THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
FORM OF
INCENTIVE STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into this day of,
______, pursuant to the DAOU SYSTEMS, INC. 1996 Stock Option Plan (the "PLAN").
Any terms not defined in this Agreement will have the meanings ascribed to such
terms in the Plan. The Committee administering the Plan has selected
_________________________________________________________ (the "OPTIONEE") to
receive the following grant of an incentive stock option ("STOCK OPTION") to
purchase shares of the common stock of DAOU SYSTEMS, INC., a California
corporation (the "CORPORATION"), on the terms and conditions set forth below to
which Optionee accepts and agrees:
1. Stock Options Granted:
Number of Shares Subject to Option _______________
Date of Grant _______________
Vesting Commencement Date _______________
Exercise Price Per Share _______________
Expiration Date _______________
2. The Stock Option is granted pursuant to the Plan to purchase the
number of shares of authorized but unissued common stock of the
Corporation specified in SECTION 1 (the "SHARES"). The Stock Option
will expire, and all rights to exercise it will terminate on the
earliest of: (a) the date provided below in SECTIONS 5 AND 6, (b) the
Expiration Date, and (c) such earlier date as provided in the Plan.
The number of shares subject to the Stock Option granted pursuant to
this Agreement will be adjusted as provided in the Plan.
3. The Stock Option will be exercisable in all respects in
accordance with the terms of the Plan which are incorporated herein by
this reference. Optionee acknowledges having received and read a copy
of the Plan. All shares of the Corporation's common stock issued
pursuant to the exercise of this Stock Option will be subject to the
Corporation's Right of Repurchase and Right of First Refusal as set
forth in Sections 11 and 12 of the Plan.
4. Optionee will have the right to exercise the Stock Option in
accordance with the following schedule:
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i. The Stock Option may not be exercised in whole or in part at any
time prior to the end of the first full year following the Vesting
Commencement Date.
ii. Optionee may exercise the Stock Option as to 20% the Shares at
the end of the first full year following the Vesting Commencement
Date.
iii. Optionee may exercise the Stock Option as to an additional 20% of
the Shares at the end of each full year thereafter following the
Vesting Commencement Date.
iv. If at any time after the end of the first full year following the
Vesting Commencement Date a change in control (as defined in the
following sentence) occurs, then Optionee may exercise the Stock
Option as to 70% of the Shares which are not otherwise vested on
the date of the change in control. For purposes of this SECTION 4,
"change in control" means any person becoming the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 50% of the Common Stock of the Corporation
outstanding at such time, without the prior approval of the Board, but
does not include any changes in ownership upon any firm commitment
underwritten offering of its securities to the general public.
v. The right to exercise the Stock Option will be cumulative.
Optionee may buy all, or from time to time any part, of the maximum
number of shares which are exercisable under the Stock Option, but in
no case may Optionee exercise the Stock Option with regard to a
fraction of a share, or for any share for which the Stock Option is
not exercisable.
c. The Stock Option will lapse and becomes unexercisable in full on the
earliest of the following events:
i. the first anniversary of the Optionee's death, as provided below
in SECTION 6;
ii. the first anniversary of the date the Optionee ceases to be an
Employee due to total and permanent disability, as provided below in
SECTION 6;
iii. the date otherwise provided below in SECTION 6, unless the
Committee otherwise extends such period before the applicable
expiration date (if permissible pursuant to applicable tax
regulation);
iv. the date provided in Section 9 of the Plan for a transaction
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described in such Section; or
v. the date the Optionee files or has filed against him or her
a petition in bankruptcy.
f. If Optionee ceases to be an Employee for any reason other than
his or her death or disability, the Optionee will have the right,
subject to the other provisions of this Agreement, to exercise the
Stock Option for 30 days after his or her termination of employment,
but not beyond the otherwise applicable term of the Option and only to
the extent that on such date of termination of employment the
Optionee's right to exercise such Option had vested, and at the end of
such 30-day period the Stock Option will expire, and all rights to
exercise it will terminate.
i. For purposes of this SECTION 6, employment will be deemed to
terminate on the date the Optionee ceases active employment with
the Corporation or any Affiliate, unless the Optionee's
reemployment rights are guaranteed by statute or contract.
ii. If Optionee dies while an Employee, or after ceasing to be
an Employee but during the period while he or she could have
exercised an Option under the preceeding sub-Sections (a) or (b),
the Option granted to the Optionee may be exercised, to the
extent it has vested at the time of death and subject to the
Plan, at any time within 12 months after the Optionee's death, by
the executors or administrators of his or her estate or by any
person or persons who acquire the Option by will or the laws of
descent and distribution, but not beyond the otherwise applicable
term of the Option.
iii. If Optionee ceases to be an Employee due to becoming totally
and permanently disabled within the meaning of Section 22(e)(3)
of the Code, the Stock Option may be exercised to the extent it
has vested at the time of cessation and, subject to the Plan, at
any time within 12 months after the Optionee's termination of
employment, but not beyond the otherwise applicable term of the
Stock Option.
g. The Optionee agrees to comply with all laws, rules, and
regulations applicable to the grant and exercise of the Stock Option
and the sale or other disposition of the common stock of the
Corporation received pursuant to the exercise of such Stock Option.
h. The Stock Option will not become exercisable unless and
until the shares exercisable under the Stock Option have been qualified
under the California Corporate Securities Law of 1968 pursuant to a
permit application filed with the California Department of Corporations
or unless the exercise is otherwise exempt
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from the qualification requirements of such law. The Stock Option is
conditioned upon the Optionee's representation, which Optionee hereby
confirms as of the date of this Agreement and which Optionee must
confirm as of the date of any exercise of all or any part of the Stock
Option, that:
i Optionee understands that both this Stock Option and any shares
purchased upon its exercise are securities, the issuance of which
require compliance with state and federal securities laws;
ii. Optionee understands that neither the Options nor the Shares have
been registered under the Securities Act of 1933 (the "ACT") in
reliance upon a specific exemption contained in the Act which depends
upon Optionee's bona fide investment intention in acquiring these
securities; that Optionee's intention is to hold these securities for
Optionee's own benefit for an indefinite period; that Optionee has no
present intention of selling or transferring any part thereof
(recognizing that the Stock Option is not transferable) and that
certain restrictions may exist on transfer of the shares issued upon
exercise of the Stock Option;
iii. Optionee understands that the Shares issued upon exercise of this
Stock Option, in addition to other restrictions on transfer, must be
held indefinitely unless subsequently registered under the Act, or
unless an exemption from registration is available; that Rule 701 and
Rule 144, two exemptions from registration which may be available, are
only available after the satisfaction of certain conditions and
require the presence of a U.S. public market for such Shares; that no
certainty exists that a U.S. public market for the shares will exist,
and that otherwise Optionee may have to sell the Shares pursuant to
another exemption from registration which exemption may be difficult
to satisfy; and
iv. The Corporation will not be under any obligation to issue any
Shares upon the exercise of this Stock Option unless and until the
Corporation has determined that:
(i) it and Optionee have taken all actions required to register
such Shares under the Securities Act, or to perfect an exemption from the
registration requirements thereof;
(ii) any applicable listing requirement of any stock exchange on
which such Shares are listed has been satisfied; and
(iii) all other applicable provisions of state and federal
law have been satisfied.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Stock
Option Agreement, in the case of the Corporation by its duly authorized officer,
as of the date and year written above.
OPTIONEE DAOU SYSTEMS, INC.,
a California corporation
----------------------------- By:________________________________
(signature) (signature)
----------------------------- Its: ______________________________
(Type or Print Name)
Address: ____________________________________
____________________________________
____________________________________
[SIGNATURE PAGE TO DAOU SYSTEMS, INC.
INCENTIVE STOCK OPTION AGREEMENT]
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