board
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members.
B. AGREEMENT shall mean this Stock Option Agreement.
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C. BOARD shall mean the Corporation's Board of Directors.
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D. CODE shall mean the Internal Revenue Code of 1986, as amended.
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E. COMMON STOCK shall mean the Corporation's common stock.
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F. CORPORATE TRANSACTION shall mean:
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(i) the consummation of a merger or consolidation of the
Corporation with or into another entity or any other corporate reorganization,
if more than fifty percent (50%) of the combined voting power of the continuing
or surviving entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
shareholders of the Corporation immediately prior to such merger, consolidation
or other reorganization, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets.
A transaction shall not constitute a Corporate Transaction if its sole purpose
is to change the state of the Corporation's incorporation or to create a holding
company that will be owned in substantially the same proportions by the persons
who held the Corporation's securities immediately before such transaction.
G. CORPORATION shall mean Xxxx, Xxxxxx & Associates, Inc., a
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California corporation.
H. DISABILITY shall mean the inability of Optionee to engage in any
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substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Administrator on the basis of
such medical evidence as the Administrator deems warranted under the
circumstances.
I. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
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(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
J. EMPLOYEE shall mean an individual who is in the employ of the
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Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
K. EXERCISE DATE shall mean the date on which the option shall have
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been exercised in accordance with Paragraph 9 of the Agreement.
L. EXERCISE PRICE shall mean the exercise price per share as
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specified in Paragraph 1.
M. EXPIRATION DATE shall mean the date on which the option expires
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as specified in Paragraph 2.
N. FAIR MARKET VALUE per share of Common Stock on any relevant date
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shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on The Nasdaq
National Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as the price is reported by
the National Association of Securities Dealers on The Nasdaq National Market or
any successor system. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange determined
by the Administrator to be the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on The Nasdaq National Market, then the Fair Market
Value shall be determined by the Administrator after taking into account such
factors as the Administrator shall deem appropriate.
X. XXXXX DATE shall mean the date of grant of this option and the
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date as of which this Agreement is entered into.
X. XXXXX NOTICE shall mean the Notice of Grant of Stock Option
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accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
Q. INCENTIVE OPTION shall mean an option which satisfies the
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requirements of Code Section 422.
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R. 1934 ACT shall mean the Securities Exchange Act of 1934, as
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amended.
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy
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the requirements of Code Section 422.
T. OPTION SHARES shall mean the number of shares of Common Stock
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subject to this option.
U. PARENT shall mean any corporation (other than the Corporation) in
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an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PURCHASE AGREEMENT shall mean the stock purchase agreement in
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substantially the form of Exhibit A to this Agreement.
W. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
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Relations Order which substantially complies with the requirements of Code
Section 414(p). The Administrator shall have the sole discretion to determine
whether a Domestic Relations Order is a Qualified Domestic Relations Order.
X. SERVICE shall mean the Optionee's performance of services for the
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Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or a consultant.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New
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York Stock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the
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Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
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EXHIBIT A
XXXX, XXXXXX & ASSOCIATES, INC.
STOCK PURCHASE AGREEMENT
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AGREEMENT made as of this _______ day of _____________, _____, by and
among XXXX, XXXXXX & ASSOCIATES, INC., a California corporation, XXXX XXXXXXXX,
Optionee under the Option Agreement, and ________________________________,
Optionee's spouse.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
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1. EXERCISE. Optionee hereby purchases _____________ shares of
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Common Stock (the "Purchased Shares") pursuant to that certain option (the
"Option") granted Optionee on October 18, 1996 (the "Grant Date"), to purchase
up to 974,000 shares of Common Stock at the exercise price of $4.00 per share
(the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to the
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Corporation, Optionee shall pay the Exercise Price for the Purchased Shares in
accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. DELIVERY OF CERTIFICATES. The certificates representing any
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Purchased Shares which are subject to the Repurchase Right shall be held in
escrow in accordance with the provisions of this Agreement.
4. STOCKHOLDER RIGHTS. Until such time as the Corporation exercises
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the Repurchase Right, the First Refusal Right or the Special Purchase Right,
Optionee (or any successor in interest) shall have all the rights of a
stockholder (including voting, dividend and liquidation rights) with respect to
the Purchased Shares, including the Purchased Shares held in escrow hereunder,
subject, however, to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
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1. RESTRICTED SECURITIES. The Purchased Shares have not been
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registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by Section 4(2) of the 1933 Act.
Optionee hereby confirms that Optionee has been informed that the Purchased
Shares are restricted securities under the 1933 Act and may not be resold or
transferred unless the Purchased Shares are first registered under the Federal
securities laws or unless an exemption from such registration is available.
Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC Rule 144
issued under the 1933 Act, which exempts certain resales of unrestricted
securities, is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee shall
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make no disposition of the Purchased Shares (other than a Permitted Transfer)
unless and until there is compliance with all of the following requirements:
(i) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(ii) Unless SEC Rule 144 issued under the 1933 Act is available,
Optionee shall have provided the Corporation with written assurances, in form
and substance satisfactory to the Corporation, that (a) the proposed disposition
does not require registration of the Purchased Shares under the 1933 Act or (b)
all appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration available under
the 1933 Act (other than Rule 144) has been taken.
The Corporation shall not be required (i) to transfer on its books any
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Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
--
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
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Shares shall be endorsed with one or more of the following restrictive legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
(ii) "It is unlawful to consummate a sale or transfer of this
security, or any interest therein, or to receive any consideration therefor,
without the prior written consent of the Commissioner of Corporations of the
State of California, except as permitted in the Commissioner's Rules."
(iii) "The shares represented by this certificate are subject to
certain repurchase rights and rights of first refusal granted to the Corporation
and accordingly may not be sold, assigned, transferred, encumbered, or in any
manner disposed of except in conformity with the terms of a written agreement
dated ____________ ___, ____, between the Corporation and the registered holder
of the shares (or the predecessor in interest to the shares). A copy of such
agreement is maintained at the Corporation's principal corporate offices."
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C. TRANSFER RESTRICTIONS
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1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
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Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right, the Market Stand-Off or the Special Purchase Right.
2. TRANSFEREE OBLIGATIONS. Each person (other than the Corporation)
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to whom the Purchased Shares are transferred by means of a Permitted Transfer
must, as a condition precedent to the validity of such transfer, acknowledge in
writing to the Corporation that such person is bound by the provisions of this
Agreement and that the transferred shares are subject to (i) the Repurchase
Right, (ii) the First Refusal Right and (iii) the Market Stand-Off, to the same
extent such shares would be so subject if retained by Optionee.
3. MARKET STAND-OFF.
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(a) In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such restriction (the "Market Stand-Off")
shall be in effect for such period of time from and after the effective date of
the final prospectus for the offering as may be requested by the Corporation or
such underwriters. In no event, however, shall such period exceed one hundred
eighty (180) days. Owner's obligations with respect to the Market Stand-Off
shall in all events terminate two (2) years after the effective date of the
Corporation's initial public offering.
(b) Owner shall be subject to the Market Stand-Off provided and
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only if the officers and directors of the Corporation are also subject to
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similar restrictions.
(c) Any new, substituted or additional securities which are by
reason of any Recapitalization or Reorganization distributed with respect to the
Purchased Shares shall be immediately subject to the Market Stand-Off, to the
same extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the Market Stand-Off, the Corporation may
impose stop-transfer instructions with respect to the Purchased Shares until the
end of the applicable stand-off period.
D. REPURCHASE RIGHT
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1. GRANT. The Corporation is hereby granted the right (the
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"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Optionee ceases for any reason to remain in Service or (if
later) during the sixty (60)-day period following
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the execution date of this Agreement, to repurchase at the Exercise Price all or
(at the discretion of the Corporation and with the consent of Optionee) any
portion of the Purchased Shares in which Optionee is not, at the time of his or
her cessation of Service, vested in accordance with the Vesting Schedule (such
shares to be hereinafter referred to as the "Unvested Shares").
2. VESTING SCHEDULE. Optionee shall acquire a vested interest in,
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and the Repurchase Right shall accordingly lapse with respect to, the Option
Shares as follows:
(a) Unless Subparagraph (b), (c), (d) or (e) below applies, the
Option Shares shall become vested in twenty-four (24) equal monthly installments
over the two (2)-year period commencing on January 1, 1998.
(b) If there is a closing of the acquisition contemplated by the
Asset Purchase Agreement by and among the Corporation, TeamAlliance Technology
Partners, L.P., TeamAlliance Technology Partners, Inc., Team Visions, Inc.,
certain related entities and certain individuals, then fifty percent (50%) of
the original number of Option Shares shall become vested on the date of such
closing. After the date of such closing, the remaining fifty percent (50%) of
the original number of Option Shares shall become vested in equal monthly
installments over the two (2)-year period commencing on January 1, 1998.
(c) All of the Option Shares shall become vested in the event of
a Corporate Transaction.
(d) All of the Option Shares shall become vested in the event
that the Employee is subject to a "constructive discharge," as such term is
defined in the Employment Agreement entered into by the Corporation and Optionee
as of October 18, 1996.
(e) Not less than fifty percent (50%) of the Option Shares shall
be vested in the event that the Corporation terminates Optionee's Service
without his consent for any reason other than "cause" or "disability," as such
terms are defined in the Employment Agreement entered into by the Corporation
and Optionee as of October 18, 1996.
3. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall be
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exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested
Shares to be repurchased shall be delivered to the Corporation prior to the
close of business on the date specified for the repurchase. Concurrently with
the receipt of such stock certificates, the Corporation shall pay to Owner, in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Exercise Price previously paid for the
Unvested Shares which are to be repurchased from Owner.
4. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right shall
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terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.3. In addition, the Repurchase Right shall
terminate and cease to be exercisable
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with respect to any and all Purchased Shares in which Optionee vests in
accordance with the Vesting Schedule. All Purchased Shares as to which the
Repurchase Right lapses shall, however, remain subject to (i) the First Refusal
Right, (ii) the Market Stand-Off and (iii) the Special Purchase Right.
5. AGGREGATE VESTING LIMITATION. If the Option is exercised in more
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than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which Optionee would otherwise at the time be
vested, in accordance with the Vesting Schedule, had all the Purchased Shares
(including those acquired under the Prior Purchase Agreements) been acquired
exclusively under this Agreement.
6. RECAPITALIZATION. Any new, substituted or additional securities
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or other property (including cash paid other than as a regular cash dividend)
which is by reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right, but only
to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Corporation's capital
structure; provided, however, that the aggregate purchase price shall remain the
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same.
E. RIGHT OF FIRST REFUSAL
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1. GRANT. The Corporation is hereby granted the right of first
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refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Optionee has vested in accordance with
the Vesting Schedule. For purposes of this Article E, the term "transfer" shall
include any sale, assignment, pledge, encumbrance or other disposition of the
Purchased Shares intended to be made by Owner, but shall not include any
Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
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Purchased Shares in which Optionee has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall, for
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a period of twenty-five (25) days following receipt of the Disposition Notice,
have the right to repurchase any or all of the Target Shares subject to the
Disposition Notice upon the same terms as those specified therein or upon such
other terms (not materially different from those specified in the
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Disposition Notice) to which Owner consents. Such right shall be exercisable by
delivery of written notice (the "Exercise Notice") to Owner prior to the
expiration of the twenty-five (25)-day exercise period. If such right is
exercised with respect to all the Target Shares, then the Corporation shall
effect the repurchase of such shares, including payment of the purchase price,
not more than five (5) business days after delivery of the Exercise Notice; and
at such time the certificates representing the Target Shares shall be delivered
to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
or cash equivalents equal in amount to the value of such property. If Owner and
the Corporation cannot agree on such cash value within ten (10) days after the
Corporation's receipt of the Disposition Notice, the valuation shall be made by
an appraiser of recognized standing selected by Owner and the Corporation or, if
they cannot agree on an appraiser within twenty (20) days after the
Corporation's receipt of the Disposition Notice, each shall select an appraiser
of recognized standing and the two (2) appraisers shall designate a third
appraiser of recognized standing, whose appraisal shall be determinative of such
value. The cost of such appraisal shall be paid by the Corporation. The
closing shall then be held on the later of (i) the fifth (5th) business day
-----
following delivery of the Exercise Notice or (ii) the fifth (5th) business day
after such valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
---------------------------------------
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
--------
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right and the First Refusal Right, but the acquired shares
shall remain subject to the provisions of Article B and Paragraph C.3. In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified thirty (30)-day period, the First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
-------------------------------------------
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares to the
third-party offeror identified in the Disposition Notice, but in full compliance
with the requirements of Paragraph E.4, as if the Corporation did not exercise
the First Refusal Right; or
6
(ii) sale to the Corporation of the portion of the Target Shares
which the Corporation has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. The First Refusal
Right shall continue to be applicable to any subsequent disposition of the
remaining Target Shares until such right lapses.
Failure of Owner to deliver timely notification to the
Corporation shall be deemed to be an election by Owner to sell the Target Shares
pursuant to alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
-------------------------------
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal Right
shall remain in full force and effect and shall apply to the new capital stock
or other property received in exchange for the Purchased Shares in consummation
of the Reorganization, but only to the extent the Purchased Shares are covered
by the First Refusal Right at the time of the Reorganization.
7. LAPSE. The First Refusal Right shall lapse upon the earliest to
----- --------
occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm-commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
F. MARITAL DISSOLUTION OR LEGAL SEPARATION
---------------------------------------
1. GRANT. In connection with the dissolution of Optionee's marriage
-----
or the legal separation of Optionee and Optionee's spouse, the Corporation shall
have the right (the "Special Purchase Right") to purchase from Optionee's
spouse, in accordance with the provisions of Paragraph F.3, all or any portion
of the Purchased Shares which would otherwise be awarded to such spouse in
settlement of any community property or other marital property rights such
spouse may have in such shares.
2. NOTICE OF DECREE OR AGREEMENT. Optionee shall promptly provide
-----------------------------
the Corporation with written notice (the "Dissolution Notice") of (i) the entry
of any judicial decree or order resolving the property rights of Optionee and
Optionee's spouse in connection with their marital dissolution or legal
separation or (ii) the execution of any contract or agreement relating to the
distribution or division of such property rights. The Dissolution Notice shall
be accompanied by a copy of the actual decree or order of dissolution or
contract or agreement
7
between Optionee and Optionee's spouse which provides for the award to the
spouse of one or more Purchased Shares in settlement of any community property
or other marital property rights such spouse may have in such shares.
3. EXERCISE OF THE SPECIAL PURCHASE RIGHT. The Special Purchase
--------------------------------------
Right shall be exercisable by delivery of written notice (the "Purchase
Notice") to Optionee and Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice) and the Fair Market Value to be paid for such Purchased Shares. Optionee
(or Optionee's spouse, to the extent such spouse has physical possession of the
Purchased Shares) shall, prior to the close of business on the date specified
for the purchase, deliver to the Corporation the certificates representing the
shares to be purchased. The Corporation shall, concurrently with the receipt of
the stock certificates, pay to Optionee's spouse (in cash or cash equivalents)
an amount equal to the Fair Market Value specified for such shares in the
Purchase Notice.
If Optionee's spouse does not agree with the Fair Market Value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two (2) appraisers
shall designate a third appraiser of recognized standing whose appraisal shall
be determinative of such value. The cost of the appraisal shall be shared
equally by the Corporation and Optionee's spouse. The closing shall then be
held on the fifth (5th) business day following the completion of such appraisal;
provided, however, that if the appraised value is more than twenty-five percent
--------
(25%) greater than the Fair Market Value specified for the shares in the
Purchase Notice, the Corporation shall have the right, exercisable prior to the
expiration of such five (5) business day period, to rescind the exercise of the
Special Purchase Right and thereby revoke its election to purchase the shares
awarded to the spouse. In the event the Corporation so revokes its election,
the Corporation shall bear the entire cost of the appraisal.
4. LAPSE. The Special Purchase Right shall lapse upon the earlier
----- -------
to occur of (i) the lapse of the First Refusal Right or (ii) the expiration of
the exercise period specified in Paragraph F.3, to the extent the Special
Purchase Right is not timely exercised in accordance with such paragraph.
G. ESCROW
------
1. DEPOSIT. Upon issuance, the certificates for the Purchased
-------
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Corporation to be held in accordance with the provisions of this
Article G. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
8
deposited with the Corporation pursuant to the requirements of this Agreement,
shall remain in escrow until such time or times as the certificates (or other
assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Paragraph G.3. Upon delivery of the
certificates (or other assets and securities) to the Corporation, Owner shall be
issued a receipt acknowledging the number of Purchased Shares (or other assets
and securities) delivered in escrow.
2. RECAPITALIZATION/REORGANIZATION. Any new, substituted or
-------------------------------
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Purchased
Shares shall be immediately delivered to the Corporation to be held in escrow
under this Article G, but only to the extent the Purchased Shares are at the
time subject to the escrow requirements hereunder. However, all regular cash
dividends on the Purchased Shares (or other securities at the time held in
escrow) shall be paid directly to Owner and shall not be held in escrow.
3. RELEASE/SURRENDER. The Purchased Shares, together with any other
-----------------
assets or securities held in escrow hereunder, shall be subject to the following
terms relating to their release from escrow or their surrender to the
Corporation for repurchase and cancellation:
(i) Should the Corporation elect to exercise the Repurchase Right
with respect to any Unvested Shares, then the escrowed certificates for those
Unvested Shares (together with any other assets or securities attributable
thereto) shall be surrendered to the Corporation concurrently with the payment
to Owner of an amount equal to the aggregate Exercise Price for such Unvested
Shares, and Owner shall cease to have any further rights or claims with respect
to such Unvested Shares (or other assets or securities attributable thereto).
(ii) Should the Corporation elect to exercise the First Refusal
Right with respect to any Target Shares held at the time in escrow hereunder,
then the escrowed certificates for those Target Shares (together with any other
assets or securities attributable thereto) shall be surrendered to the
Corporation concurrently with the payment of the Paragraph E.3 purchase price
for such Target Shares to Owner, and Owner shall cease to have any further
rights or claims with respect to such Target Shares (or other assets or
securities attributable thereto).
(iii) Should the Corporation elect not to exercise the Repurchase
---
Right with respect to any Unvested Shares or the First Refusal Right with
respect to any Target Shares held at the time in escrow hereunder, then the
escrowed certificates for those shares (together with any other assets or
securities attributable thereto) shall be immediately released to Owner.
(iv) As the Purchased Shares (or any other assets or securities
attributable thereto) vest in accordance with the Vesting Schedule, the
certificates for those vested shares (as well as all other vested assets and
securities) shall be released from escrow upon Owner's request, but not more
frequently than once every six (6) months.
9
(v) All Purchased Shares which vest (and any other vested assets
and securities attributable thereto) shall be released within thirty (30) days
after the earlier to occur of (a) Optionee's cessation of Service or (b) the
-------
lapse of the First Refusal Right.
(vi) All Purchased Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to (a) the First Refusal
Right, to the extent such right has not otherwise lapsed, (b) the Market Stand-
Off, until such restriction terminates, and (c) the Special Purchase Right, to
the extent such right has not otherwise lapsed.
H. SPECIAL TAX ELECTION
--------------------
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election under Code
Section 83(b). Such election must be filed within thirty (30) days after the
date of this Agreement. A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR
HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(B)
ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(B), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS BEHALF.
I. GENERAL PROVISIONS
------------------
1. ASSIGNMENT. The Corporation may assign the Repurchase Right, the
----------
First Refusal Right and/or the Special Purchase Right to any person or entity
selected by the Board, including (without limitation) one or more stockholders
of the Corporation.
If the assignee of the Repurchase Right is other than (i) a wholly
owned subsidiary of the Corporation or (ii) the parent corporation owning one
hundred percent (100%) of the Corporation's outstanding capital stock, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the Fair
Market Value of the Purchased Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Purchased Shares.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
---------------------------------
shall confer upon Optionee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Corporation (or any Parent or Subsidiary employing or retaining Optionee)
or of Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason, with or without cause.
10
3. NOTICES. Any notice required to be given under this Agreement
-------
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
---------
exercise the Repurchase Right, the First Refusal Right or the Special Purchase
Right shall not constitute a waiver of any other repurchase rights and/or rights
of first refusal that may subsequently arise under the provisions of this
Agreement or any other agreement between the Corporation and Optionee or
Optionee's spouse. No waiver of any breach or condition of this Agreement shall
be deemed to be a waiver of any other or subsequent breach or condition, whether
of like or different nature.
5. CANCELLATION OF SHARES. If the Corporation shall make available,
----------------------
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
J. MISCELLANEOUS PROVISIONS
------------------------
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
--------------------
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
----------------------------
entire contract between the parties hereto with regard to the subject matter
hereof.
3. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
----------------------
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon
11
Optionee, Optionee's permitted assigns and the legal representatives, heirs and
legatees of Optionee's estate, whether or not any such person shall have become
a party to this Agreement and have agreed in writing to join herein and be bound
by the terms hereof.
6. POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
-----------------
her true and lawful attorney in fact, for her and in her name, place and xxxxx,
and for her use and benefit, to agree to any amendment or modification of this
Agreement and to execute such further instruments and take such further actions
as may reasonably be necessary to carry out the intent of this Agreement.
Optionee's spouse further gives and grants unto Optionee as her attorney in fact
full power and authority to do and perform every act necessary and proper to be
done in the exercise of any of the foregoing powers as fully as she might or
could do if personally present, with full power of substitution and revocation,
hereby ratifying and confirming all that Optionee shall lawfully do and cause to
be done by virtue of this power of attorney.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
XXXX, XXXXXX & ASSOCIATES, INC.
By:______________________________
Title:___________________________
Address:_________________________
_________________________________
_________________________________
OPTIONEE
Address:_________________________
_________________________________
12
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
right of the Corporation (or its assigns) to purchase any Purchased Shares in
which Optionee is not vested and the right of the Corporation (or its assigns)
to purchase any and all interest or right the undersigned may otherwise have in
the Purchased Shares pursuant to community property laws or other marital
property rights.
_________________________________
OPTIONEE'S SPOUSE
Address:_________________________
_________________________________
APPENDIX
--------
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
---------
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock.
------------
E. CORPORATE TRANSACTION shall mean:
---------------------
(i) the consummation of a merger or consolidation of the Corporation
with or into another entity or any other corporate reorganization, if more than
fifty percent (50%) of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not shareholders of the
Corporation immediately prior to such merger, consolidation or other
reorganization, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets.
A transaction shall not constitute a Corporate Transaction if its sole purpose
is to change the state of the Corporation's incorporation or to create a holding
company that will be owned in substantially the same proportions by the persons
who held the Corporation's securities immediately before such transaction.
F. CORPORATION shall mean Xxxx, Xxxxxx & Associates, Inc., a California
-----------
corporation.
G. DISPOSITION NOTICE shall have the meaning assigned to such term in
------------------
Paragraph E.2.
H. DISSOLUTION NOTICE shall have the meaning assigned to such term in
------------------
Paragraph F.2.
I. EXERCISE NOTICE shall have the meaning assigned to such term in
---------------
Paragraph E.3.
J. EXERCISE PRICE shall have the meaning assigned to such term in
--------------
Paragraph A.1.
K. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
-----------------
prior to the initial public offering of the Common Stock, shall be determined
either by the Board
or by a committee of Board members after taking into account such factors as it
shall deem appropriate.
L. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation in
-------------------
accordance with Article X.
X. XXXXX DATE shall have the meaning assigned to such term in Paragraph
----------
A.1.
N. MARKET STAND-OFF shall mean the market stand-off restriction specified
----------------
in Paragraph C.3.
O. 1933 ACT shall mean the Securities Act of 1933, as amended.
--------
P. OPTION shall have the meaning assigned to such term in Paragraph A.1.
------
Q. OPTION AGREEMENT shall mean all agreements and other documents
----------------
evidencing the Option.
R. OPTIONEE shall mean the person to whom the Option is granted.
--------
S. OPTION SHARES shall mean the number of shares of Common Stock subject
-------------
to the Option on the Grant Date.
T. OWNER shall mean Optionee and all subsequent holders of the Purchased
-----
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
U. PARENT shall mean any corporation (other than the Corporation) in
------
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
------------------
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer in pledge as security for any
purchase-money indebtedness incurred by Optionee in connection with the
acquisition of the Purchased Shares.
W. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such term
------------------------
in Paragraph D.5.
X. PURCHASE NOTICE shall have the meaning assigned to such term in
---------------
Paragraph F.3.
2
Y. PURCHASED SHARES shall have the meaning assigned to such term in
----------------
Paragraph A.1.
Z. RECAPITALIZATION shall mean any stock split, stock dividend,
----------------
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
AA. REORGANIZATION shall mean any of the following transactions:
--------------
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially all
of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in which
the Corporation is incorporated or to create a holding company structure.
BB. REPURCHASE RIGHT shall mean the right granted to the Corporation in
----------------
accordance with Article D.
CC. SEC shall mean the Securities and Exchange Commission.
---
DD. SERVICE shall mean the provision of services to the Corporation (or
-------
any Parent or Subsidiary) by a person in the capacity of an employee, subject to
the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance, a non-employee member of the
board of directors or a consultant.
EE. SPECIAL PURCHASE RIGHT shall mean the right granted to the Corporation
----------------------
in accordance with Article F.
FF. SUBSIDIARY shall mean any corporation (other than the Corporation)
----------
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
GG. TARGET SHARES shall have the meaning assigned to such term in
-------------
Paragraph E.2.
3
HH. VESTING SCHEDULE shall mean the vesting schedule specified in
----------------
Paragraph D.2.
II. UNVESTED SHARES shall have the meaning assigned to such term in
---------------
Paragraph D.1.
4
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED Xxxx Xxxxxxxx hereby sells, assigns and transfers
unto Xxxx, Xxxxxx & Associates, Inc. (the "Corporation") _______________________
(________) shares of the Common Stock of the Corporation standing in his name on
the books of the Corporation represented by Certificate No._____________________
herewith and does hereby irrevocably constitute an appoint ______________
Attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises.
Dated: _____________ _____, ________
Signature ______________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
EXHIBIT II
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name: Xxxx Xxxxxxxx
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Xxxx, Xxxxxx & Associates,
Inc.
(3) The property was issued on _____________ _____, ________.
(4) The taxable year in which the election is being made is the calendar year
_________.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of
installments pursuant to a stock purchase agreement between the issuer
and taxpayer.
(6) The fair market value of the property at the time of transfer (determined
without regard to any restriction other than a restriction which by its
terms will never lapse) is $___________ per share.
(7) The amount paid for such property is $4.00 per share.
(8) A copy of this statement was furnished to Xxxx, Xxxxxx & Associates,
Inc., for whom taxpayer rendered the services underlying the transfer of
property.
(9) This statement is executed on _________________ ______, __________.
_____________________________ _______________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his Federal income tax returns and must be made not later than
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain two (2) copies of the completed form for filing with his
Federal and state tax returns for the current tax year and an additional copy
for his records.
