EXHIBIT 4.2
FORM OF STOCK OPTION AGREEMENT UNDER COMPANY'S 1997 EMPLOYEE STOCK INCENTIVE
PLAN
EMPLOYEE STOCK OPTION AGREEMENT
UNDER XXXXXXX-XXXXXXX COMPANY
1997 EMPLOYEE STOCK INCENTIVE PLAN
THIS AGREEMENT, dated as of , between XXXXXXX-XXXXXXX COMPANY, a
California corporation, (hereinafter called "Company") and
_________________________________ , (hereinafter called "Employee").
WITNESSETH:
WHEREAS, the Company has established the Xxxxxxx-Xxxxxxx Company 1997
Employee Stock Incentive Plan (the "Plan"), adopted February 24, 1997, a copy of
which Plan is attached hereto (unless the context shall clearly require
otherwise, all terms used herein shall have the same meaning as provided in the
Plan); and
WHEREAS, the Administrator under the Plan has determined that the
Employee shall be granted a nonqualified stock option under said Plan as
hereinafter set forth.
NOW, THEREFORE, the parties hereby agree as follows:
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1. In order to participate in the benefits of the Plan, Employee
must remain in the employment of the Company for a period of
at least two years from the date hereof. Nevertheless,
Employee acknowledges that there is no agreement by Company
for any specific period of employment, nor for long-term
employment. Employee further acknowledges that while options
granted hereunder vest over a period of time, the granting of
this option is not a promise or representation, express or
implied, of continuing employment, and the Company's right to
terminate employment with or without cause is unaltered by the
grant of stock options. Employee further acknowledges that
pursuant to paragraph 2 of this Agreement, (i) options vest
over a period of years and only options vested upon
termination of employment may thereafter be exercised for
three months, and (ii) that unvested options have no value
whatsoever and upon termination of employment are not
compensation, nor subject to buyout or other remuneration of
any kind under any circumstances.
2. The Company hereby grants to Employee an option to purchase
____________ shares of the no par value common stock of the
Company upon the following terms and conditions:
a. This option is granted under and pursuant to the
above described Plan, and is subject to each and all
the provisions thereof.
b. The option price shall be ________ per share, which
is agreed to be 100% of the fair market value of the
common stock of the Company on the date of the
granting of the option.
c. Subject to the restrictions contained herein and in
the Plan, this option may be exercised as follows:
During Year of % of Option
Grant Exercisable
----------------- --------------
1 0
2 0
3 33-1/3
4 66-2/3
5 and after 100
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The term "year of Grant" refers to year periods
following the Grant, not to Calendar years.
No such exercise shall be with respect to less than
fifty (50) shares, or the remaining shares covered by
the option, if less than fifty (50).
d. In the event that Employee's service with the Company
or its subsidiaries terminates for any reason prior
to two (2) years from the date hereof, Employee's
right to exercise this option or any part thereof
shall be forfeited.
e. (i) In the event that Employee shall cease to be
employed by the Company or its subsidiaries
for any reason other than Employee's death
(subject to the condition that no option
shall be exercisable after the expiration of
term for exercise as set forth in paragraph
(f)), Employee shall have the right to
exercise the option at any time within three
(3) months after termination of employment
to the extent that, at the date of
termination of employment, Employee's right
to exercise such option had accrued pursuant
to the terms of this option agreement and
had not previously been exercised; provided
however, that if the employment of Employee
is terminated by the Company or a subsidiary
by reason of misconduct, such option shall
cease to be exercisable on the date of
Employee's termination of employment. An
employee who is disabled (to be determined
by the Administrator) shall have the right
to exercise such option at any time within
one (1) year after termination of employment
as a result of such disability.
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(ii) If Employee shall die while in the employ of
the Company or a subsidiary and shall not
have fully exercised the option, an option
may be exercised (provided that the option
expiration periods set forth in paragraph
(f) shall not be exceeded) to the extent
that Employee's right to exercise such
option had accrued at the date of Employee's
death pursuant to the terms of the option
agreement and had not previously been
exercised, at any time within one (1) year
after Employee's death, by the executors or
administrators of Employee or by any person
or persons who shall have acquired the
option directly from Employee by bequest or
inheritance.
f. Unless sooner terminated as provided in the Plan, the
period for which this option is granted is the period
of ten (10) years.
g. This option is not transferable by Employee otherwise
than by Will or the laws of descent and distribution
and is exercisable, during the Employee's lifetime,
only by him. Neither this option nor any interest
therein may be transferred, assigned, pledged or
hypothecated by the Employee during this lifetime
whether by operation of law or otherwise, nor be made
subject to execution, attachment or similar process.
3. a. The Company hereby also grants to Employee a Limited
Right with respect to all of the shares of stock
covered by the option identified in paragraph 3
herein (the "Related Stock Option"). The Limited
Right may be exercised only during the sixty-day
period beginning on an "Acceleration Date" (as
defined in paragraph 4 hereof); provided, however,
that if the Acceleration Date occurs within the
six-month period following the grant of the Limited
Right or the grant of the Related Stock Option, then
the Limited Right will be exercisable for a period of
sixty days following expiration of such six-month
period. The Limited Right shall be exercisable only
if, and to the extent that, (i) the Related Stock
Option is exercisable and (ii) the Employee is
subject to the restrictions of Section 16 under the
Securities Exchange Act of 1934.
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Upon the exercise of the Limited Right, such Related
Stock Option shall cease to be exercisable to the
extent of the shares of stock with respect to which
such Limited Right is exercised, but shall be
considered to have been exercised to that extent for
purposes of determining the number of shares of stock
available for the grant of further options pursuant
to the Plan. Upon the exercise or termination of a
Related Stock Option, the Limited Right with respect
to such Related Stock Option shall terminate to the
extent of the shares of stock with respect to which
the Related Stock Option was exercised or terminated.
b. Upon the exercise of the Limited Right, the holder
thereof shall receive in cash from the Company
whichever of the following amounts is applicable:
(i) in the case of an exercise of the Limited
Right by reason of the occurrence of an
Offer (as defined in paragraph 4 hereof), an
amount equal to the Offer Spread (as defined
in paragraph 3d hereof);
(ii) in the case of an exercise of the Limited
Right by reason of shareholder approval of
an agreement described in paragraph 4, an
amount equal to the Merger Spread (as
defined in paragraph 3f hereof); or
(iii) in the case of an exercise of the Limited
Right by reason of shareholder approval of a
plan of liquidation described in paragraph
4, an amount equal to the Liquidation Spread
(as defined in paragraph 3h hereof); or
(iv) in the case of an exercise of the Limited
Right by reason of an acquisition of stock
described in paragraph 4, an amount equal to
the Acquisition Spread (as defined in
paragraph 3j hereof); or
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(v) in the case of an exercise of the Limited
Right by reason of the election of 50% or
more of the directors described in paragraph
4, an amount equal to the Director Spread
(as defined in paragraph 3l hereof).
c. The term "Offer Price per Share" as used in this
paragraph 3 shall mean, with respect to the exercise
of any Limited Right by reason of the occurrence of
an Offer, the greater of (i) the highest price per
share of stock paid in any Offer, which Offer is in
effect at any time during the sixty-day period ending
on the date of which such Limited Right becomes
exercisable, or (ii) the highest Fair Market Value
per Share of the Stock during such sixty-day period.
Any securities or property which are part or all of
the consideration paid for shares of stock in the
Offer shall be valued in determining the Offer Price
per Share at the higher of (A) the valuation placed
on such securities or property by the corporation,
person or other entity making such Offer or (B) the
valuation placed on such securities or property by
the Committee.
d. The term "Offer Spread" as used in this paragraph 3
shall mean an amount equal to the product computed by
multiplying (i) the excess of (A) the Offer Price per
Share over (B) the option price per share of stock at
which the Related Stock Option is exercisable, by
(ii) the number of shares of stock with respect to
which such Limited Right is being exercised.
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e. The term "Merger Price per Share" as used in this
paragraph 3 shall mean, with respect to the exercise
of any Limited Right by reason of shareholder
approval of an agreement described in paragraph 4,
the greater of (i) the fixed or formula price for the
acquisition of shares of stock specified in such
agreement if such fixed or formula price is
determinable on the date on which such Limited Right
becomes exercisable, and (ii) the highest Fair Market
Value per Share of the Stock during the sixty-day
period ending on the date on which such Limited Right
is exercised. Any securities or property which are
part or all of the consideration paid for shares of
stock pursuant to such agreement shall be valued in
determining the Merger Price per Share at the higher
of (A) the valuation placed on such securities or
property by the corporation, person or other entity
which is a party with the Company to such agreement,
or (B) the valuation placed on such securities or
property by the Committee.
f. The term "Merger Spread" as used in this paragraph 3
shall mean an amount equal to the product computed by
multiplying (i) the excess of (A) the Merger Price
per Share over (B) the option price per share of
stock at which the Related Stock Option is
exercisable, by (ii) the number of shares of Stock
with respect to which such Limited Right is being
exercised.
g. The term "Liquidation Price per Share" as used in
this paragraph 3 shall mean, with respect to the
exercise of any Limited Right by reason of
shareholder approval of a plan of liquidation
described in paragraph 4, the greater of (i) the
highest amount paid or to be paid per share of stock
pursuant to the plan of liquidation as determined by
the Committee and (ii) the highest Fair Market Value
per Share of the Stock during the sixty-day period
ending on the date on which such Limited Right
becomes exercisable. Any securities or property which
(A) are part or all of the consideration paid for
shares of stock pursuant to such plan of liquidation
or (B) are to be sold and the
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proceeds distributed in liquidation shall be valued
in determining the Liquidation Price per share at the
higher of (i) the valuation placed on such securities
or property by the Company upon the distribution of
such securities or property in accordance with the
plan of liquidation, if known at the time of the
exercise of such Limited Right, or (ii) the valuation
placed on such securities or property by the
Committee.
h. The term "Liquidation Spread" as used in this
paragraph 3 shall mean an amount equal to the product
computed by multiplying (i) the excess of (A) the
Liquidation Price per Share over (B) the option price
per share of Stock at which the Related Stock Option
is exercisable by (ii) the number of shares of stock
with respect to which such Limited Right is being
exercised.
i. The term "Acquisition Price per Share" as used in
this paragraph 3 shall mean, with respect to the
exercise of any Limited Right by reason of an
acquisition of stock described in paragraph 4, the
greater of (i) the highest price per share stated on
the Schedule 13D, 14D-1 or similar schedule (or
amendment thereto) filed by the holder of 50% or more
of the Company's voting power which gives rise to the
exercise of such Limited Right, and (ii) the highest
Fair Market Value per Share of the Stock during the
sixty-day period ending on the date the Limited Right
is exercised.
j. The term "Acquisition Spread" as used in this
paragraph 3 shall mean an amount equal to the product
computed by multiplying (i) the excess of (A) the
Acquisition Price per Share over (B) the option price
per share of stock at which the Related Stock Option
is exercisable, by (ii) the number of shares of stock
with respect to which such Limited Right is being
exercised.
k. The term "Director Price per Share" as used in this
paragraph 3 shall mean, with respect to the exercise
of any Limited Right by reason of the election of 50%
or more of the Directors described in paragraph 4,
the Fair Market Value per Share of the Stock during
the sixty-day period ending on the date the Limited
Right becomes exercisable.
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l. The term "Director Spread" as used in this paragraph
3 shall mean an amount equal to the product computed
by multiplying (i) the excess of (A) the Director
Price per Share over (b) the option price per share
of stock at which the Related Stock Option is
exercisable, by (ii) the number of shares of stock
with respect to which such Limited Right is being
exercised.
m. The term "Fair Market Value per Share of the Stock"
as used in this paragraph 3 shall mean, as of a
particular date, (i) if the shares of stock are then
listed on a national securities exchange, the
definition provided in Article 6(C) of the Plan, or
(ii) if the shares of Stock are not then listed on a
national securities exchange, the average of the
closing "bid" and "asked" prices for shares of stock
in the over-the-counter market for the last preceding
date on which there was a sale of Stock in such
market.
4. If while unexercised options remain outstanding under the Plan
(i) any corporation (other than the Company), person or group
(within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act") makes
a tender or exchange offer which, if consummated, would make
such corporation, person or group the beneficial owner (within
the meaning of Rule 13d-3 under the Act) of more than 30% of
the Company's then outstanding Stock and, pursuant to such
offer, purchases are made ("Offer"); (ii) the shareholders or
directors of the Company approve a definitive agreement to
merge or consolidate the Company with or into another
corporation and the Company is not the surviving corporation,
or upon agreement to sell or otherwise dispose of all or
substantially all of the Company's assets, or adopt a plan of
liquidation; (iii) the Company becomes aware that any person
or group (within the meaning of Section 13(d) and 14(d)(2) of
the Act), has become the beneficial owner (within the meaning
of Rule 13d-3 under the Act) of more than 20% of the Company's
then outstanding Stock; (iv) 50% or more of the directors of
the Company are elected to the Board of Directors during
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any period of 24 months or less, such election being without
the approval of at least a majority of the members of the
Board of Directors of the Company in office immediately prior
to such period; then on the date of the first purchase of
stock pursuant to such Offer, or the date of any such
shareholder approval or adoption, or the date on which the
Company becomes aware of the acquisition of such percentage of
the Company's Stock or on the date of the election of such
directors (any such date being referred to as an "Acceleration
Date"), each outstanding option shall be exercisable in full.
5. Employee may exercise this option by giving written notice to
the Company at Palo Alto, California, attention of the
Secretary, specifying the election to exercise the option and
the number of shares in respect of which it is being
exercised. Employee or Employee's representative shall deliver
to the Secretary at the time of giving such notice payment in
United States dollars for the amount of the purchase price. In
addition, Employee may deliver Company stock, valued at its
fair market value (as defined in the Plan) on the date of such
exercise, in the full amount of the purchase price, or any
portion thereof, in payment for the shares.
The notice shall be signed by the Employee exercising the
option. The Company shall thereafter cause to be issued a
certificate or certificates for the shares as to which the
option shall have been so exercised, registered in the name of
the Employee.
6. This Agreement shall be interpreted and construed in
accordance with the laws of the State of California.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
XXXXXXX-XXXXXXX COMPANY
By: __________________________
ACCEPTED:
______________________________________________
Employee
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