EXHIBIT 99.2
COMPOSITE SOLUTIONS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board of Directors of Composite Solutions, Inc. (the
"COMPANY") has adopted the Company's 2000 Stock Incentive Plan (the "PLAN") for
the purpose of attracting and retaining the services of selected key employees
who contribute to the financial success of the Company and its affiliates.
B. Optionee is an individual who is to render valuable services to
the Company or its parent or subsidiary corporations, and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Company's grant of a stock option to Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement, the Company hereby grants to Optionee, as of the grant
date (the "GRANT DATE") specified in the accompanying Notice of Grant of Stock
Option or other employment or similar agreement notifying Optionee of the grant
of a stock option by the Company to Optionee (the "GRANT NOTICE"), an option to
purchase up to that number of shares of the Company's Common Stock (the "OPTION
SHARES") as is specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term at the option price per
share (the "OPTION PRICE") specified in the Grant Notice.
2. OPTION TERM. This Option shall expire at the close of business on
the expiration date (the "EXPIRATION DATE") specified in the Grant Notice,
unless sooner terminated in accordance with Sections 5, 6 or 18, but in no event
shall an Option be exercisable later than ten (10) years from the date of the
Grant Date.
3. OPTION NONTRANSFERABLE; EXCEPTION. This Option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution and may be exercised, during Optionee's lifetime, only
by Optionee.
4. DATES OF EXERCISE. This Option may not vest and may not be
exercised in whole or in part at any time prior to the time the Plan is approved
by the Company's shareholders in accordance with Section 18. Provided such
shareholder approval is obtained, this Option shall thereupon vest as is
specified in the Grant Notice, but at a rate of at least twenty percent (20%)
per year over a five (5) year period measured from the Grant Date.
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5. ACCELERATED TERMINATION OF OPTION TERM. The option term specified
in Section 2 shall terminate (and this Option shall cease to be exercisable)
prior to the Expiration Date should one of the following provisions become
applicable:
5.1 Except as otherwise provided in subparagraph 5.2. or 5.3
below, should Optionee cease to remain in Continuous Service while this Option
is outstanding, then all unvested Options shall immediately terminate and the
period for exercising any vested Option shall be reduced to a ninety (90) day
period commencing on the date of such cessation of Continuous Service. Upon the
expiration of such ninety (90) day period or (if earlier) upon the Expiration
Date, this Option shall terminate and cease to be outstanding.
5.2 Should Optionee die or become permanently disabled while in
Continuous Service or within the ninety (90) day period following cessation of
Continuous Service, then the personal representative of the Optionee's estate or
the person or persons to whom the Option is transferred pursuant to the
Optionee's will or in accordance with the law of descent and distribution shall
have the right to exercise any vested Option. Such right shall lapse and this
Option shall cease to be exercisable at the expiration of the one hundred eighty
(180) day period measured from the date of Optionee's death or disability. Upon
the expiration of such one hundred eighty (180) day period or (if earlier) upon
the Expiration Date, this Option shall terminate and cease to be outstanding.
5.3 If: (a) the Optionee's service is terminated as a result of
any act of dishonesty, willful misconduct, theft, fraud, embezzlement,
alcoholism or drug abuse; or (b) the Optionee makes or attempts to make any
unauthorized use or disclosure of confidential information or trade secrets of
the Company or its parent or subsidiary corporations, then in any such event all
outstanding Options granted to the Optionee under the Plan whether or not vested
shall terminate and cease to be exercisable immediately upon such termination of
Continuous Service or such unauthorized disclosure of confidential or secret
information or attempt thereof.
5.4 During the limited period of exercisability applicable under
Sections 5.1 and 5.2 above, this Option may be exercised for any or all of the
Option Shares for which this Option is, at the time of the Optionee's cessation
of Continuous Service, exercisable in accordance with the exercise schedule
specified in the Grant Notice and the provisions of Section 6 of this Agreement.
5.5 For purposes of this Section 5 and for all other purposes
under this Agreement:
5.5.1 The Optionee shall be deemed to remain in Continuous
Service for so long as the Optionee continues to render periodic services to the
Company or any parent or subsidiary corporation as an Employee or as otherwise
provided in a written agreement between Optionee and the Company.
5.5.2 A corporation shall be considered to be a subsidiary
corporation of the Company if it is a member of an unbroken chain of
corporations beginning with the Company, provided each such corporation in the
chain (other than the last corporation)
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owns, at the time of 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.
5.5.3 A corporation shall be considered to be a parent
corporation of the Company if it is a member of an unbroken chain ending with
the Company, provided each such corporation in the chain (other than the
Company) owns, at the time of 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.
5.6 This Section 5 shall not apply to any non-qualified Option
granted to a Director as compensation for services as a Director.
6. SPECIAL TERMINATION OF OPTION.
6.1 "CORPORATE TRANSACTION" shall mean any of the following
transactions:
6.1.1 A merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose of which is
to change the State of the Company's incorporation;
6.1.2 The sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or dissolution of
the Company;
6.1.3 Any reverse merger in which the Company is the
surviving entity, but in which fifty percent (50%) or more of the Company's
outstanding voting stock is transferred to holders different from those who held
the securities immediately prior to the merger; or
6.1.4 An acquisition by any person or related group of
persons (other than the Company or a person that directly or indirectly
controls, is controlled by or is under common control with, the Company) of
ownership of more than fifty percent (50%) of the Company's outstanding Common
Stock, pursuant to a tender or exchange offer (other than a tender or exchange
offer approved by the Board of Directors of the Company and the Board of
Directors determines in its sole discretion shall not be considered a "CORPORATE
TRANSACTION").
All outstanding unexercised Options granted under this Agreement shall
automatically and immediately vest and become exercisable immediately prior to
the specified effective date for the Corporate Transaction, unless, with the
approval of the Board of Directors of the Company, the Options are assumed in
connection with such Corporate Transaction or substitute options are granted as
provided in the Plan. Upon consummation of the Corporate Transaction, all
outstanding Options under this Agreement shall terminate and cease to be
outstanding, unless assumed by the surviving successor corporation or parent
thereof.
6.2 If this Option is to be assumed in connection with the
Corporate Transaction or is otherwise to continue in effect, then it shall be
appropriately adjusted,
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immediately after such Corporate Transaction, to apply and pertain to the number
and class of securities which would have been issuable, in consummation of such
Corporate Transaction, to an actual holder of the same number of shares of
Common Stock as are subject to such Option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the Option Price
payable per share, provided that the aggregate Option Price payable for such
securities shall remain the same.
6.3 The exercisability of this Option as an incentive stock
option under the Federal tax laws (if designated as such in the Grant Notice)
shall, in connection with any such Corporate Transaction, be subject to the
applicable dollar limitation set forth in the Code.
6.4 This Agreement shall not in any way affect the right of the
Company to adjust, reclassify, reorganize or otherwise make changes in 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. In the event additional shares of
Common Stock are issued pursuant to a stock split, stock dividend or other
recapitalization resulting in combinations or exchanges of shares or otherwise,
the number of shares of Common Stock then covered by each outstanding Option
shall be increased proportionately with no increase in the total Option Price of
the Common Stock then so covered, and the number of shares of Common Stock
reserved for the purpose of the Plan shall be increased by the same proportion.
In the event that the shares of Common Stock of the Company from time to time
issued and outstanding are reduced by a combination of shares, the number of
shares of Common Stock then covered by each outstanding Option shall be reduced
proportionately with no reduction in the total Option Price of the Common Stock
then so covered, and the number of shares of Common Stock reserved for the
purpose of the Plan shall be reduced by the same proportion.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this Option shall not
have any of the rights of a shareholder with respect to the Option Shares until
such individual shall have exercised the Option and paid the Option Price.
9. MANNER OF EXERCISING OPTION.
9.1 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 in the case of exercise after Optionee's death, the Optionee's
executor, administrator, heir or legatee, as the case may be) must pay the
aggregate Option Price in one of the following alternative forms:
(1) Full payment in cash or check; or
(2) Any other form which the Board of Directors may, in its
sole discretion, approve at the time of exercise.
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9.2 For purposes of this Agreement, the fair market value of a
share of Common Stock on any relevant date shall be determined in accordance
with the terms of the Plan.
9.3 As soon after the Exercise Date as practical, the Company
shall mail or deliver to Optionee or to the other person or persons exercising
this Option a certificate or certificates representing the shares so purchased
and paid for, with the appropriate legends affixed thereto; provided, however,
if in the determination of the Board of Directors based upon the advise of the
Company's tax advisors the issuance of the Option Shares at such time would
materially reduce or eliminate any tax credit, net loss carry-over or other tax
benefit of the Company, the Company may delay issuance and delivery of the
Option Shares until up to the earlier of: (i) the day preceding the occurrence
of a Corporate Transaction; or (ii) one year after the date of exercise by
Optionee.
9.4 In no event may this Option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
10.1 The exercise of this Option and the issuance of Option
Shares upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto.
10.2 In connection with the exercise of this Option, Optionee
shall execute and deliver to the Company such representations in writing as may
be requested by the Company in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Section 3 and Section 5 of this Agreement, the provisions of this Agreement
shall inure to the benefit of, and be binding upon, the successors,
administrators, heirs, legal representatives and assigns of Optionee and the
successors and assigns of the Company.
12. LIABILITY OF COMPANY.
12.1 If the Option Shares covered by this Agreement exceed, as of
the Grant Date, the number of shares of Common Stock which may without
shareholder approval be issued under the Plan, then this option shall be void
with respect to such excess shares, unless shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained.
12.2 The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Company 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
Company, however, shall use its diligent efforts to obtain all such approvals.
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13. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or
in the Plan shall confer upon the Optionee any right to continue in the service
of the Company (or any parent or subsidiary corporation of the Company employing
or retaining Optionee) for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any parent or
subsidiary corporation of the Company employing or retaining Optionee) or the
rights of the Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason whatsoever, with or
without cause.
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Company in care of the Corporate Secretary 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 last known address of Optionee in
Company's employment records. All notices shall be deemed to have been given or
delivered upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.
15. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan.
16. GOVERNING LAW. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules and the laws of the United
States of America.
17. SHAREHOLDER APPROVAL. The grant of this Option is subject to
approval of the Plan, and if applicable each amendment to the Plan, by the
Company's shareholders within twelve (12) months after the adoption of the Plan
by the Board of Directors. Notwithstanding any provision of this Agreement to
the contrary, this Option may not be exercised in whole or in part until such
shareholder approval is obtained. In the event that such shareholder approval is
not obtained, then this option shall thereupon terminate in its entirety and the
Optionee shall have no further rights to acquire any Option Shares hereunder.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the
event this Option is an incentive stock option as specified in the Grant Notice,
this Option may cease to qualify for favorable tax treatment as an incentive
stock option under the Federal tax laws if (and to the extent) this Option is
exercised and the Option Shares disposed of other than in compliance with
applicable Federal tax laws and regulations. The Company assumes no
responsibility to advise Optionee regarding the tax consequences of exercising
an option or disposing of the Option Shares and Optionee must rely solely upon
Optionee's independent tax advisers.
19. Withholding. Optionee hereby agrees to make appropriate
arrangements with the Company or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
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COMPOSITE SOLUTIONS, INC. OPTIONEE
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