FORM OF SOFTMAX, INC STOCK OPTION AGREEMENT
Exhibit 99.3
SoftMax, Inc. has granted to the individual (the “Optionee”) named in the Notice of Grant of
Stock Option (the “Notice”) to which this Stock Option Agreement (the “Option Agreement”) is
attached an option (the “Option”) to purchase certain shares of Stock upon the terms and conditions
set forth in the Notice and this Option Agreement. The Option has been granted pursuant to and
shall in all respects be subject to the terms and conditions of the SoftMax, Inc. 2004 Stock Option
Plan (the “Plan”) as amended to the Date of Option Grant, the provisions of which are incorporated
herein by reference. By signing the Notice, the Optionee: (a) represents that the Optionee has read
and is familiar with the terms and conditions of the Notice, the Plan and this Option Agreement,
including the Effect of Termination of Service set forth in Section 7, the Right of First Refusal
set forth in Section 11, (b) accepts the Option subject to all of the terms and conditions of the
Notice, the Plan and this Option Agreement, (c) agrees to accept as binding, conclusive and final
all decisions or interpretations of the Board upon any questions arising under the Notice, the Plan
or this Option Agreement, and (d) acknowledges receipt of a copy of the Notice, the Plan and this
Option Agreement.
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Notice or the Plan. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) “Cause” shall mean any of the following: (i) the Optionee’s theft of Company property or
falsification of any Participating Company documents or records; (ii) the Optionee’s improper use
or disclosure of a Participating Company’s confidential or proprietary information; (iii) any
action by the Optionee which has a detrimental effect on a Participating Company’s reputation or
business; (iv) the Optionee’s failure or inability to perform any reasonable assigned duties after
written notice from the Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment agreement between
the Optionee and the Participating Company Group, which breach is not cured pursuant to the terms
of such agreement; or (vi) the Optionee’s conviction (including any plea of guilty or no contest)
of any criminal act which impairs the Optionee’s ability to perform his or her duties with the
Participating Company Group.
(b) “Good Reason” shall mean any one or more of the following:
(i) without the Optionee’s express written consent, the assignment to the Optionee of any
duties, or any limitation of the Optionee’s responsibilities, substantially inconsistent with the
Optionee’s positions, duties, responsibilities and status with the Participating Company Group
immediately prior to the date of the Change in Control;
(ii) without the Optionee’s express written consent, the relocation of the principal place of
the Optionee’s employment to a location that is more than fifty (50) miles from the Optionee’s
principal place of employment immediately prior to the date
of the Change in Control or the imposition of travel requirements substantially more demanding
of the Optionee than such travel requirements existing immediately prior to the date of the Change
in Control;
(iii) any failure by the Participating Company Group to pay, or any material reduction by the
Participating Company Group of the Optionee’s base salary in effect immediately prior to the date
of the Change in Control (unless reductions comparable in amount and duration are concurrently made
for all other employees of the Participating Company Group with responsibilities, organizational
level and title comparable to the Optionee’s); or
(iv) any failure by the Participating Company Group to (1) continue to provide the Optionee
with the opportunity to participates on terms no less favorable than those in effect for the
benefit of any employee group which customarily includes a person holding the employment position
or a comparable position with the Participating Company Group then held by the Optionee, in any
benefit or compensation plans and programs, including, but not limited to, the Participating
Company Group’s life, disability, health, dental, medical, savings, profit sharing, stock purchase
and retirement plans, if any, in which the Optionee was participating immediately prior to the date
of the Change in Control, or their equivalent, or (2) provide the Optionee with all other fringe
benefits (or their equivalent) from time to time in effect for the benefit of any employee group
which customarily includes a person holding the employment position or a comparable position with
the Participating Company Group then held by the Optionee.
(c) “Termination After Change in Control” shall mean either of the following events occurring
within twelve (12) months after (or directly in connection with) a Change in Control:
(i) termination by the Participating Company Group of the Optionee’s Service with the
Participating Company Group for any reason other than for Cause; or
(ii) the Optionee’s resignation for Good Reason from Service with the Participating Company
Group within a reasonable period of time following the event constituting Good Reason.
Notwithstanding any provision herein to the contrary, Termination After Change in Control shall not
include any termination of the Optionee’s Service with the Participating Company Group which (1) is
for Cause; (2) is a result of the Optionee’s death or Disability; (3) is a result of the Optionee’s
voluntary termination of Service other than for Good Reason; or (4) occurs prior to the
effectiveness of a Change in Control (and is not a direct result of the Change in Control).
1.2 Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term “or” is not intended to be exclusive, unless the context
clearly requires otherwise.
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2. Tax Consequences.
2.1 Tax Status of Option. This Option is intended to have the tax status designated in the
Notice.
(a) Incentive Stock Option. If the Notice so designates, this Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should consult with the
Optionee’s own tax advisor regarding the tax effects of this Option and the requirements necessary
to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited
to, holding period requirements. (NOTE TO OPTIONEE: If the Option is exercised more than three (3)
months after the date on which you cease to be an Employee (other than by reason of your death or
permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be
treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required
by Section 422 of the Code.)
(b) Nonstatutory Stock Option. If the Notice so designates, this Option is intended to be a
Nonstatutory Stock Option and shall not he treated as an Incentive Stock Option within the meaning
of Section 422(b) of the Code.
2.2 ISO Fair Market Value Limitation. If the Notice designates this Option as an Incentive
Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted
to the Optionee under all stock option plans of the Participating Company Group, including the
Plan) becomes exercisable for the first time during any calendar year for shares having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options
which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this
Section 2.2, options designated as Incentive Stock Options are taken into account in the order in
which they were granted, and the Fair Market Value of stock is determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a different limitation
from that set forth in this Section 2.2, such different limitation shall be deemed incorporated
herein effective as of the date required or permitted by such amendment to the Code. If the Option
is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by
reason of the limitation set forth in this Section 2.2, the Optionee may designate which portion of
such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be
deemed to have exercised the Incentive Stock Option portion of the Option first. Separate
certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE
TO OPTIONEE: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied
by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock
Options you hold (whether granted pursuant to the Plan or any other stock option plan of the
Participating Company Group) is greater than $100,000, you should contact the Chief Financial
Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock
Option.)
3. Administration.
All questions of interpretation concerning this Option Agreement shall be determined by the
Board. All determinations by the Board shall be final and binding upon all
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persons having an interest in the Option. Any officer of a Participating Company shall have
the authority to act on behalf of the Company with respect to any matter, right, obligation, or
election which is the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation, or election.
4. Exercise of the Option.
4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be
exercisable on and after the Date of Option Grant and prior to the termination of the Option {as
provided in Section 6) in an amount not to exceed the number of Vested Shares less the number of
shares previously acquired upon exercise of the Option, subject to the Company’s repurchase rights
set forth in Section 11.
4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company which
must state the election to exercise the Option, the number of whole shares of Stock for which the
Option is being exercised and such other representations and agreements as to the Optionee’s
investment intent with respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, by. confirmed facsimile
transmission, or by such other means as the Company may permit, to the Chief Financial Officer of
the Company, or other authorized representative of the Participating Company Group, prior to the.
termination of the Option as set forth in Section 6, accompanied by full payment of the aggregate
Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice and the aggregate Exercise Price.
4.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of whole shares of Stock owned by the Optionee having a Fair Market
Value (as determined by the Company without regard to any restrictions on transferability
applicable to such stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii) by means of a
Cashless Exercise, as defined in Section 43(b), or (iv) by any combination of the foregoing.
(b) Limitations on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. The Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly,
from the Company.
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(ii) Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed notice
together with irrevocable instructions to a broker in a form acceptable to the Company providing
for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of
the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure
approved by the Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System). The Company reserves, at any and all times, the right, in the Company’s
sole and absolute discretion, to decline to approve or terminate any such program or procedure.
4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and
any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of
any restriction with respect to any shares acquired upon exercise of the Option. The Company shall
have no obligation to deliver shares of Stock until the tax withholding obligations of the
Participating Company Group have been satisfied by the Optionee.
4.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a
Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, in the names of the heirs of the
Optionee.
4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such securities. The
Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other law or regulations
or the requirements of any stock exchange or market system upon which the Stock may then be listed.
In addition, the Option may not be exercised unless (i) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with respect to the shares
issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act, THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares subject to the Option shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which such
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requisite authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the Company.
4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.
5. Nontransferability of the Option.
The Option may be exercised during the lifetime of the Optionee only by the Optionee or the
Optionee’s guardian or legal representative and may not be assigned or transferred in any manner
except by will or by the laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent provided in Section 7, may be exercised by the Optionee’s legal
representative or by any person empowered to do so under the deceased Optionee’s will or under the
then applicable laws of descent and distribution.
6. Termination of the Option.
The Option shall terminate and may no longer be exercised on the first to occur of (a) the
Option Expiration Date, (b) the last date for exercising the Option following termination of the
Optionee’s Service as described in Section 7, or (c) a Change hi Control to the extent provided in
Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) Disability. If the Optionee’s Service with the Participating Company Group terminates
because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on
the date on which the Optionee’s Service terminated, may be exercised by the Optionee (or the
Optionee’s guardian or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Optionee’s Service terminated, but in any event no later than
the Option Expiration Date.
(b) Death. If the Optionee’s Service with the Participating Company Group terminates because
of the death of the Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee’s Service terminated, may be exercised by the Optionee’s legal representative or
other person who acquired the right to exercise the Option by reason of the Optionee’s death at any
time prior to the expiration of twelve (12) months after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date. The Optionee’s Service shall
be deemed to have terminated on account of death if the Optionee dies within three (3) months after
the Optionee’s termination of Service.
(c) Other Termination of Service. If the Optionee’s Service with the Participating Company
Group terminates for any reason, except Disability or death, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee at any time prior to the expiration of three
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(3) months (or such other longer period of time as determined by the Board, in its discretion)
after the date on which the Optionee’s Service terminated, but in any event no later than the
Option Expiration Date.
7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of
the Option within the applicable time periods set forth in Section 7.1 is prevented by the
provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
7.3 Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 7:1 of shares acquired upon the exercise of
the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date
on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii) the
Option Expiration Date.
8. Change in Control.
In the event of a Change in Control vesting of the shares subject to the Option shall
accelerate as provided in the Notice. In addition, the Acquiring Corporation may either assume the
Company’s rights and obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation’s stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Change in Control to the extent that the Option is
neither assumed or substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control. Notwithstanding the foregoing,
shares acquired upon exercise of the Option prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of this Option Agreement except as otherwise provided herein.
9.
Adjustments for Changes in Capital Structure.
In the event of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of shares of stock
subject to the Option. If a majority of the shares which are of the same class as the shares that
are subject to the Option are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the Board
may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the
event of any such amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its discretion. Notwithstanding the
foregoing, any fractional share resulting from an adjustment pursuant to this Section 9 shall be
rounded down to the nearest whole number and in no event may the Exercise Price be decreased to an
amount less than the par value, if any, of the stock
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subject to the Option. The adjustments determined by the Board pursuant to this Section 9
shall be final, binding and conclusive.
10. Rights as a Stockholder, Employee or Consultant.
The Optionee shall have no rights as a stockholder with respect to any shares covered by the
Option until the date of the issuance of a certificate for the shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date such certificate is issued, except
as provided in Section 9. If the Optionee is an Employee, the Optionee understands and acknowledges
that, except as otherwise provided in a separate, written employment agreement between a
Participating Company and the Optionee, the Optionee’s employment is “at will” and is for no
specified term. Nothing in this Option Agreement shall confer upon the Optionee any right to
continue in the Service of a Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee’s Service as an Employee or Consultant, as
the case may be, at any time.
11. Right of First
Refusal.
11.1 Grant of Right of First Refusal. Except as provided in Section 11.7 below, in the event
the Optionee, the Optionee’s legal representative, or other holder of shares acquired upon exercise
of the Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of any shares
acquired upon exercise of the Option (the “Transfer Shares”) to any person or entity, including,
without limitation, any stockholder of a Participating Company, the Company shall have the right to
repurchase the Transfer Shares under the terms and subject to the conditions set forth in this
Section 11 (the “Right of First Refusal”).
11.2 Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the
Optionee shall deliver written notice (the “Transfer Notice”) to the Company describing fully the
proposed transfer, including the number of Transfer Shares, the name and address of the proposed
transferee (“Proposed Transferee”) and, if the transfer is voluntary, the proposed transfer price,
and containing such information necessary to show the bona fide nature of the proposed transfer. In
the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed
to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith. If
the Optionee proposes to transfer any Transfer Shares to more than one Proposed Transferee, the
Optionee shall provide a separate Transfer Notice for the proposed transfer to each Proposed
Transferee. The Transfer Notice shall be signed by both the Optionee and the Proposed Transferee
and must constitute a binding commitment of the Optionee and the Proposed Transferee for the
transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First
Refusal
11.3 Bona Fide Transfer. If the Company determines that the information provided by the
Optionee in the Transfer Notice is insufficient to establish the bona fide nature of a proposed
voluntary transfer, the Company shall give the Optionee written notice of the Optionee’s failure to
comply with the procedure described in this Section 11, and the Optionee shall have no right to
transfer the Transfer Shares without first complying with the procedure
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described in this Section 11. The Optionee shall not be permitted to transfer the Transfer
Shares if the proposed transfer is not bona fide.
11.4 Exercise of Right of First Refusal. If the Company determines the proposed transfer to be
bona fide, the Company shall have the right to purchase ail, but not less than all, of the Transfer
Shares (except as the Company and the Optionee otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Optionee of a notice of exercise of the
Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to
the Company. The Company’s exercise or failure to exercise the Right of First Refusal with respect
to any proposed transfer described in a Transfer Notice shall not affect the Company’s right to
exercise the Right of First Refusal with respect to any proposed transfer described in any other
Transfer Notice, whether or not such other Transfer Notice is issued by the Optionee or issued by a
person other than the Optionee with respect to a proposed transfer to the same Proposed Transferee.
If the Company exercises the Right of First Refusal, the Company and the Optionee shall thereupon
consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer
Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company
(unless a longer period is offered by the Proposed Transferee); provided, however, that in the
event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the present value cash
equivalent of the consideration described in the Transfer Notice as reasonably determined by the
Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to the extent of the
unpaid principal and any accrued interest canceled.
11.5 Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right of
First Refusal in full (or to such lesser extent as the Company and the Optionee otherwise agree)
within the period specified in Section 11.4 above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer
Notice, provided such transfer occurs not later than ninety (90) days following delivery to the
Company of the Transfer Notice. The Company shall have the right to demand further assurances from
the Optionee and the Proposed Transferee (in a form satisfactory to the Company) that the transfer
of the Transfer Shares was actually carried out on the terms and conditions described in the
Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the
Company has received such assurances, if so demanded, and has approved the proposed transfer as
bona fide. Any proposed transfer on terms and conditions different from those described in the
Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be
subject to the Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 11.
11.6 Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest
therein, other than the Company, shall be required as a condition of such transfer to agree in
writing (in a form satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions of this Option
Agreement, including this Section 11 providing for the Right of First Refusal with respect to any
subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall
be void unless the provisions of this Section 11 are met.
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11.7 Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not
apply to any transfer or exchange of the shares acquired upon exercise of the Option if such
transfer or exchange is in connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the provisions of Section
129 below result in a termination of the Right of First Refusal.
11.8 Assignment of Right of First Refusal. The Company shall have the right to assign the
Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or
more persons as may be selected by the Company.
11.9 Early Termination of Right of First Refusal. The other provisions of this Option
Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force
and effect upon (a) the occurrence of a Change in Control, unless the Acquiring Corporation assumes
the Company’s rights and obligations under the Option or substitutes a substantially equivalent
option for the Acquiring Corporation’s stock for the Option, or (b) the existence of a public
market for the class of shares subject to the Right of First Refusal. A “public market” shall be
deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used
in the Exchange Act) or (ii) such stock is traded on the over-the-counter market and prices
therefor are published daily on business days in a recognized financial journal.
12. Stock Distributions Subject to Option Agreement.
If, from time to time, there is any stock dividend, stock split or other change, as described
in Section 9, in the character or amount of any of the outstanding stock of the corporation the
stock of which is subject to the provisions of this Option Agreement, then in such event any and
all new, substituted or additional securities to which the Optionee is entitled by reason of the
Optionee’s ownership of the stores acquired upon exercise of the Option shall be immediately
subject to the Right of First Refusal with the same force and effect as the shares subject to the
Right of First Refusal immediately before such event.
13. Notice of Sales Upon Disqualifying Disposition.
The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance
with the provisions of this Option Agreement. In addition, if the Notice designates this Option as
an Incentive Stock Option, the Optionee shall (a) promptly notify the Chief Financial Officer of
the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within
one (1) year after the date the Optionee exercises all or part of the Option or within two (2)
years after the Date of Option Grant and (b) provide the Company with a description of the
circumstances of such disposition. Until such time as the Optionee disposes of such shares in a
manner consistent with the provisions of this Option Agreement, unless otherwise expressly
authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in
the Optionee’s name (and not in the name of any nominee) for the one-year period immediately after
the exercise of the Option and the two-year period immediately after Date of Option Grant. At any
time during the one-year or two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the
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Option requesting the transfer agent for the Company’s stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate pursuant to the preceding
sentence.
14. Legends.
The Company may at any time place legends referencing the Right of First Refusal and any
applicable federal, state or foreign securities law restrictions on all certificates representing
shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the
request of the Company, promptly present to the Company any and all certificates representing
shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the
provisions of this Section. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
14.1 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT PROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT.”
14.2 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL
OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
14.3 If the Notice designates this Option as an Incentive Stock Option: “THE SHARES EVIDENCED
BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN
INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT
BE TRANSFERRED PRIOR TO [INSERT THE LATER OF TWO YEARS AFTER THE DATE OF OPTION GRANT OR ONE
YEAR AFTER THE DATE OF EXERCISE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE
SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL
NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE
INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR
TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”
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15. Lock-Up Agreement.
The Optionee hereby agrees that in the event of any underwritten public offering of
stock/including an initial public offering of stock, made by the Company pursuant to an effective
registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract
to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise
dispose of any shares of stock of the Company or any rights to acquire stock of the Company for
such period of time from and after the effective date of such registration statement as may be
established by the underwriter for such public offering; provided, however* that such period of
time shall not exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing limitation shall not
apply to shares registered in the public offering under the Securities Act.
16. Restrictions on Transfer of Shares.
No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including,
without limitations any transfer to a nominee or agent of the Optionee), assigned, pledged,
hypothecated or otherwise disposed of, including by operation of law, in any manner which violates
any of the provisions of this Option Agreement, and any such attempted disposition shall be void.
The Company shall not be required (a) to transfer on its books any shared which will have been
transferred in violation of any of the provisions set forth in this Option Agreement or (b) to
treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares will have been so transferred.
17. Miscellaneous Provisions.
17.1 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
17.2 Termination or Amendment. The Board may terminate or amend the Plan or the Option at any
time; provided, however, that except as provided in Section 8 in connection with a Change in
Control, no such termination or amendment may adversely affect the Option or any unexercised
portion hereof without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is required to enable the
Option, if designated an Incentive Stock Option in the Notice, to qualify as an Incentive Stock
Option. No amendment or addition to this Option Agreement shall be effective unless in writing.
17.3 Notices. Any notice required or permitted hereunder shall be given in writing and shall
be deemed effectively given (except to the extent that this Option Agreement provides for
effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail, with postage arid fees prepaid,
addressed to the other party at the address shown below that party’s signature on the Notice or at
such other address as such party may designate in writing from time to time to the other party.
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17.4 Integrated Agreement. The Notice, this Option Agreement and the Plan constitute the
entire understanding and agreement of the Optionee and the Participating Company Group with respect
to the subject matter contained herein or therein and supersedes any prior agreements,
understandings, restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than those as set forth or
provided for herein or therein. To the extent contemplated herein or therein, the provisions of the
Notice and the Option Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
17.5 Applicable Law. This Option Agreement shall be governed by the laws of the State of
California as such laws are applied to agreements between California residents entered into and to
be performed entirely within the State of California.
17.6 Counterparts. The Notice may be executed in counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same instrument.
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