XXXXXXX ELECTRONICS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made effective as of this _____ day of ____________,
19___, by and between Xxxxxxx Electronics, Inc., a Minnesota corporation (the
"Company"), and ________________ ("Optionee").
W I T N E S S E T H:
WHEREAS, the Optionee on the date hereof is a key employee, officer,
director, consultant or advisor of the Company or one of its Subsidiaries; and
WHEREAS, the Company wishes to grant a nonqualified stock option to
Optionee to purchase shares of the Company's Common Stock pursuant to the
Company's 1997 Stock Option Plan (the "Plan"); and
WHEREAS, the Administrator has authorized the grant of a nonqualified
stock option to Optionee and has determined that, as of the effective date of
this Agreement, the fair market value of the Company's Common Stock is $______
per share;
WHEREAS, the Administrator has authorized the grant of a nonqualified
stock option to Optionee and has determined that, as of the effective date of
this Agreement, the fair market value of the Company's Common Stock is $ per
share;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to Optionee on the date
set forth above (the "Date of Grant"), the right and option (the "Option") to
purchase all or portions of an aggregate of ____________________________
(______) shares of Common Stock at a per share price of $_______ on the terms
and conditions set forth herein, subject to adjustment pursuant to Section 13 of
the Plan. This Option is a nonqualified stock option and will not be treated as
an incentive stock option, as defined under Section 422, or any successor
provision, of the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder.
2. Duration and Exercisability.
a. The term during which this Option may be exercised shall terminate
on ____________________, ______, except as otherwise provided in Paragraphs 2(b)
through 2(e) below. This Option shall become exercisable according to the
following schedule:
Percentage/Number
Vesting Date of Shares
Once the Option becomes exercisable to the extent of one hundred percent (100%)
of the aggregate number of shares specified in Paragraph 1, Optionee may
continue to exercise this Option under the terms and conditions of this
Agreement until the termination of the Option as provided herein. If Optionee
does not purchase upon an exercise of this Option the full number of shares
which Optionee is then entitled to purchase, Optionee may purchase upon any
subsequent exercise prior to this Option's termination such previously
unpurchased shares in addition to those Optionee is otherwise entitled to
purchase.
b. Termination of Relationship (other than Change of Control,
Disability or Death). If Optionee ceases to be an employee, director, consultant
or an advisor of the Company or any Subsidiary for any reason other than because
of a "change of control transaction" as described in Paragraph 2(c) or because
of disability or death, this Option shall completely terminate on the earlier of
(i) the close of business on the three-month anniversary date of the termination
of all such relationships, and (ii) the expiration date of this Option stated in
Paragraph 2(a) above. In such period following such termination, this Option
shall be exercisable only to the extent the Option was exercisable on the
vesting date immediately preceding the date on which all of Optionee's
relationships with the Company or Subsidiary have terminated, but had not
previously been exercised. To the extent this Option was not exercisable upon
the termination of such relationship, or if Optionee does not exercise the
Option within the time specified in this Paragraph 2(b), all rights of Optionee
under this Option shall be forfeited.
c. Change of Control. If (i) Optionee ceases to be an
employee, director, consultant or advisor of the Company or any Subsidiary
because of a "change of control transaction," this Option shall completely
terminate on the earlier of (i) the close of business on the three-month
anniversary date of such termination of relationship with the Company and (ii)
the expiration date of this Option stated in Paragraph 2(a) above; provided,
however, that if (a) such transaction is treated as a "pooling of interests"
under generally accepted accounting principles and (b) Optionee is an
"affiliate" of the Company or Subsidiary under applicable legal and accounting
principles, this Option shall completely terminate on the later of (A) the close
of business on the three-month anniversary date of the termination of all such
relationships with the Company or any Subsidiary, and (B) the close of business
on the date that is 60 days after the date on which affiliates are no longer
restricted from selling, transferring or otherwise disposing of the shares of
stock received in the change of control transaction.
In such period following termination of Optionee's relationship with
the Company upon a change of control transaction, this Option shall be fully
exercisable unless the acceleration of the exercisability of this Option has
been prevented as provided in Section 13 of the Plan, in which case, this Option
shall be exercisable only to the extent the Option was exercisable on the
vesting date immediately preceding such termination of all of Optionee's
relationships with the Company, but had not previously been exercised. To the
extent this Option was not exercisable upon such termination of such
relationships, or if Optionee does not exercise the Option within the time
period specified in this Paragraph 2(c), all rights of Optionee under this
Option shall be forfeited.
For purposes of this Paragraph 2(c), a "change of control transaction"
means an acquisition of the Company through the sale of substantially all of the
Company's assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification, extraordinary
dividend, divestiture or liquidation of the Company.
d. Disability. If Optionee ceases to be an employee, director,
consultant or advisor of the Company or any Subsidiary because of disability (as
such term is defined in Code Section 22(e)(3), or any successor provision), this
Option shall completely terminate on the earlier of (i) the close of business on
the twelve-month anniversary date of the termination of all such relationships
with the Company or any Subsidiary, and (ii) the expiration date under this
Option stated in Paragraph 2(a) above. In such period following such
termination, this Option shall be exercisable only to the extent the Option was
exercisable on the vesting date immediately preceding the termination of all of
Optionee's relationships. If Optionee does not exercise the Option within the
time specified in this Paragraph 2(d), all rights of Optionee under this Option
shall be forfeited.
e. Death. In the event of Optionee's death, this Option shall
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the date of Optionee's death, and (ii) the expiration date
of this Option stated in Paragraph 2(a) above. In such period following
Optionee's death, this Option may be exercised by the person or persons to whom
Optionee's rights under this Option shall have passed by Optionee's will or by
the laws of descent and distribution only to the extent the Option was
exercisable on the vesting date immediately preceding the date of Optionee's
death. If such person or persons fail to exercise this Option within the time
specified in this Paragraph 2(e), all rights under this Option shall be
forfeited.
3. Manner of Exercise.
a. General. The Option may be exercised only by Optionee (or
other proper party in the event of death or incapacity), subject to the
conditions of the Plan and subject to such other administrative rules as the
Administrator may deem advisable, by delivering within the option period written
notice of exercise to the Company at its principal office. The notice shall
state the number of shares as to which the Option is being exercised and shall
be accompanied by payment in full of the option price for all shares designated
in the notice. The exercise of the Option shall be deemed effective upon receipt
of such notice by the Company and upon payment that complies with the terms of
the Plan and this Agreement. The Option may be exercised with respect to any
number or all of the shares as to which it can then be exercised and, if
partially exercised, may be exercised as to the unexercised shares any number of
times during the option period as provided herein.
b. Form of Payment. Payment of the option price by Optionee
shall be in the form of cash, personal check, certified check or previously
acquired shares of Common Stock of the Company, or any combination thereof. Any
stock so tendered as part of such payment shall be valued at its Fair Market
Value as provided in the Plan. For purposes of this Agreement, "previously
acquired shares of Common Stock" shall include shares of Common Stock that are
already owned by Optionee at the time of exercise.
c. Stock Transfer Records. As soon as practicable after the
effective exercise of all or any part of the Option, Optionee shall be recorded
on the stock transfer books of the Company as the owner of the shares purchased,
and the Company shall deliver to Optionee one or more duly issued stock
certificates evidencing such ownership. All requisite original issue or transfer
documentary stamp taxes shall be paid by the Company.
4. Miscellaneous.
a. Rights as Shareholder. This Agreement shall not confer on
Optionee any right with respect to the continuance of any relationship with the
Company or any of its Subsidiaries, nor will it interfere in any way with the
right of the Company to terminate any such relationship. Optionee shall have no
rights as a shareholder with respect to shares subject to this Option until such
shares have been issued to Optionee upon exercise of this Option. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the
record date is prior to the date such shares are issued, except as provided in
Section 13 of the Plan.
b. Securities Law Compliance. The exercise of all or any parts
of this Option shall only be effective at such time as counsel to the Company
shall have determined that the issuance and delivery of Common Stock pursuant to
such exercise will not violate any state or federal securities or other laws.
Optionee may be required by the Company, as a condition of the effectiveness of
any exercise of this Option, to agree in writing that all Common Stock to be
acquired pursuant to such exercise shall be held, until such time that such
Common Stock is registered and freely tradable under applicable state and
federal securities laws, for Optionee's own account without a view to any
further distribution thereof and that such shares will be not transferred or
disposed of except in compliance with applicable state and federal securities
laws.
c. Mergers, Recapitalizations, Stock Splits, Etc. Pursuant and
subject to Section 13 of the Plan, certain changes in the number or character of
the Common Stock of the Company (through sale, merger, consolidation, exchange,
reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Optionee's rights with
respect to any unexercised portion of the Option (i.e., Optionee shall have such
"anti-dilution" rights under the Option with respect to such events, but shall
not have "preemptive" rights).
d. Withholding Taxes. In order to permit the Company to comply
with all applicable federal or state income tax laws or regulations, the Company
may take such action as it deems appropriate to insure that, if necessary, all
applicable federal or state payroll, income or other taxes are withheld from any
amounts payable by the Company to Optionee. If the Company is unable to withhold
such federal and state taxes, for whatever reason, Optionee hereby agrees to pay
to the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal or state law. Optionee may, subject to the
approval and discretion of the Administrator or such administrative rules it may
deem advisable, elect to have all or a portion of such tax withholding
obligations satisfied by delivering shares of the Company's Common Stock having
a fair market value equal to such obligations.
e. Nontransferability. During the lifetime of Optionee,
the accrued Option shall be exercisable only by Optionee or by the Optionee's
guardian or other legal representative, and shall not be assignable or
transferable by Optionee, in whole or in part, other than by will or by the laws
of descent and distribution.
f. 1997 Stock Option Plan. The Option evidenced by this
Agreement is granted pursuant to the Plan, a copy of which Plan has been made
available to Optionee and is hereby incorporated into this Agreement. This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan. The Plan governs this Option and, in the event of any questions as
to the construction of this Agreement or in the event of a conflict between the
Plan and this Agreement, the Plan shall govern, except as the Plan otherwise
provides.
g. Lockup Period Limitation. Optionee agrees that in the event
the Company advises Optionee that it plans an underwritten public offering of
its Common Stock in compliance with the Securities Act of 1933, as amended, and
that the underwriter(s) seek to impose restrictions under which certain
shareholders may not sell or contract to sell or grant any option to buy or
otherwise dispose of part or all of their stock purchase rights of the
underlying Common Stock, Optionee hereby agrees that for a period not to exceed
180 days from the date of prospectus, Optionee will not sell or contract to sell
or grant an option to buy or otherwise dispose of this option or any of the
underlying shares of Common Stock without the prior written consent of the
underwriter(s) or its representative(s).
h. Blue Sky Limitation. Notwithstanding anything in this
Agreement to the contrary, in the event the Company makes any public offering of
its securities and determines in its sole discretion that it is necessary to
reduce the number of issued but unexercised stock purchase rights so as to
comply with any state securities or Blue Sky law limitations with respect
thereto, the Board of Directors of the Company shall have the right (i) to
accelerate the exercisability of this Option and the date on which this Option
must be exercised, provided that the Company gives Optionee 15 days' prior
written notice of such acceleration, and (ii) to cancel any portion of this
Option or any other option granted to Optionee pursuant to the Plan which is not
exercised prior to or contemporaneously with such public offering. Notice shall
be deemed given when delivered personally or when deposited in the United States
mail, first class postage prepaid and addressed to Optionee at the address of
Optionee on file with the Company.
i. Accounting Compliance. Optionee agrees that, in the event a
"change of control transaction" (as defined in Paragraph 2(c) above) is treated
as a "pooling of interests" under generally accepted accounting principles and
Optionee is an "affiliate" of the Company or any Subsidiary (as defined in
applicable legal and accounting principles) at the time of such change of
control transaction, Optionee will comply with all requirements of Rule 145 of
the Securities Act of 1933, as amended, and the requirements of such other legal
or accounting principles, and will execute any documents necessary to ensure
such compliance.
j. Stock Legend. If applicable, the Company may put an
appropriate legend on the certificates for any shares of Common Stock purchased
by Optionee (or, in the case of death, Optionee's successors) to reflect the
restrictions of Paragraphs 4(b), 4(g), 4(h) and 4(i) of this Agreement.
k. Scope of Agreement. This Agreement shall bind and inure
to the benefit of the Company and its successors and assigns and Optionee and
any successor or successors of Optionee permitted by Paragraph 2(b) above.
l. Arbitration. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an attorney
who has practiced securities or business litigation for at least ten years. If
the parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Hennepin County, Minnesota,
select an arbitrator. Arbitration will be conducted pursuant to the provisions
of this Agreement, and the commercial arbitration rules of the American
Arbitration Association, unless such rules are inconsistent with the provisions
of this Agreement. Limited civil discovery shall be permitted for the production
of documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator's fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys' fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
XXXXXXX ELECTRONICS, INC.
By:_____________________________________
Its:___________________________________
COMPANY
________________________________________
OPTIONEE
