1
EXHIBIT 10.5
ENTERWORKS, INC.
INCENTIVE STOCK OPTION AGREEMENT
(Associate Plan)
1. Grant of Option. Enterworks, Inc., a Delaware corporation (the
"Company"), hereby grants to __________________ (the "Optionee"), an option,
pursuant to the Company's 1996 Stock Option Plan, as amended (the "Plan"), to
purchase an aggregate of ___________ shares of Common Stock ("Common Stock") of
the Company at a price of $______ per share, purchasable as set forth in and
subject to the terms and conditions of this option and the Plan. Except where
the context otherwise requires, the term "Company" shall include the parent and
all present and future subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from
time to time (the "Code").
2. Incentive Stock Option. This option is intended to qualify as an
incentive stock option ("Incentive Stock Option") within the meaning of Section
422 of the Code.
3. Exercise of Option and Provisions for Termination.
(a) Vesting Schedule. Except as otherwise provided in this
Agreement, this option may be exercised prior to the tenth anniversary of the
date of grant (hereinafter the "Expiration Date") as follows:
(i) In installments as to not more than the number of
shares set forth in the table below during the respective installment periods
set forth in the table below:
Number of
Shares as to which
Exercise Period Option is Exercisable
--------------- ---------------------
On or after the first anniversary 25%
of the date of grant
On or after the second anniversary 50%
of the date of grant
On or after the third anniversary 75%
of the date of grant
On or after the fourth anniversary 100%
of the date of grant
(ii) The right of exercise shall be cumulative so that if
the option is not exercised to the maximum extent permissible during any
exercise period, it shall be exercisable, in whole or in part, with respect to
all shares not so purchased at any time prior to the Expiration Date or the
earlier termination of this option. This option may not be exercised at any time
on or
2
after the Expiration Date.
(b) Exercise Procedure. Subject to the conditions set forth in
this Agreement, this option shall be exercised by the Optionee's delivery of
written notice of exercise to the Treasurer of the Company, specifying the
number of shares to be purchased and the purchase price to be paid therefor and
accompanied by payment in full in accordance with Section 4. Such exercise shall
be effective upon receipt by the Treasurer of the Company of such written notice
together with the required payment. The Optionee may purchase less than the
number of shares covered hereby, provided that no partial exercise of this
option may be for any fractional share or for fewer than ten whole shares.
(c) Continuous Employment Required. Except as otherwise
provided in this Section 3, this option may not be exercised unless the
Optionee, at the time he or she exercises this option, is, and has been at all
times since the date of grant of this option, an employee of the Company. For
all purposes of this option, (i) "employment" shall be defined in accordance
with the provisions of Section 1.421-7(h) of the Income Tax Regulations or any
successor regulations, and (ii) if this option shall be assumed or a new option
substituted therefor in a transaction to which Section 424(a) of the Code
applies, employment by such assuming or substituting corporation (hereinafter
called the "Successor Corporation") shall be considered for all purposes of this
option to be employment by the Company.
(d) Exercise Period Upon Termination of Employment. If the
Optionee ceases to be employed by the Company for any reason, then, except as
provided in paragraphs (e), (f) and (g) below, the right to exercise this option
shall terminate three (3) months after such cessation (but in no event after the
Expiration Date), provided that this option shall be exercisable only to the
extent that the Optionee was entitled to exercise this option on the date of
such cessation. The Company's obligation to deliver shares upon the exercise of
this option shall be subject to the satisfaction of all applicable federal,
state and local income and employment tax withholding requirements, arising by
reason of this option being treated as a non-statutory option or otherwise.
Notwithstanding the foregoing, if the Optionee, prior to the Expiration Date,
materially violates the non-competition or confidentiality provisions of any
employment contract, confidentiality and nondisclosure agreement or other
agreement between the Optionee and the Company, the right to exercise this
option shall terminate immediately upon written notice to the Optionee from the
Company describing such violation.
(e) Exercise Period Upon Death or Disability. If the Optionee
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
prior to the Expiration Date while he or she is an employee of the Company, or
if the Optionee dies within three months after the Optionee ceases to be an
employee of the Company (other than as the result of a discharge for "cause" as
specified in paragraph (f) below), this option shall be exercisable, as to all
shares subject to this option (whether or not exercisable theretofore), and any
such exercise shall take place within the period of six months following the
date of death of the Optionee (whether or not such exercise occurs before the
Expiration Date), and in the event of the Optionee's disability, within the
period of six months following the date of termination caused by the disability
(but in no event after the Expiration Date), by the Optionee or by the person to
whom this option is transferred by will or the laws of descent and distribution.
Except as otherwise indicated by the context, the term "Optionee", as used in
this option, shall be deemed to include the estate of the Optionee or any person
who acquires the right to exercise this option by bequest or inheritance or
Associate Option Agreement 2
3
otherwise by reason of the death of the Optionee.
(f) Resignation. If the Optionee, prior to the Expiration Date,
voluntarily or involuntarily resigns from the Company, the right to exercise
this option shall terminate immediately upon such cessation of employment.
(g) Discharge for Cause. If the Optionee, prior to the
Expiration Date, is discharged by the Company for "cause" (as defined below),
the right to exercise this option shall terminate immediately upon such
cessation of employment. "Cause" shall mean willful misconduct in connection
with the Optionee's employment or willful failure to perform his or her
employment responsibilities in the best interests of the Company (including,
without limitation, breach by the Optionee of any provision of any employment,
nondisclosure, non-competition or other similar agreement between the Optionee
and the Company), as determined by the Company, which determination shall be
conclusive; unless Cause is defined in an agreement between the Company and the
Optionee in effect at time of a purported discharge, in which case "Cause" shall
have the same meaning for the purpose of this option as is ascribed to it in the
agreement between the Company and the Optionee.
4. Payment of Purchase Price.
(a) Method of Payment. Payment of the purchase price for shares
purchased upon exercise of this option shall be made (i) by delivery to the
Company of cash or a check to the order of the Company in an amount equal to the
purchase price of such shares, (ii) subject to the consent of the Company, by
delivery to the Company of shares of Common Stock of the Company then owned by
the Optionee having a fair market value equal in amount to the purchase price of
such shares, (iii) by any other means which the Board of Directors determines
are consistent with the purpose of the Plan and with applicable laws and
regulations (including, without limitation, the provisions of Rule 16b-3 under
the Securities Exchange Act of 1934 if applicable to the Optionee and Regulation
T promulgated by the Federal Reserve Board), or (iv) by any combination of such
methods of payment.
(b) Valuation of Shares or Other Non-Cash Consideration
Tendered in Payment of Purchase Price. For the purposes hereof, the fair market
value of any share of the Company's Common Stock or other non-cash consideration
which may be delivered to the Company in exercise of this option shall be
determined in good faith by the Board of Directors of the Company.
(c) Delivery of Shares Tendered in Payment of Purchase Price.
If the Optionee exercises options by delivery of shares of Common Stock of the
Company, the certificate or certificates representing the shares of Common Stock
of the Company to be delivered shall be duly executed in blank by the Optionee
or shall be accompanied by a stock power duly executed in blank suitable for
purposes of transferring such shares to the Company. Fractional shares of Common
Stock of the Company will not be accepted in payment of the purchase price of
shares acquired upon exercise of this option.
(d) Restrictions on Use of Option Stock. Notwithstanding the
foregoing, no shares of Common Stock of the Company may be tendered in payment
of the purchase price of shares purchased upon exercise of this option if the
shares to be so tendered were acquired within
Associate Option Agreement 3
4
twelve (12) months before the date of such tender, through the exercise of an
option granted under the Plan or any other stock option or restricted stock plan
of the Company.
5. Delivery of Shares; Compliance With Securities Laws, Etc.
(a) General. The Company shall, upon payment of the option
price for the number of shares purchased and paid for, make prompt delivery of
such shares to the Optionee, provided that if any law or regulation requires the
Company to take any action with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to complete such action.
(b) Listing, Qualification, Etc. This option shall be subject
to the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject hereto
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or that the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance or purchase of shares
hereunder, this option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, disclosure or
satisfaction of such other condition shall have been effected or obtained on
terms acceptable to such Company counsel. Nothing herein shall be deemed to
require the Company to apply for, effect or obtain such listing, registration,
qualification, or disclosure, or to satisfy such other condition.
6. Nontransferability of Option. Except as provided in paragraph (e)
of Section 3, this option is personal and no rights granted hereunder may be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law or otherwise) nor shall any such rights be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or of such rights contrary to
the provisions hereof, or upon the levy of any attachment or similar process
upon this option or such rights, this option and such rights shall, at the
election of the Company, become null and void.
7. No Special Employment Rights. Nothing contained in the Plan or
this option shall be construed or deemed by any person under any circumstances
to bind the Company to continue the employment of the Optionee for the period
within which this option may be exercised.
8. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares which may be purchased by exercise of
this option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) unless and until a
certificate representing such shares is duly issued and delivered to the
Optionee. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.
9. Adjustment Provisions.
(a) General. If, through, or as a result of, any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding shares of
Common Stock are increased or decreased or are exchanged for a different number
or
Associate Option Agreement 4
5
kind of shares or other securities of the Company, or (ii) additional shares or
new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Common Stock or other
securities, the Optionee shall, with respect to this option or any unexercised
portion hereof, be entitled to the rights and benefits, and be subject to the
limitations, set forth in Section 15(a) of the Plan.
(b) Board Authority to Make Adjustments. Any adjustments under
this Section 9 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued pursuant to this
option on account of any such adjustments.
(c) Limits on Adjustments. No adjustment shall be made under
this Section 9 which would, within the meaning of any applicable provision of
the Code, constitute a modification, extension or renewal of this option or a
grant of additional benefits to the Optionee.
10. Mergers, Consolidation, Distributions, Liquidations Etc. In the
event of a consolidation or merger or sale of all or substantially all of the
assets of the Company in which outstanding shares of Common Stock are exchanged
for securities, cash or other property of any other corporation or business
entity, or in the event of a liquidation of the Company, prior to the Expiration
Date or termination of this option, the Optionee shall, with respect to this
option or any unexercised portion hereof, be entitled to the rights and
benefits, and be subject to the limitations, set forth in Section 16(a) of the
Plan.
11. Withholding Taxes. The Company's obligation to deliver shares upon
the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
12. Limitations on Disposition of Incentive Stock Option Shares. It is
understood and intended that this option shall qualify as an "incentive stock
option" as defined in Section 422 of the Code. Accordingly, the Optionee
understands that in order to obtain the benefits of an incentive stock option
under Section 421 of the Code, no sale or other disposition may be made of any
shares acquired upon exercise of the option within one year after the day of the
transfer of such shares to him, nor within two years after the grant of the
option. If the Optionee intends to dispose, or does dispose (whether by sale,
exchange, gift, transfer or otherwise), of any such shares within said periods,
he or she will notify the Company in writing within ten days after such
disposition.
13. Investment Representations; Legends.
(a) Representations. The Optionee represents, warrants and
covenants that:
(i) Any shares purchased upon exercise of this option
shall be acquired for the Optionee's account for investment
only and not with a view to, or for sale in connection
with, any distribution of the shares in violation of the
Securities Act of 1933 (the "Securities Act") or any rule
or regulation under the Securities Act.
(ii) The Optionee has had such opportunity as he or she has
deemed
Associate Option Agreement 5
6
adequate to obtain from representatives of the Company such
information as is necessary to permit the Optionee to
evaluate the merits and risks of his or her investment in
the Company.
(iii) The Optionee is able to bear the economic risk of
holding shares acquired pursuant to the exercise of this
option for an indefinite period.
(iv) The Optionee understands that (A) the shares acquired
pursuant to the exercise of this option will not be
registered under the Securities Act and are "restricted
securities" within the meaning of Rule 144 under the
Securities Act; (B) such shares cannot be sold, transferred
or otherwise disposed of unless they are subsequently
registered under the Securities Act or an exemption from
registration is then available; (C) in any event, an
exemption from registration under Rule 144 or otherwise
under the Securities Act may not be available for at least
two years and even then will not be available unless a
public market then exists for the Common Stock, adequate
information concerning the Company is then available to the
public and other terms and conditions of Rule 144 are
complied with; and (D) there is now no registration
statement on file with the Securities and Exchange
Commission with respect to any stock of the Company and the
Company has no obligation or current intention to register
any shares acquired pursuant to the exercise of this option
under the Securities Act.
(v) The Optionee agrees that, if the Company offers for
the first time any of its Common Stock for sale pursuant to
a registration statement under the Securities Act, the
Optionee will not, without the prior written consent of the
Company, publicly offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, any shares
purchased upon exercise of this option for a period of 90
days after the effective date of such registration
statement.
By making payment upon exercise of this option, the Optionee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 13.
(b) Legends on Stock Certificates. All stock certificates
representing shares of Common Stock issued to the Optionee upon exercise of this
option shall have affixed thereto legends substantially in the following forms,
in addition to any other legends required by applicable state law:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 and may not be
transferred, sold or otherwise disposed of in the absence of an
effective registration statement with respect to the shares
evidenced by this certificate, filed and made effective under the
Securities Act of 1933, or an opinion of counsel satisfactory to
the Company to the effect that registration under such Act is not
required."
"The shares of stock represented by this certificate are subject
to
Associate Option Agreement 6
7
certain restrictions on transfer contained in an Option Agreement,
a copy of which will be furnished upon request by the issuer."
14. Purchase Option. Whenever the Employee ceases to be employed by
the Company for any reason or no reason, with or without cause, prior to the
first sale by the Company of its Common Stock pursuant to the filing of a
Registration Statement with the SEC, the Company shall have the right and option
(the "Purchase Option") to purchase from the Employee for a sum equal to the
fair market value on the date the Employee ceases to be employed by the Company
(the "Option Price"), any shares of the capital stock of the Company held by the
Employee including without limitation shares of Common Stock which were
purchased pursuant to this Incentive Stock Option Agreement. "Fair market value"
shall be determined, for purposes of Sections 14 through 15 inclusive hereof, in
accordance with any valuation of the Company and/or its Common Stock (or other
capital stock, as applicable) which is completed within one year prior to the
time the Employee ceases to be employed by the Company or within three months
thereafter and which is available to the Board of Directors of the Company
(including valuation of Common Stock for any Company employee benefit plan). If
such a valuation has not been completed within such time period, "fair market
value" will be as determined in good faith by the Board of Directors.
15. Exercise of Purchase Option and Closing.
(a) The Company may exercise the Purchase Option by delivering
or mailing to the Employee (or his estate), in accordance with Section 16(b),
within 90 days after the termination of the employment of the Employee with the
Company, a written notice of exercise of the Purchase Option. Such notice shall
specify the number of Shares and other capital stock to be purchased. If and to
the extent the Purchase Option is not so exercised by the giving of such a
notice within such 90-day period, the Purchase Option shall automatically expire
and terminate effective upon the expiration of such 90-day period.
(b) Within 30 days after his receipt of the Company's notice of
the exercise of the Purchase Option pursuant to subsection (a) above, the
Employee (or his estate) shall tender to the Company at its principal offices
the certificate or certificates representing the Shares and other capital stock
which the corporation has elected to purchase, duly endorsed in blank by the
Employee or with duly endorsed stock powers attached thereto, all in form
suitable for the transfer of such Shares and other capital stock to the Company.
Promptly upon its receipt of such certificate or certificates, the Company shall
deliver or mail to the Employee a check in the amount of the aggregate Option
Price therefor.
(c) After the time at which any Shares and other capital stock
are required to be delivered to the Company for transfer to the Company pursuant
to subsection (b) above, the Company shall not pay any dividend to the Employee
on account of such Shares and other capital stock or permit the Employee to
exercise any of the privileges or rights of a stockholder with respect to such
Shares and other capital stock, but shall, insofar as permitted by law, treat
the Company as the owner of such Shares and other capital stock.
(d) The Option Price may be payable, at the option of the
Company, in cancellation of all or a portion of any outstanding indebtedness of
the Employee to the Company or in cash (by check) or both.
Associate Option Agreement 7
8
(e) The Company shall not purchase any fraction of a Share upon
exercise of the Purchase Option, and any fraction of a Share resulting from a
computation made pursuant to Section 14 of this Agreement shall be rounded to
the nearest whole Share (with any one-half Share being rounded upward).
16. Miscellaneous.
(a) Except as provided herein, this option may not be amended
or otherwise modified unless evidenced in writing and signed by the Company and
the Optionee.
(b) All notices under this option shall be mailed or delivered
by hand to the parties at their respective addresses set forth beneath their
names below or at such other address as may be designated in writing by either
of the parties to one another.
(c) This option shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, except that all
corporate actions taken by the Company shall be governed by Delaware's General
Corporate Law.
Date of Grant: ENTERWORKS, INC.
By:
---------------------------
Xxxxxx X. Xxxxx
President
Associate Option Agreement 8
9
OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof. The undersigned hereby acknowledges receipt of a
copy of the Company's 1996 Stock Option Plan.
OPTIONEE
----------------------
Address:
----------------------
----------------------
Associate Option Agreement 9
