EXHIBIT 4.2
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT
SUPERIOR GALLERIES, INC.
STOCK OPTION AGREEMENT
(NONQUALIFIED STOCK OPTIONS)
I. NOTICE OF STOCK OPTION GRANT
(Participant's Name and Address)
The undersigned Participant has been granted an Option to purchase
Common Stock of the Superior Galleries, Inc., a Delaware Corporation (the
"Company"), subject to the terms and conditions of this Option Agreement, as
follows:
Grant Number
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Date of Grant
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Vesting Commencement Date
---------------------------
Exercise Price Per Share
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Total Number of Shares of
Common Stock covered
by this Option
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Total Exercise Price
---------------------------
Term/Expiration Date (which shall not
exceed 10 years from the date of grant.):
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VESTING SCHEDULE: This Option shall be exercisable, in whole or in
part, according to the following vesting schedule: [INDICATE VESTING SCHEDULE:
AT LEAST 20% PER YEAR FOR EMPLOYEES]
STOCK OPTION PLAN: This Option is granted pursuant to the Omnibus Stock
Option Plan of Superior Galleries, Inc. adopted by the Company's corporate
predecessor by shareholder vote on June 30, 2003, and assumed by this Company on
the same date (the "PLAN"). All of the terms and conditions of the Plan are
hereby incorporated herein by this reference. If there is a conflict between the
terms of the Plan and the terms of this Option, the terms of the Plan shall
supercede any such conflicting terms in this Option.
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II. AGREEMENT
1. GRANT OF OPTION. The Company hereby grants to the Participant (the
"PARTICIPANT") named in the Notice of Stock Option Grant (the "NOTICE OF GRANT")
an option (the "OPTION") to purchase the number of shares of Common Stock of the
Company set forth in the Notice of Grant (the "SHARES"), at the exercise price
per Share set forth in the Notice of Grant (the "EXERCISE PRICE"), and subject
to the terms and conditions of this Agreement.
This Option is not an "INCENTIVE STOCK OPTION" as defined in Section
422 of the Internal Revenue Code (the "CODE"). Accordingly, this Option is
granted pursuant to "Plan B" as set forth in the Plan.
The Participant acknowledges that the grant and exercise of this Option
have substantial tax effects on him or her, and the Participant agrees to obtain
his or her own tax and accounting advice concerning the grant and exercise of
this Option, and concerning his or her sale of the shares issuable upon exercise
of this Option.
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option shall be exercisable during
its term in accordance with the Vesting Schedule set out in the Notice
of Grant and with the applicable provisions of this Option Agreement.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
delivery of an exercise notice in the form attached as EXHIBIT A (the
"EXERCISE NOTICE") which shall state the election to exercise the
Option, the number of Shares with respect to which the Option is being
exercised (the "EXERCISED SHARES"), and such other representations and
agreements as may be required by the Company. The Exercise Notice shall
be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice
accompanied by the aggregate Exercise Price. As a condition to the
exercise of the Option, in whole or in part, the Company may, in its
sole discretion, require the Participant to pay, in addition to the
purchase price for the Shares being exercised, an amount equal to any
federal, state or local taxes that the Company has determined are
required to be paid in connection with the exercise of the Option.
(c) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except
as otherwise provided in this SECTION 2, this Option may not be
exercised unless the Participant, at the time he or she exercises this
Option, is, and has been at all times since the Grant Date, eligible to
receive a grant of an option under Plan B, as set forth in Section 3.2
of the Plan (an "ELIGIBLE PARTICIPANT").
(d) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the
Participant ceases to be an Eligible Participant for any reason other
than his or her death or disability or termination of his or her
relationship with the Company for cause, then the right to exercise
this option shall terminate thirty (30) days after such cessation (but
in no event after the Expiration Date as set forth in the Notice of
Grant (the "EXPIRATION 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.
(e) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the
Participant dies or becomes disabled (within the meaning of Section
22(e)(3) of the Code) prior to the Expiration Date while he or she is
an Eligible Participant, this Option shall be exercisable, within the
period of one year following the date of death or disability of the
Participant, by the Participant or the administrator of his or her
estate, PROVIDED THAT this Option shall be exercisable only to the
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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 Expiration Date.
(f) EXERCISE FOLLOWING TERMINATION FOR CAUSE. If an Eligible
Participant's employment, directorship, or other relationship with the
Company that was the basis for the grant of this Option is terminated
for Cause, as defined herein, then this Option shall immediately expire
on the date of such termination. As used in this Section, "CAUSE" shall
mean: (i) a failure by the Eligible Participant to comply with any
material obligation imposed under any applicable contract of employment
or employment manual; (ii) willful malfeasance by the Eligible
Participant in connection with the performance of his employment or
other duties to the Company; (iii) the Eligible Participant's
conviction of, or pleading guilty or nolo contendere to, or being
indicted for a felony or other crime involving theft, fraud or moral
turpitude; (iv) the illegal use by the Eligible Participant of drugs or
alcohol; (v) fraud or embezzlement against the Company; (vi) the
failure of the Eligible Participant to obey any proper written
direction of the Board that is not inconsistent with this Agreement; or
(x) the violation by the Eligible Participant of the non-competition
and confidentiality provisions of any other agreement with the Company.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with all applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Participant on the date on which the Option is exercised with respect to
such Shares.
3. PARTICIPANT'S REPRESENTATIONS. Participant represents and warrants
to the Company that Participant is acquiring the Option for his own account, and
not with a view to or for sale in connection with any distribution thereof. If
the Shares have not been registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), at the time this Option is exercised, the Participant
shall, if required by the Company, concurrently with the exercise of all or any
portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as EXHIBIT B.
4. LOCKUP PERIOD. The Participant hereby agrees that, if so requested
by the Company or any representative of the underwriters (the "MANAGING
UNDERWRITER") in connection with any registration of the offering of any
securities of the Company under the Securities Act, the Participant shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "MARKET
STANDOFF PERIOD") following the effective date of a registration statement of
the Company filed under the Securities Act. Such restriction shall apply only to
the first registration statement of the Company to become effective under the
Securities Act that includes securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
5. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Participant:
(a) cash or check, payable to the order of the Company;
(b) by (i) delivery of an irrevocable and unconditional
undertaking by a creditworthy broker to deliver promptly to the Company
sufficient funds to pay the exercise price and any required tax
withholding or (ii) delivery by the Participant to the Company of a
copy of irrevocable and unconditional instructions to a creditworthy
broker to deliver promptly to the Company cash or a check sufficient to
pay the exercise price and any required tax withholding;
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(c) when the Common Stock is registered under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT"), by delivery of shares of
Common Stock owned by the Participant valued at their fair market value
as determined by (or in a manner approved by) the Board in good faith
("FAIR MARKET VALUE"), provided (i) such method of payment is then
permitted under applicable law and (ii) such Common Stock, if acquired
directly from the Company, was owned by the Participant at least six
months prior to such delivery;
(d) to the extent permitted by the Board, in its sole
discretion at the time of exercise by payment of such other lawful
consideration as the Board may determine;
(e) by presentation and surrender of this Option to the
Company at its principal executive offices with a "Cashless Exercise
Form" annexed hereto duly executed (such exercise being referred to
herein as a "CASHLESS EXERCISE"). In the event of a Cashless Exercise,
the Participant shall exchange its Option for such number of Shares
determined by multiplying the number of Shares covered by this Option
by a fraction, the numerator of which shall be the difference between
the current market price per share of Common Stock and the Exercise
Price, and the denominator of which shall be the then-current market
price per share of Common Stock.;
(f) by any combination of the above permitted forms of
payment.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of the underlying Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
law.
7. ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS.
(a) CHANGES IN CAPITALIZATION. The provisions of this SECTION
7(A) and SECTION 7(B) below are intended to implement Section 25 of the
Plan. In the event of any stock split, reverse stock split, stock
dividend, recapitalization, combination of shares, reclassification of
shares, spin-off or other similar change in capitalization or event, or
any distribution to holders of Common Stock other than a normal cash
dividend, (i) the number and class of securities and exercise price per
share subject to each outstanding Option, and (ii) the exercise price
of this Option shall be proportionally adjusted by the Company (or
substituted Awards may be made, if applicable) to the extent the Board
shall determine, in good faith, that such an adjustment (or
substitution) is necessary and appropriate. If this Section 7(a)
applies and Section 7(c) also applies to any event, Section 7(c) shall
be applicable to such event, and this Section 7(a) shall not be
applicable.
(b) LIQUIDATION OR DISSOLUTION. In the event of a proposed
liquidation or dissolution of the Company, the Board shall upon written
notice to the Participants provide that all then unexercised Options
will, to the extent permissible under the rules of the California
Department of Corporations (i) become exercisable in full as of a
specified time at least 10 business days prior to the effective date of
such liquidation or dissolution and (ii) terminate effective upon such
liquidation or dissolution, except to the extent exercised before such
effective date.
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(c) REORGANIZATION EVENTS
(a) DEFINITION. A "Reorganization Event" shall mean:
(a) any merger or consolidation of the Company with or into
another entity as a result of which the Common Stock is
converted into or exchanged for the right to receive cash,
securities or other property or (b) any exchange of shares of
the Company for cash, securities or other property pursuant to
a share exchange transaction.
(b) CONSEQUENCES OF A REORGANIZATION EVENT ON
OPTIONS. Upon the occurrence of a Reorganization Event, or the
execution by the Company of any agreement with respect to a
Reorganization Event, the Board shall provide that all
outstanding Options shall be assumed, or equivalent options
shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof). For purposes hereof, an
Option shall be considered to be assumed if, following
consummation of the Reorganization Event, the Option confers
the right to purchase, for each share of Common Stock subject
to the Option immediately prior to the consummation of the
Reorganization Event, the consideration (whether cash,
securities or other property) received as a result of the
Reorganization Event by holders of Common Stock for each share
of Common Stock held immediately prior to the consummation of
the Reorganization Event (and if holders were offered a choice
of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common
Stock); provided, however, that if the consideration received
as a result of the Reorganization Event is not solely common
stock of the acquiring or succeeding corporation (or an
affiliate thereof), the Company may, with the consent of the
acquiring or succeeding corporation, provide for the
consideration to be received upon the exercise of Options to
consist solely of common stock of the acquiring or succeeding
corporation (or an affiliate thereof) equivalent in fair
market value to the per share consideration received by
holders of outstanding shares of Common Stock as a result of
the Reorganization Event.
Notwithstanding the foregoing, if the acquiring or
succeeding corporation (or an affiliate thereof) does not
agree to assume, or substitute for, such Options, then the
Board shall, upon written notice to the Participants, provide
that if permitted under the rules of the California Department
of Corporations all then unexercised Options will become
exercisable in full as of a specified time prior to the
Reorganization Event and will terminate immediately prior to
the consummation of such Reorganization Event, except to the
extent exercised by the Participants before the consummation
of such Reorganization Event; provided, however, that in the
event of a Reorganization Event under the terms of which
holders of Common Stock will receive upon consummation thereof
a cash payment for each share of Common Stock surrendered
pursuant to such Reorganization Event (the "Acquisition
Price"), then the Board may instead provide that all
outstanding Options shall terminate upon consummation of such
Reorganization Event and that each Participant shall receive,
in exchange therefor, a cash payment equal to the amount (if
any) by which (A) the Acquisition Price multiplied by the
number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the
aggregate exercise price of such Options.
8. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the Participant only by the Participant.
The terms of this Option Agreement shall be binding upon the executors,
administrators, heirs and successors of the Participant.
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9. WITHHOLDING. The Participant agrees that the Participant may be
subject to income tax withholding by the Company on the compensation income
recognized by the Participant. 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.
10. ENTIRE AGREEMENT; GOVERNING LAW. This Option Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof
and supersedes in their entirety all prior undertakings and agreements of the
Company and Participant with respect to the subject matter hereof, and may not
be modified adversely to the Participant's interest except by means of a writing
signed by the Company and Participant. This agreement is governed by the
internal substantive laws but not the choice of law rules of the State of
California.
11. NO GUARANTEE OF CONTINUED SERVICE. THE PARTICIPANT ACKNOWLEDGES AND
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS AN ELIGIBLE PARTICIPANT AT THE WILL OF THE COMPANY
(NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING
SHARES HEREUNDER). THE PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN ELIGIBLE PARTICIPANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR
AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE THE PARTICIPANT'S RELATIONSHIP AS AN ELIGIBLE
PARTICIPANT AT ANY TIME, WITH OR WITHOUT CAUSE.
The Participant has reviewed this Option in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option and
fully understands all provisions of the Option. The Participant further agrees
to notify the Company upon any change in the residence address indicated below.
PARTICIPANT: SUPERIOR GALLERIES, INC.
By:
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Signature
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Print Name Title
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Residence Address
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EXHIBIT A
EXERCISE NOTICE
Superior Galleries, Inc.
0000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: President
1. EXERCISE OF OPTION. Effective as of today, _____________, _____, the
undersigned ("PARTICIPANT") hereby elects to exercise Participant's option
("OPTION") to purchase __________ shares of the Common Stock (the "SHARES") of
SUPERIOR GALLERIES, INC., (the "COMPANY") under and pursuant to the Stock Option
Agreement dated ___________, ____ (the "OPTION AGREEMENT").
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the
full purchase price of the Shares, as set forth in the Option Agreement.
The payment method shall be:
A. Cash or Check: Amount Provided: _________________
B. Shares of Common Stock Held : Number of: _________ Value:
________
C. Other Method Permitted by the Option Agreement (specify):
___________________________________________________________.
3. REPRESENTATIONS OF PARTICIPANT. Participant acknowledges that
Participant has received, read and understood the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Shares
subject to this Option, notwithstanding the exercise of the Option. The Shares
shall be issued to the Participant as soon as practicable after the Option is
exercised. No adjustment shall be made for a dividend or other right for which
the record date is prior to the date of issuance.
5. TAX CONSULTATION. Participant understands that Participant may
suffer adverse tax consequences as a result of Participant's purchase or
disposition of the Shares. Participant represents that Participant has consulted
with any tax consultants Participant deems advisable in connection with the
purchase or disposition of the Shares and that Participant is not relying on the
Company for any tax advice.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS. Participant
understands and agrees that the Company shall cause the legend set forth below
or a legend substantially equivalent thereto, to be placed upon any
certificate(s) evidencing ownership of the Shares together with any other
legends that may be required by the Company or by state or federal securities
laws:
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
7. REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Participant and his or her heirs, executors, administrators, successors and
assigns.
9. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or by the Company forthwith to the
Board of Directors which shall review such dispute at its next regular meeting.
The resolution of such a dispute by the Board of Directors shall be final and
binding on all parties.
10. GOVERNING LAW: SEVERABILITY. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of the State of
California.
11. ENTIRE AGREEMENT. The Option Agreement is incorporated herein by
reference. This Agreement, the Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Participant with respect to the
subject matter hereof, and may not be modified adversely to the Participant's
interest except by means of a writing signed by the Company and Participant.
Submitted by: Accepted by:
PARTICIPANT: SUPERIOR GALLERIES, INC.
By:
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Print Name: Its:
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Address:
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PARTICIPANT:
COMPANY: SUPERIOR GALLERIES, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-referenced securities (the
"SECURITIES"), the undersigned Participant makes the following representations
to the Company:
(a) Participant is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities.
Participant is acquiring the Securities for investment for Participant's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
(b) Participant acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Participant's investment intent as expressed herein. In this
connection, Participant understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Participant's representation was predicated solely upon a present intention
to hold these Securities for the minimum capital gains period specified under
tax statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Participant further understands that the Securities must
be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. Participant
further acknowledges and understands that the Company is under no obligation to
register the Securities. Participant understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.
(c) Participant is familiar with the provisions of Rule 144,
promulgated under the Securities Act, which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a nonpublic offering subject to the satisfaction of
certain conditions. The Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which require the resale to
occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a nonaffiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
SECTIONS (1), (2), (3) AND (4) of the paragraph immediately above.
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(d) Participant further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the Securities and Exchange Commission has expressed
its opinion that persons proposing to sell private placement securities other
than in a registered offering and otherwise than pursuant to Rules 144 will have
a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own
risk. Participant understands that no assurances can be given that any such
other registration exemption will be available in such event.
Submitted by:
Accepted by:
PARTICIPANT
SUPERIOR GALLERIES, INC.
By:
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Signature
Its:
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ADDRESS:
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Print Name 0000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx, XX 00000
ADDRESS:
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Date Received
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