STOCK OPTION AGREEMENT
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THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of _________
199__, by and between VREAM, Inc., an Illinois corporation (the "Company"), and
the individual named as the Holder on the signature page hereof (the "Holder").
1. Background. On November 7, 1995, the Company reserved certain shares
of Common Stock of the Company, without par value (the "Common Stock"), for
issuance to employees, officers and directors of, and consultants to, the
Company pursuant to the 1995 Stock Option Plan of VREAM, Inc. (the "Plan"),
which has been adopted and approved by the Board of Directors of the Company
(the "Board"). This Agreement (a) is being entered into as of the date hereof
(the "Date of Grant") and (b) documents the relative rights, privileges, powers,
duties, responsibilities and obligations of the parties hereto with respect to
the stock option which the Company granted to the Holder pursuant to the Plan as
of the Date of Grant (the "Stock Option"). The Stock Option is issued, and this
Agreement is entered into, in accordance with the terms of the Plan and the
Provisions of the Plan, including, but not limited to, Sections 13, 14, 15, 16,
17, 18, 19 and 20, are hereby incorporated in this Agreement by reference.
2. Definitions. In addition to other terms defined herein, when used
herein, the following capitalized terms shall have the following meanings:
"Approved Sale" means the sale of the Company to a third party in an
arm's-length transaction, whether by merger, consolidation, sale of all or
substantially all of its assets or sale of all or substantially all of the
capital stock of the Company.
"Cause" means (a) the Holder's commission of fraud, theft, embezzlement
or similar malfeasance or any felony, (b) the Holder's breach of Section 6 of
this Agreement, and (c) termination of the Holder's consulting relationship with
the Company for failure to perform the Holder's consulting services in a
satisfactory manner.
"Common Stock" has the meaning set forth in Section 1 hereof.
"Date of Grant" has the meaning set forth in Section 1 hereof.
"Exercise Price" has the meaning set forth in Section 3.1 hereof.
"Fundamental Change" means (a) a sale or transfer of all or
substantially all the assets of the Company on a consolidated basis in any
transaction or series of related transactions (other than sales in the ordinary
course of business), or (b) any merger, consolidation or reorganization to which
the Company is a party, except for a merger, consolidation or reorganization in
which, after giving effect to such merger, consolidation or reorganization, the
holders of the Company's outstanding capital stock (on a fully-diluted basis)
immediately prior to the merger, consolidation or reorganization will own
immediately following the merger,
consolidation or reorganization the outstanding capital stock (on a fully
diluted basis) having a majority of the ordinary voting power to elect the
Board.
"Option Shares" means ____________ shares of Common Stock, subject to
adjustment as set forth in Section 3.7 hereof.
"Parent" means any corporation directly or indirectly owning shares of
capital stock entitling such corporation to elect a majority of the members of
the board of directors of the Company.
"Private Placement" means the closing of the sale of debt or equity
securities of the Company to one or more investors other than pursuant to a
registration statement declared effective under the Securities Act of 1933, as
amended.
"Purchased Option Shares" has the meaning set forth in Section 3.2
hereof.
"Representative" means the executor(s) or administrator(s) of the
Holder's estate or, if the Holder is incompetent, the Holder's guardian(s).
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Stock Option" has the meaning set forth in Section 1 hereof.
"Stock Sale" means any sale of outstanding shares of the capital stock
of the Company by the holders thereof if after giving effect to such sale the
Company's stockholders (on a fully diluted basis) prior to such sale do not own
immediately following such sale outstanding capital stock of the Company (on a
fully diluted basis) having the voting power (under ordinary circumstances) to
elect a majority of the Board.
"Subsidiary" means any corporation of which the Company or its Parent,
if any, or another Subsidiary owns stock entitling it (or any combination of
them) to elect a majority of the members of the board of directors of such
corporation.
"Unpurchased Option Shares" means all Option Shares (whether or not
available for purchase by the Holder pursuant to Section 3.3) which have not yet
been purchased pursuant to this Agreement.
3. Terms of Stock Option.
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3.1 Grant of the Option. Upon the terms and conditions hereinafter
set forth, the Company hereby grants to the Holder an option to purchase the
Option Shares at a price of $.0125 per share, subject to adjustment as set forth
in Section 3.7 hereof (the "Exercise Price").
3.2 Procedures for Exercise. Subject to the Stock Option becoming
vested and exercisable pursuant to Section 3.3, the Holder, during his or her
lifetime, may exercise the Stock Option in whole or in part at any time prior to
the earlier of (a) 5:00 p.m. (Chicago time)
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on _______________ 200__ (the "Expiration Date") and (b) the Stock Option's
earlier termination upon the terms set forth herein. In order to exercise the
Stock Option, the Holder shall give to the Company a written notice specifying
the number of Option Shares to be purchased, accompanied by payment in full of
the entire Exercise Price for such Option Shares in cash or certified check
payable to the order of the Company; provided, however, that the Company may, in
its sole discretion, permit the Holder to pay all or part of the Exercise Price
(i) in one or more future installments pursuant to an interest-bearing
promissory note of the Holder containing such terms as the Board, or an
authorized committee thereof, may approve, (ii) by delivering to the Company for
cancellation shares of Common Stock owned by the Holder at the time of such
exercise having a fair market value, determined by the Board, equal to the
aggregate exercise price of the Stock Options being exercised, and/or (iii) by
cancellation of outstanding options of the Holder exercisable at the time of
such exercise or withholding shares of Common Stock issuable to the Holder upon
exercise of Stock Options exercisable at the time of such exercise, which
options or shares have a fair market value, net of the applicable exercise
price, determined by the Board. Upon exercise of the Stock Option and payment
of the entire Exercise Price for the shares of Common Stock being purchased as
provided in the preceding sentence, the Company will prepare, execute and
deliver to the Holder a stock certificate ("Stock Certificate") issued in the
name of the Holder representing the number of Option Shares purchased hereunder
(the "Purchased Option Shares").
3.3 Vesting Schedule. Twenty-five percent (25%) of the Option Shares
shall become vested and exercisable on the first anniversary of the Date of
Grant. Thereafter, 2.083% of the Option Shares shall become vested and
exercisable on the last day of each of the next thirty-six (36) months (and any
Option Shares not vested and exercisable on the fourth anniversary of the Date
of Grant shall become vested and exercisable on such anniversary).
Notwithstanding the foregoing, if a Fundamental Change or Stock Sale occurs
prior to the Stock Option becoming vested and exercisable for all of the Option
Shares, all Option Shares that have not become vested and exercisable will
become vested and exercisable immediately prior to the consummation of such
Fundamental Change or Stock Sale, as the case may be.
3.4 Fractional Shares. Fractional shares will not be issued upon the
exercise of the Option but in any case where the Holder would, except for the
provisions of this Section 3.4, be entitled under the terms of this Agreement to
receive a fractional share upon the complete exercise of the Stock Option, the
Company will, upon the exercise of the Option for the largest number of whole
shares then called for, pay a sum in cash equal to the excess of the value of
such fractional share (determined in such reasonable manner and in good faith by
the Board or an authorized committee thereof) over the proportional part of the
Exercise Price represented by such fractional share.
3.5 Termination Events. (a) If the Holder's consulting relationship
with the Company terminates while the Stock Option is outstanding and
unexercised, in whole or in part:
(i) if such termination occurs for any reason on or prior to the
first anniversary of the Date of Grant, or if such termination occurs at
any time for Cause, the Stock Option shall terminate and cease to be
exercisable upon the date of such termination; and
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(ii) if such termination occurs after the first anniversary of the
Date of Grant other than for Cause, the Stock Option shall immediately
terminate for Option Shares which are not yet vested and exercisable
pursuant to Section 3.3. With respect to Option Shares which are vested
and exercisable pursuant to Section 3.3, the Stock Option shall terminate
and cease to be exercisable on the earlier of (A) six months after the date
of such termination and (B) the Expiration Date.
(b) The Company shall use its reasonable best efforts to give notice
to the Holder not less than fifteen (15) days prior to the consummation of a
Fundamental Change or Stock Sale. Upon the consummation of a Fundamental Change
or Stock Sale, the Stock Option shall terminate for all Unpurchased Option
Shares.
(c) In the event of the dissolution, liquidation or winding-up of the
Company, whether voluntary or involuntary, the Stock Option shall terminate for
all Unpurchased Option Shares immediately prior to such dissolution, liquidation
or winding-up.
(d) Notwithstanding subparagraphs (a), (b), or (c) above, if the
Holder violates Section 6, the Stock Option shall terminate and cease to be
exercisable as of and after the time of such violation.
3.6 No Rights. Nothing contained in the Plan or this Agreement shall
confer upon the Holder any right with respect to the continuation of the
Holder's consulting relationship with the Company, a Parent or any Subsidiary or
interfere in any way with the right of the Company, a Parent or any Subsidiary
at any time to terminate such relationship or to increase or decrease
compensation of the Holder.
3.7 Antidilution Provisions. In the event of any stock dividend,
stock split or combination of the Common Stock, the number of shares that are
subject to the Stock Option and the Exercise Price may be proportionately and
appropriately adjusted, without any change in the aggregate Exercise Price to be
paid for all Option Shares upon full exercise of the Stock Option. Any
adjustments under this Section 3.7 will be made by the Board, whose
determination as to what adjustments, if any, will be made and the extent
thereof will be final, binding and conclusive.
4. Representations of the Holder. The Holder represents and warrants to
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the Company as follows:
(a) the Holder will acquire the Option Shares, to the extent that the
Stock Option becomes vested and exercisable pursuant to the terms hereof and the
Holder exercises the Stock Option in whole or in part, solely for investment for
the Holder's own account and not with a view to the resale or distribution of
all or any part thereof;
(b) the Holder understands that (i) the Holder may purchase the Option
Shares only to the extent that the Stock Option becomes vested and exercisable
pursuant to Section 3.3 hereof, (ii) it is possible that the Stock Option will
not become exercisable for any of the Option Shares, (iii) none of the Company,
the Parent or any Subsidiary is obligated to continue their relationship with
the Holder, and (iv) none of the Option Shares have been registered under the
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Securities Act of 1933, as amended (the "Securities Act"), and the Holder may
have to hold the Option Shares, to the extent they become Purchased Option
Shares hereunder, for an indefinite period unless the offer and sale thereof is
subsequently registered under the Securities Act (and the Company is under no
obligation to so register any Purchased Option Shares) or an exemption is
available therefrom; and
(c) the Holder's permanent residence is at the address specified on
the signature page hereof.
5. Representations of the Company. The Company represents and warrants
to the Holder that (a) the Company is a corporation validly existing, and in
good standing under the laws of the State of Illinois, (b) this Agreement has
been duly authorized, executed, and delivered by the Company, (c) the Company
has the requisite power and authority to issue the Option Shares and to perform
its obligations under this Agreement, and (d) the execution, delivery, and
performance of this Agreement by the Company do not and will not violate or
result in a default under the Company's articles of incorporation or by-laws or
any agreement or instrument to which the Company is a party or by which it or
any of its property is bound.
6. Confidential Information. The Holder shall not, without the prior
written consent of the Company (or the Parent or any Subsidiary thereof), except
as may be required in connection with any judicial or administrative proceeding
or inquiry, disclose to any person or entity, other than an officer or director
of the Company (or the Parent or any Subsidiary thereof) or a person or entity
to whom disclosure is reasonably necessary or appropriate in connection with the
performance by the Holder of the Holder's duties as a director of, or an advisor
or consultant to, the Company (or the Parent or any Subsidiary thereof), any
material confidential information obtained by the Holder while providing
services for, the Company (or the Parent or any Subsidiary thereof) (or any
predecessor of any such entity) with respect to its business or assets,
including, but not limited to, material confidential information relating to the
properties, accounts, books, records, suppliers, trade secrets, and contracts of
the Company (or the Parent or any Subsidiary thereof) (or any predecessor of any
such entity); provided, however, that confidential information shall not include
any information known or available to the public (other than as a result of
unauthorized disclosure by the Holder).
7. Sale of the Company. If the Board of Directors of the Company and the
holders of 66-2/3% or more of the shares of Common Stock then outstanding
approve an Approved Sale, the Holder will consent to and raise no objections to
the Approved Sale, and (a) if the Approved Sale is structured as a sale of
stock, the Holder will agree to sell all of his or her Purchased Option Shares
on the terms and conditions approved by the holders of 66-2/3% or more of the
shares of Common Stock then outstanding, (b) if the Approved Sale is structured
as a merger or consolidation, the Holder will vote in favor thereof and will not
exercise any dissenters' rights of appraisal he or she may have under applicable
law, and (c) if the Approved Sale is structured as a sale of all or
substantially all of the assets of the Company and a subsequent dissolution and
liquidation of the Company, the Holder will vote in favor thereof and will vote
in favor of the subsequent dissolution and liquidation of the Company. The
Holder will take all necessary actions in connection with the consummation of
the Approved Sale as are reasonably requested by the Company. The provisions of
this Section 7 are applicable to the Holder only so long as
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the consideration to be paid with respect to each Purchased Option Share in the
Approved Sale is the same for each share of Common Stock of the Company.
▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇. (a) If the Holder's consulting
relationship with the Company is terminated at any time for any reason, the
Company shall have the right (but not the obligation) to purchase from the
Holder any or all of the Purchased Option Shares for a purchase price per share
of Common Stock equal to the Fair Market Value of a share of the Common Stock on
the date of termination of such Holder's consulting relationship. "Fair Market
Value," with respect to a share of the Common Stock, means the fair market value
of such share, as the Board of Directors of the Company may reasonably determine
in good faith. Any such purchase shall be effectuated by the Company giving the
Holder notice of its desire to purchase the Purchased Option Shares within sixty
(60) days of the date of termination of such Holder's consulting relationship
with the Company, or with respect to any Purchased Option Shares purchased after
the date of such termination, sixty (60) days after the date of purchase of such
shares by the Holder. The closing(s) of such purchase of the Purchased Option
Shares shall be held ten business days after the Company gives the Holder notice
of its election to effect such purchase. The Company shall pay the
consideration due upon exercise of the rights hereunder in cash. The Holder
(and any other subsequent Holder) agrees to execute all such assignments and
stock powers as the Company deems necessary or desirable to effectuate such
purchase.
(b) The Company shall cause each certificate representing Purchased Option
Shares to be stamped or otherwise imprinted with a legend in the following form:
The securities represented by this certificate are subject to certain
restrictions, including, but not limited to, purchase rights, pursuant
to that certain Option Agreement between VREAM, Inc. and the original
holder of the options issued thereunder, a copy of which may be
obtained from VREAM, Inc. upon request.
(c) The provisions set forth in this Section 7A and Sections 7 and 8 of
this Agreement shall terminate upon the earlier of the consummation of an
Approved Sale and the consummation of a public offering of securities of the
Company pursuant to a registration statement declared effective by the
Securities and Exchange Commission pursuant to the Securities Act.
8. Shareholders Agreements. Upon exercise of the Option, the Holder will
agree in writing to be bound by that certain Shareholders' Agreement, dated as
of November 9, 1995 as a Management Stockholder and a Holder of Management
Securities (as such terms are defined therein). In connection with any
subsequent Private Placements, if one or more investors in such Private
Placement request the shareholders of the Company to execute a shareholder's
agreement as a condition to closing such Private Placement, the Holder will
agree (i) to be bound by the same restrictions (including restrictions applying
after the closing of such Private Placement) with respect to the Holder's
Purchased Option Shares as ▇▇▇▇▇▇ ▇▇▇▇▇▇ ("LaHood") may agree to be bound by
with respect to shares of Common Stock owned by LaHood and (ii) to execute an
agreement containing such restrictions so long as LaHood executes such agreement
with respect to shares of Common Stock owned by LaHood.
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9. Miscellaneous.
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9.1 Successors and Assigns; Binding Agreement. Subject to the
provisions of the Plan and Section 9.2 hereof, this Agreement shall inure to the
benefit of, be enforceable by and binding upon, the respective successors and
assigns of the Company and the Holder and their respective personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees and, with respect to Sections 7, 7A and 8 of this Agreement, each
transferee of all or any of the Purchased Option Shares, whether so expressed or
not.
9.2 Limitation on Alienation. Notwithstanding the terms of Section
9.1 hereof, the Holder shall not transfer, sell, convey, exchange or otherwise
dispose of (herein referred to as "disposition" or "to dispose of") the Stock
Option and the rights and privileges of the Holder under this Agreement, except
(i) by will or by the applicable laws of descent and distribution to a person
(or persons) who consents in writing to be bound by the terms of this Agreement
to the same extent as the Holder or (ii) by exercise pursuant to the terms of
this Agreement. During the lifetime of the Holder, the Stock Option shall be
exercisable only by the Holder.
9.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal law of, and not the law of conflicts of, the
State of Illinois applicable to contracts entered into and to be wholly
performed in Illinois.
9.4 Waivers. The waiver by either party of any right hereunder or of
any failure to perform or breach by the other party shall not be deemed a waiver
of any other right hereunder or of any other failure or breach by the other
party, whether of the same or a similar nature or otherwise. No waiver shall be
deemed to have occurred unless set forth in a writing executed by or on behalf
of the waiving party. No such written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each such waiver shall operate
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
9.5 Notices. All notices and communications that are required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally or upon mailing by registered or
certified mail, postage prepaid, return receipt requested, as follows:
If to the Company, to:
VREAM, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to the Holder, to the address set forth on the signature page hereto; or
to such other address as may be specified in a notice given by one party to the
other hereunder.
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9.6 Severability. If for any reason any term or provision of this
Agreement is held to be invalid or unenforceable, all other valid terms and
provisions hereof shall remain in full force and effect, and all of the terms
and provisions of this Agreement shall be deemed to be severable in nature.
9.7 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
9.8 Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person or
entity and, so long as the Holder lives, no person or entity, other than the
parties, shall have any rights under or interest in this Agreement or the
subject matter hereof.
9.9 Entire Agreement. This Agreement and the Plan constitute the
entire agreement between the parties, and supersedes all prior oral or written
understandings between the parties, relating to the Option Shares. The Holder
acknowledges that he or she has received a copy of the Plan and in the event
that any provision of this Agreement is inconsistent with any provision of the
Plan, the provisions of the Plan shall be controlling.
9.10 Exhibits and Schedules. All exhibits and schedules hereto are an
integral part of this Agreement.
9.11 No Attachment. Except as required by law, no right to receive
Option Shares under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation or to execution, attachment, levy, or similar process or
assignment by operation of law, and any attempt, voluntary or involuntary, to
effect any such action shall be null, void and of no effect.
9.12 No Rights as Stockholder. The Holder will not have any of the
rights of a stockholder with respect to the Option Shares except to the extent
that such Option Shares are actually issued pursuant to exercise of the Stock
Option. The existence of the Stock Option shall not affect in any way the right
or power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations, or other changes to the
Company's capital structure or its business, or to effect any sale, merger or
consolidation of the Company, nor create any pre-emptive right on behalf of the
holder of the Stock Option to acquire any Common Stock or securities or
indebtedness convertible into or exchangeable for Common Stock.
9.13 Securities Act Legend. Until (a) the Purchased Option Shares
represented by such certificate are effectively registered under the Securities
Act (and the Company is under no obligation at any time to so register any of
such Purchased Option Shares), or (b) the holder of such securities delivers to
the Company a written opinion of counsel, which counsel and opinion are
reasonably acceptable to the Company, to the effect that such legend is no
longer necessary, the Company shall be entitled to cause each certificate
representing Purchased Option Shares to be stamped or otherwise imprinted with a
legend in substantially the following form:
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"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and thus may
not be transferred unless so registered or unless an exemption from
registration is available."
[Remainder of page intentionally left blank.
Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Stock Option
Agreement as of the date first above written.
VREAM, INC.
HOLDER:
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