THIS OPTION MAY BE EXERCISED ONLY IN ACCORDANCE WITH THE TERMS OF THE PLAN AND
THIS AGREEMENT. ONLY CERTAIN PROVISIONS OF THE PLAN ARE SUMMARIZED IN THIS
AGREEMENT. A COPY OF THE PLAN IS PROVIDED WITH THIS AGREEMENT.
ONLINE STOCK MARKET GROUP(TM)
INCENTIVE STOCK OPTION AGREEMENT
Date of Grant: ___________
TO: _____________
We are pleased to notify you that ONLINE STOCK MARKET GROUP (the
"Company") on this day hereby grants to you an option to purchase all or any
part of ____________ shares of the Common Stock of the Company at the price of
$_____ per share (the "Exercise Price"), which has been determined by the
Company to be one hundred percent (100%) of the fair market value of a share of
the Common Stock of the Company as of the Date of Grant, as a stock option under
the ONLINE STOCK MARKET GROUP 1998 Stock Option Plan (the "Plan").
THIS OPTION IS INTENDED TO BE AN INCENTIVE STOCK OPTION, AS DESCRIBED IN ss.422
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), BUT THE COMPANY
DOES NOT REPRESENT OR WARRANT THAT THIS OPTION NECESSARILY QUALIFIES AS SUCH.
YOUR ABILITY TO RECEIVE THE TAX TREATMENT ACCORDED TO INCENTIVE STOCK OPTIONS
UPON EXERCISE OF THIS OPTION AND THE SALE OF THE STOCK ACQUIRED UPON EXERCISE IS
SUBJECT TO TIMING REQUIREMENTS SET FORTH IN THE CODE. YOU SHOULD CONSULT WITH
YOUR OWN TAX ADVISOR REGARDING THE TAX EFFECTS OF THIS OPTION.
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1. Signature on Option Agreement
You cannot exercise this option unless you first sign this Agreement in
the place provided and return it to the Secretary of the Company before the
close of business on the 20th day after the Date of Grant. If you fail to do so,
this option will terminate and be of no effect. However, your signing and
delivering this letter will not bind you to purchase any of the shares subject
to this option.
2. Term of Option and Vesting
Subject to the provisions of Sections 5 and 6 below, you may exercise
this option at any time during a period of one hundred twenty (120) months from
the Date of Grant in accordance with the following schedule:
a. You may not exercise this option with respect to any shares until
_________. On _____________, you may exercise this option with respect
to _______________ shares of the Company's Common Stock.
b. For each full month after __________________, you may exercise this
option for an additional ________ shares of the Company's Common Stock.
You may exercise all or any unexercised portion of this option any time
prior to or upon the expiration of one hundred twenty (120) months from the Date
of Grant. If you do not exercise all of this option prior to or on that date,
all of your rights to exercise any unexercised portion of this option will
immediately terminate.
3. Method of Exercising Option.
a. Notice and Payment - General This option may be exercised by
delivering to the Secretary of the Company payment in full at the Exercise Price
for the number of shares being purchased in cash, certified or cashier's check,
personal bank check or the equivalent thereof acceptable to the Company,
together with a written notice in a form satisfactory to the Company, signed by
you specifying the number of shares you then desire to purchase and the time of
delivery thereof, which shall not be less than fifteen (15) days and not more
than thirty (30) days after the giving of such notice.
b. Alternative Forms of Payment The Company may, in its sole
discretion, agree to allow you to make payment of the exercise price in any one
of the following forms:
i. The surrender of shares of the Company's stock which you
own having a value, as determined by the Company, equal to the exercise price,
provided that if you are subject to short-swing profit liability under '16 of
the Exchange Act, the timing of the exercise must satisfy the requirements of
Rule 16b-3 of the SEC;
ii. The delivery of a recourse promissory note signed by you,
provided that the promissory note shall be due and payable not more than four
(4) years after this option is exercised
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and that interest shall be payable at least annually at a rate not less than
that necessary to avoid assessment of imputed interest under the Code; or
iii. The assignment by you of the proceeds of the sale of some
or all of the shares being acquired upon exercise of this option.
The Company shall be under no obligation to allow you to use any of
these alternative forms of payment of the purchase price. Furthermore, the
Company may place additional conditions upon your use of these methods of
payment of the Exercise Price if it believes, in its sole discretion, that it is
in the best interests of the Company to do so.
c. Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of this option.
d. Securities Laws Restrictions. The Company has granted you this
option pursuant to an exemption from the registration requirements of the
Securities Act of 1933 (the "Act") set forth in Rule 701 of the Securities and
Exchange Commission, and it is anticipated that the exemption contained in that
Rule will apply to your exercise of this option. If for any reason that Rule or
successor thereto is not available to the exercise of this option, this option
may not be exercised unless a registration statement under the Act is in effect
with respect to the shares issuable upon exercise of this option or, if in the
opinion of counsel to the Company, another exemption to the registration
requirements is available. The availability of any exemption to the registration
requirements may be conditioned, among other things, upon the Company's receipt
of written representations from you regarding your investment experience, your
receipt of financial and other information regarding the Company, and
representations from you that you will not resell or otherwise dispose of the
shares you are acquiring other than in accordance with Rule 144 of the SEC. If
an exemption to the registration requirements is not available, the Company
shall be under no obligation to register the shares you may receive under the
Act. As a result, it is possible that you may not be able to exercise this
option when you desire to do so.
e. Withholding. If you incur a tax liability in connection with this
option, the Company may, in its discretion, allow you to satisfy federal and
state tax withholding requirements by having the Company withhold from the
shares to be issued to you upon exercise of this option that number of shares
with a fair market value equal to the amount of tax to be withheld. The value of
the shares to be withheld shall be determined on the date that the amount of tax
to be withheld is ascertained. You must make this election in writing on or
before the date that the amount of tax is determined and you may not revoke this
election after you make it. If the Company decides not to allow you to satisfy
your withholding obligations in this manner, the Company may require you as a
condition to your exercise of this option to pay in cash or cash equivalent to
the Company the amount of your withholding obligations on or before the date
that payment of withholding taxes is due.
4. Nontransferability of Option.
This option shall not be transferable except by Will or the laws of
descent and distribution, and this option may be exercised during your lifetime
only by you. Any purported transfer or
3
assignment of this option shall be void and of no effect, and shall give the
Company the right to terminate this option as of the date of such purported
transfer or assignment.
5. Termination of Employment.
a. Termination: General. Notwithstanding the provisions of Section 2,
if your status as employee of the Company is terminated for any reason other
than death or disability, you may exercise this option within three (3) months
from the effective date of such termination to the extent you were entitled to
exercise this option on the date of termination, after which you will no longer
have any rights to exercise this option. If your status as an employee is
terminated due to death or disability, you (or your qualified representative or
estate, as the case may be) may exercise this option within twelve (12) months
from the date you died or became disabled to extent to which you were entitled
to exercise this option on the date of death or disability, after which time you
will no longer have any rights to exercise this option. The definition of
"disability" for purposes of this agreement shall be that set forth in '22(e)(3)
of the Internal Revenue Code of 1986, as amended (the "Code"), or such successor
provision under the Code as is in effect as of the date of such disability. In
no event may you exercise this option after the expiration of the term of this
option.
b. Leave of Absence. For the purposes of this Agreement, your status as
an employee shall not be deemed terminated if you take any military leave, sick
leave or other leave of absence approved by the Company of ninety (90) days or
less. If the leave extends beyond that time, your employment will be deemed to
have terminated on the ninety-first (91st) day after the leave began unless your
right to reemployment is guaranteed by statute or contract. There shall be no
continued vesting of shares as provided in Section 2 while you are on an
approved leave unless the Company otherwise agrees or continuation of vesting
during your leave of absence is required by law.
6. Termination of Options Upon Certain Events.
a. General. Except as otherwise provided in this Section 6, this option
shall terminate immediately, notwithstanding the fact that this option could
otherwise be exercised, two (2) business days prior to the occurrence of any of
the following events:
i. The merger or consolidation of the Company, whether or not
the Company is the surviving corporation, if the beneficial owners of the
Company's securities immediately prior to the merger or consolidation as a group
are the beneficial owners of less than 50% of the surviving entity's outstanding
voting securities immediately after the merger or consolidation;
ii. The sale or exchange of all or substantially all of the
outstanding voting securities of the Company;
iii. The sale, exchange or transfer of all or substantially
all of the assets of the Company other than in the ordinary course of business;
or
iv. The dissolution or liquidation of the Company.
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b. No Assumption of Obligations. Although the Company may attempt to
negotiate with the surviving, continuing, successor or acquiring corporation or
entity, as the case may be (the "Acquiror") for the Acquiror to assume the
obligations of the Company with respect to the outstanding options, the Acquiror
shall not be required to assume these obligations or provide substitute options
unless the Acquiror agrees to do so. The Company shall not be liable in any way
if the Acquiror does not agree to assume the Company's obligations or provide
substitute options.
c. Notice of Event. If the Acquiror does not agree to assume the
obligations of the Company under this agreement, the Company shall provide you
with notice of any event described in subsection 6.a above no later than ten
(10) calendar days before it occurs.
d. No Cancellation of Options. There shall be no cancellation of
options under this Section 6 if the Acquiror was an affiliate of the Company
immediately prior to the event described in 6.a.i, 6.a.ii or 6.a.iii above or is
a person, group or other entity which beneficially owned over 10% of the
Company's outstanding voting stock immediately prior to the event.
7. Adjustment of and Changes in the Shares.
a. Adjustments. If: (i) the shares of the Company's Common Stock are
changed into a different number of shares by reason of reorganization,
recapitalization, combination of shares, stock split, reverse stock split or
reclassification; (ii) the Company declares and pays a stock dividend on the
Common Stock; or (iii) the Company's Common Stock is changed into or exchanged
for a different type of security due to any reorganization, recapitalization,
reclassification or similar event, the Company shall make appropriate
adjustments in the number of shares or kind of securities which you may purchase
upon exercise of this option so that your proportionate shareholding interest in
the Company represented by unexercised portion of this option shall be
maintained as before the event. Adjustments in this option shall be made without
change to the total price of the unexercised portion of this option and with a
corresponding adjustment in the option price per share.
b. No Additional Rights. Except as expressly provided in this Section
7, you shall have no rights by reason of any of the following events: (1)
subdivision or consolidation of shares of stock of any class issued by the
Company; (2) payment by the Company of any stock dividend; (3) any other
increase or decrease in the number of shares of stock of any class; (4) any
dissolution, liquidation, merger, consolidation, spin-off or acquisition of
assets or stock of another corporation by the Company. Other than as set forth
in subsection 7.a, no issuance by the Company of shares of stock of any class or
securities convertible into shares of any class, or the conversion of such
securities into shares of any class of stock, shall affect the number or price
of shares of Common Stock subject to this option, and no adjustment by reason
thereof shall be made.
c. No Limitation on Company's Rights. Nothing in this Agreement shall
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or
any part of its business or assets.
8. Rights as a Shareholder.
You shall have no rights as a shareholder by virtue of possessing this
option and no such rights with respect to any shares of stock issuable upon
exercise of this option until the date you are issued a stock certificate
evidencing the your ownership of the shares. No adjustment shall be made
5
for dividends or other rights for which the record date is prior to the date of
such issuance, except as provided in Section 7 hereof.
9. Right of First Refusal.
a. General. If you propose to sell, pledge or otherwise transfer any of
the shares you acquire upon the exercise of this option to any person pursuant
to a bona fide offer, the Company shall have the right to purchase those shares
(the "Offered Shares") from you pursuant to the terms and conditions set forth
below (hereafter referred to as the "Right of First Refusal").
b. Notice of Proposed Transfer. Before you transfer any of the Offered
Shares, you shall provide the Company with a written notice (the "Transfer
Notice") setting forth the number of shares you wish to transfer, the identity
of the proposed transferee, the price at which the Offered Shares are proposed
to be transferred and all of the material terms of the proposed transfer. If the
Company wishes to exercise the Right of First Refusal with respect to some or
all of these shares, the Company must so notify you no later than thirty (30)
days after its receipt of the Transfer Notice (the "Election Notice"). The
Company shall then be entitled to purchase the number of Offered Shares set
forth in the Election Notice at the price and pursuant to the terms and
conditions contained in the Transfer Notice, provided that the sale shall take
place on the later of: i) the date upon which the transfer to the proposed
transferee was to take place; or ii) sixty (60) days following the Company's
receipt of the Transfer Notice. If the purchase price specified in the Transfer
Notice is payable in property other than cash or debt, the Company shall have
the option of paying the purchase price in cash equal to the fair market value
of that property, as determined in the good faith discretion of the Board of
Directors of the Company.
c. Shares Not Purchased. Offered Shares which the Company does not
elect to purchase and which are transferred to the proposed transferee in
accordance with the Transfer Notice shall not be subject to the Right of First
Refusal after the transfer occurs. The Right of First Refusal will continue to
apply to all shares purchasable upon exercise of this option, including but not
limited to the Offered Shares, if the transfer does not take place in accordance
with the Transfer Notice or if the transfer violates subsection 9.g.
d. Change in Offer. If the offer from the proposed transferee pursuant
to which you propose to transfer these shares is amended in any way which makes
the offer materially more favorable to the proposed transferee, or if the date
for completion of the sale is extended more than sixty (60) days beyond that set
forth in the Transfer Notice, the amended or extended offer shall be considered
a new offer. No shares may be sold to the proposed transferee on the basis of
that new offer unless the shares are re-offered to the Company on the terms
contained in the new offer in accordance with the procedures set forth in this
Section 9.
e. Involuntary Transfers. If any of the shares you acquire upon
exercise of this option are sold or otherwise transferred pursuant to court
order, foreclosure or otherwise by operation of law (other than upon death under
the conditions set forth in subsection 9.f), the Company shall have the right to
purchase the shares from you or, if title to these shares has been given to the
transferee, from the transferee in accordance with the procedures set forth in
subsection 9.b. You or, if title to these
6
shares has already been transferred, the transferee must transmit copies of the
court order or notice of foreclosure or sale to the Company together with the
Transfer Notice. If the proposed transferee is required to provide consideration
in exchange for the shares, the purchase price for the shares by the Company
shall be the amount of that consideration. If no price capable of valuation is
given, the purchase price for the shares by the Company shall be the fair market
value of the shares as determined in the good faith discretion of the Company.
f. Transfers Not Subject to Right of First Refusal. The Right of First
Refusal shall not apply to any transfer of shares acquired upon exercise of this
option to: i) your spouse, children or your lineal descendants or to a trust
established for your benefit or the benefit of these persons; or ii) to your
estate and, thereafter, your ancestors, descendants or spouse by Will or
intestate succession following your death, provided that each transferee agrees
in writing in a form acceptable to the Company that the transferee will abide by
all of the provisions of this Section 9 and acknowledging that the shares are
subject to the Right of First Refusal and other provisions of this Agreement.
Transfers of shares by gift other than as provided for in this subsection 9.f
are prohibited.
g. Transfers in Bad Faith. If the Company concludes that any transfer
described in a Transfer Notice is not bona fide, or if a transfer is not
otherwise made in accordance with the requirements of this Section 9, the
Company may refuse to recognize that transfer in its shareholder records and
that purported transfer will be null and void.
h. Assignment of Right of First Refusal. The Company may assign its
Right of First Refusal to one or more of the Company's shareholders at any time
with respect to some or all of the shares which are proposed to be transferred.
i. Termination of Right of First Refusal. This Section 9 shall cease to
be in effect upon the occurrence of any of the following events:
i. The closing of an underwritten public offering for the
Company's Common Stock (or any equity securities of a class which may be
purchased upon the exercise of this option) pursuant to an effective
registration statement filed with the Securities and Exchange Commission under
the Securities Act; provided that the gross proceeds to the Company from the
offering, after underwriter's discounts and commissions, exceed $5,000,000;
ii. The listing of the Company's Common Stock (or other equity
securities of a class which may be purchased upon the exercise of this option)
on a national securities exchange (as that term is used in the Securities
Exchange Act of 1934), on the Nasdaq National Market or the Nasdaq SmallCap
Market;
iii. The occurrence of any of the events described in
subsection 6.a.
10. Notification of Sale.
If the right of first refusal has been terminated, you agree to notify
the Company of a sale, pledge or other transfer of any of the shares acquired
upon exercise of this option not more than five (5) days after the sale, pledge
or other transfer.
7
11. Restrictions on Sales under Securities Laws.
a. Federal Securities Laws. The shares which are issuable upon
the exercise of this option have not been registered under the Securities Act.
As a consequence, you will not be able to sell, pledge or otherwise transfer
these shares unless they are registered under the Securities Act or unless the
sale complies with the requirements of SEC Rule 701 or SEC Rule 144 or, in the
opinion of counsel to the Company, another exemption to the registration
requirements is available to the transaction. You should be aware that your
ability to sell, pledge or otherwise transfer these shares may be subject to
substantial restrictions under the Securities Act and the rules of the SEC. No
sale, pledge or other transfer of these shares will be allowed unless you are
able to demonstrate to the satisfaction of the Company that the proposed
transfer complies with the Securities Act and the rules of the SEC. If you wish
for information on whether a proposed transfer may violate these restrictions,
you should contact the Secretary of the Company or your own counsel.
b. The shares issuable upon the exercise of this option have
not been registered or qualified under the securities laws of any other state.
If the securities laws of any other state require that the Company place
limitations on the transferability of these shares, these shares may not be
transferred unless you are able to demonstrate to the satisfaction of the
Company that the proposed transfer complies with that state's law.
12. Restrictive Legends.
The Company may place restrictive legends on the certificate
or certificates representing the shares issued upon exercise of this option
referring the Right of First Refusal set forth in Section 9 of this Agreement
and any restrictions on transfer under federal and applicable state securities
laws. Upon the request of the Company, you shall promptly provide the Company
with any and all certificates representing shares acquired upon exercise of this
option in order to allow the Company to attach applicable legends. Unless the
Company determines otherwise, the legends which may be placed on the certificate
or certificates representing the shares may include, but are not limited to, the
following:
a. "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE
SHARES MAY NOT BE SOLD, HYPOTHECATED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THESE SHARES OR THE
COMPANY RECEIVES EVIDENCE REASONABLY SATISFACTORY TO IT THAT THE SALE,
HYPOTHECATION, ASSIGNMENT OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION
REQUIREMENT OF THE ACT.
b. "THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL IN FAVOR OF THE CORPORATION OR ITS ASSIGNEES. THE TERMS
OF THE RIGHT OF FIRST REFUSAL ARE CONTAINED IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER OF THE SHARES, A COPY OF WHICH MAY BE
REVIEWED UPON WRITTEN REQUEST MADE TO THE SECRETARY OF
8
THE CORPORATION. ANY TRANSFER OF THE SHARES IN VIOLATION OF THIS AGREEMENT SHALL
BE VOID."
13. Market Standoff Agreement.
You agree that, in connection with any registration of the Company's
securities under the Securities Act of 1933, upon the request of the Company or
the underwriters managing any public offering of the Company's securities, you
will not sell or otherwise dispose of any shares you acquire upon exercise of
this option without the prior written consent of the Company or the underwriters
for such period as the Company or the underwriters may specify; provided that
such period shall not exceed 180 days from the registration of the securities.
14. Subject to Terms of the Plan.
This Agreement shall be subject in all respects to the terms and
conditions of the Plan, and if the terms of this Agreement and the Plan conflict
in any way, the terms of the Plan shall control. Your signature herein
represents your acknowledgment of receipt of a copy of the Plan. Any dispute or
disagreement which shall arise under, or as a result of, or pursuant to, this
Agreement shall be finally and conclusively determined by the Company in its
sole discretion, and such determination shall be binding upon all parties.
15. Exercise of Option Conditioned on Approval.
This option shall become null and void, and you may not exercise this
option, unless the shareholders of the Company approve the Plan within twelve
months of the date the Plan was adopted by the Company's Board of Directors.
16. Taxes.
This option is intended to be an incentive stock option within the
meaning of ?422 of the Code, and taxation thereof (with respect to both the
Company and you or your estate) shall be governed by applicable provisions of
the Code. Your ability to receive the tax treatment accorded to incentive stock
options upon the exercise of this option and the sale of the stock acquired upon
exercise is subject to timing requirements set forth in the Code. You should
consult with your tax advisor if you have questions regarding the tax effect of
this option.
17. Not an Employment Contract.
This Agreement shall not be deemed to be an agreement to employ you for
a specific term or to limit in any way the right of the Company to terminate
your employment at any time with or without cause.
9
18. Entire Agreement.
This document, the Plan and all attachments to this document contain
the entire agreement between you and the Company with respect to the subject
matter contained herein and supersede in their entirety any previous or
contemporaneous agreements, whether oral or written, with respect to that
subject matter.
19. No Waiver or Amendment.
This Agreement may not be amended or modified except with the signed,
written consent of the parties to such amendment or modification. No right shall
be deemed waived without the written consent of the party charged with waiving
such right. The Company may at any time terminate or amend the Plan; provided,
however, that no such termination or amendment may adversely affect your rights
under this Agreement.
20. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California, exclusive of its conflicts of laws
provisions.
ONLINE STOCK MARKET GROUP
By: _______________________
Its: ______________________
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I acknowledge receipt of this Agreement and a copy of the ONLINE STOCK
MARKET GROUP 1999 Stock Option Plan. I have reviewed this Agreement and accept
the terms and conditions thereof.
Date: _______________ ____________________________
[Signature of Optionee]
____________________________
[Printed or Typed Name of Optionee]
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