EXHIBIT 4.2
IDS SOFTWARE SYSTEMS, INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining
the services of selected Employees, non-employee members of the Board or the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors in the service of the Corporation (or any Parent or
Subsidiary).
B. Optionee is to render valuable services to the Corporation (or
a Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to
Optionee, as of the Grant Date, an option to purchase up to the number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in Paragraph 2 at the
Exercise Price.
2. OPTION TERM. This option shall have a term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the Expiration Date, unless sooner terminated in accordance
with Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY.
(a) This option shall be neither transferable
nor assignable by Optionee other than by will or the laws of inheritance
following Optionee's death and may be exercised, during Optionee's lifetime,
only by Optionee. However, Optionee may designate one or more persons as the
beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding this
option. Such beneficiary or beneficiaries shall take the transferred option
subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to
Paragraph 5, be exercised following Optionee's death.
(b) If this option is designated a Non-Statutory
Option in the Grant Notice, then this option may be assigned in whole or in part
during Optionee's lifetime to one or more members of Optionee's family or to a
trust established for the exclusive benefit of one or more such family members
or to Optionee's former spouse, to the extent such assignment is in connection
with the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary
interest in the option pursuant to such assignment. The terms applicable to the
assigned portion shall be the same as those in effect for this option
immediately prior to such assignment.
4. DATES OF EXERCISE. This option shall become
exercisable for the Option Shares in one or more installments as specified in
the Grant Notice. As the option becomes exercisable for such installments, those
installments shall accumulate, and the option shall remain exercisable for the
accumulated installments until the Expiration Date or sooner termination of the
option term under Paragraph 5 or 6.
5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Should Optionee cease to remain in Service
for any reason (other than death, Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.
(b) Should Optionee die while holding this
option, then the personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to Optionee's will or the
laws of inheritance shall have the right to exercise this option. However, if
Optionee has designated one or more beneficiaries of this option, then those
persons shall have the exclusive right to exercise this option following
Optionee's death. Any such right to exercise this option shall lapse, and this
option shall cease to be outstanding, upon the earlier of (i) the expiration of
the twelve (12)-month period measured from the date of Optionee's death or (ii)
the Expiration Date.
(c) Should Optionee cease Service by reason of
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
Note: Exercise of this option on a date later than
three (3) months following cessation of Service due to
Disability will result in loss of favorable Incentive Option
treatment, unless such Disability constitutes Permanent
Disability. In the event that Incentive Option treatment is
not available, this option will be taxed as a Non-Statutory
Option upon exercise.
(d) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for more than
the number of Option Shares in which Optionee is, at the time of Optionee's
cessation of Service, vested pursuant to the Vesting Schedule specified in the
Grant Notice or the special vesting acceleration provisions of Paragraph 6. Upon
the expiration of such limited exercise period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be outstanding for any
vested Option Shares for which the option has not been exercised. To the extent
Optionee is not vested in one
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or more Option Shares at the time of Optionee's cessation of Service, this
option shall immediately terminate and cease to be outstanding with respect to
those shares.
(e) Should Optionee's Service be terminated for
Misconduct or should Optionee otherwise engage in Misconduct while this option
is outstanding, then this option shall terminate immediately and cease to remain
outstanding.
6. ACCELERATED VESTING.
(a) In the event of any Corporate Transaction,
the Option Shares at the time subject to this option but not otherwise vested
shall automatically vest in full so that this option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all of
the Option Shares as fully-vested shares and may be exercised for any or all of
those Option Shares as vested shares. However, the Option Shares shall NOT vest
on such an accelerated basis if and to the extent: (i) this option is assumed by
the successor corporation (or parent thereof) in the Corporate Transaction and
the Corporation's repurchase rights with respect to the unvested Option Shares
are assigned to such successor corporation (or parent thereof) or (ii) this
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested Option Shares at
the time of the Corporate Transaction (the excess of the Fair Market Value of
those Option Shares over the Exercise Price payable for such shares) and
provides for subsequent payout in accordance with the same Vesting Schedule
applicable to those unvested Option Shares as set forth in the Grant Notice.
(b) Immediately following the Corporate
Transaction, this option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof) in
connection with the Corporate Transaction.
(c) If this option is assumed in connection with
a Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same. To
the extent the actual holders of the Corporation's outstanding Common Stock
receive cash consideration for their Common Stock in consummation of the
Corporate Transaction, the successor corporation may, in connection with the
assumption of this option, substitute one or more shares of its own common stock
with a fair market value equivalent to the cash consideration paid per share of
Common Stock in such Corporate Transaction.
(d) This Agreement shall not in any way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be
made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class
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without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the total number and/or class of securities subject to this
option and (ii) the Exercise Price in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall
not have any stockholder rights with respect to the Option Shares until such
person shall have exercised the option, paid the Exercise Price and become the
record holder of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with
respect to all or any part of the Option Shares for which this option is at the
time exercisable, Optionee (or any other person or persons exercising the
option) must take the following actions:
(i) Execute and deliver to the
Corporation a Purchase Agreement for the Option Shares for which the
option is exercised.
(ii) Pay the aggregate Exercise Price
for the purchased shares in one or more of the following forms:
(A) cash or check made payable
to the Corporation; or
(B) a promissory note payable
to the Corporation, but only to the extent authorized by the
Plan Administrator in accordance with Paragraph 14.
Should the Common Stock be registered under Section
12 of the 1934 Act at the time the option is exercised, then
the Exercise Price may also be paid as follows:
(C) in shares of Common Stock
held by Optionee (or any other person or persons exercising
the option) for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date;
or
(D) to the extent the option is
exercised for vested Option Shares, through a special sale and
remittance procedure pursuant to which Optionee (or any other
person or persons exercising the option) shall concurrently
provide irrevocable instructions (a) to a
Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal, state
and local income and employment taxes required to be withheld
by the Corporation by reason of such exercise and (b) to the
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Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale.
Except to the extent the sale and remittance
procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Purchase
Agreement delivered to the Corporation in connection with the
option exercise.
(iii) Furnish to the Corporation
appropriate documentation that the person or persons exercising the
option (if other than Optionee) have the right to exercise this option.
(iv) Execute and deliver to the
Corporation such written representations as may be requested by the
Corporation in order for it to comply with the applicable requirements
of Federal and state securities laws.
(v) Make appropriate arrangements with
the Corporation (or Parent or Subsidiary employing or retaining
Optionee) for the satisfaction of all Federal, state and local income
and employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise
Date, the Corporation shall issue to or on behalf of Optionee (or any other
person or persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for
any fractional shares.
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON
THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE
CORPORATION AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE
TERMS SPECIFIED IN THE PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance
of the Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
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12. SUCCESSORS AND ASSIGNS. Except to the extent
otherwise provided in Paragraphs 3 and 6, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and Optionee, Optionee's assigns and the legal representatives,
heirs and legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered
to the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation at its principal corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Grant Notice. All notices shall be deemed effective upon personal delivery or
upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.
14. FINANCING. The Plan Administrator may, in its
absolute discretion and without any obligation to do so, permit Optionee to pay
the Exercise Price for the purchased Option Shares (to the extent such Exercise
Price is in excess of the par value of those shares) by delivering a
full-recourse, interest-bearing promissory note secured by those Option Shares.
The payment schedule in effect for any such promissory note shall be established
by the Plan Administrator in its sole discretion.
15. CONSTRUCTION. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the terms of the Plan. All decisions of the Plan Administrator
with respect to any question or issue arising under the Plan or this Agreement
shall be conclusive and binding on all persons having an interest in this
option.
16. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
17. STOCKHOLDER APPROVAL. If the Option Shares covered by
this Agreement exceed, as of the Grant Date, the number of shares of Common
Stock which may be issued under the Plan as last approved by the stockholders,
then this option shall be void with respect to such excess shares, unless
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock issuable under the Plan is obtained in accordance with
the provisions of the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION.
In the event this option is designated an Incentive Option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for
favorable tax treatment as an Incentive Option if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date Optionee ceases to be an Employee for any reason other
than death or Permanent Disability or (ii) more than twelve (12) months after
the date Optionee ceases to be an Employee by reason of Permanent Disability.
(b) This option shall not become exercisable in
the calendar year in which granted if (and to the extent) the aggregate Fair
Market Value (determined at the Grant
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Date) of the Common Stock for which this option would otherwise first become
exercisable in such calendar year would, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock and
any other securities for which one or more other Incentive Options granted to
Optionee prior to the Grant Date (whether under the Plan or any other option
plan of the Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion shall become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18(b) would not
be contravened, but such deferral shall in all events end immediately prior to
the effective date of a Corporate Transaction in which this option is not to be
assumed, whereupon the option shall become immediately exercisable as a
Non-Statutory Option for the deferred portion of the Option Shares.
(c) Should Optionee hold, in addition to this
option, one or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar year as this option, then
the foregoing limitations on the exercisability of such options as Incentive
Options shall be applied on the basis of the order in which such options are
granted.
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APPENDIX
The following definitions shall be in effect under the
Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger, consolidation or other
reorganization approved by the Corporation's stockholders, unless
securities representing more than fifty percent (50%) of the total
combined voting power of the voting securities of the successor
corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Corporation's outstanding voting securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean IDS Software Systems, Inc., a Delaware
corporation, and any successor corporation to all or substantially all of the
assets or voting stock of IDS Software Systems, Inc. which shall by appropriate
action assume this option.
G. DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment and shall be determined by the Plan Administrator
on the basis of such medical evidence as the Plan Administrator deems warranted
under the circumstances. Disability shall be deemed to constitute PERMANENT
DISABILITY in the event that such Disability is expected to result in death or
has lasted or can be expected to last for a continuous period of twelve (12)
months or more.
H. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. EXERCISE DATE shall mean the date on which the option shall
have been exercised in accordance with Paragraph 9 of the Agreement.
J. EXERCISE PRICE shall mean the exercise price payable per
Option Share as specified in the Grant Notice.
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K. EXPIRATION DATE shall mean the date on which the option
expires as specified in the Grant Notice.
L. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as the price is reported by the National Association of
Securities Dealers on the Nasdaq National Market and published in The
Wall Street Journal. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange and published in The
Wall Street Journal. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither
listed on any Stock Exchange nor traded on the Nasdaq National Market,
then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate.
X. XXXXX DATE shall mean the date of grant of the option as
specified in the Grant Notice.
X. XXXXX NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not in any way
preclude or restrict the right of the Corporation (or any Parent or Subsidiary)
to discharge or dismiss Optionee or any other person in the Service of the
Corporation (or any Parent or Subsidiary) for any other acts or omissions, but
such other acts or omissions shall not be deemed, for purposes of the Plan or
this Agreement, to constitute grounds for termination for Misconduct.
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Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
R. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
S. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
T. OPTIONEE shall mean the person to whom the option is granted
as specified in the Grant Notice.
U. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PLAN shall mean the Corporation's 2001 Stock Option/Stock
Issuance Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee
of the Board acting in its capacity as administrator of the Plan.
X. PURCHASE AGREEMENT shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.
Y. SERVICE shall mean the Optionee's performance of services for
the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or technical advisory board, or an
independent consultant.
Z. STOCK EXCHANGE shall mean the American Stock Exchange or the
New York Stock Exchange.
AA. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
BB. VESTING SCHEDULE shall mean the vesting schedule specified in
the Grant Notice pursuant to which the Optionee is to vest in the Option Shares
in a series of installments over his or her period of Service.
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ADDENDUM
TO
STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement (the "Option
Agreement") by and between IDS Software Systems, Inc. (the "Corporation") and
_____________________ ("Optionee") evidencing the stock option (the "Option")
granted on this date to Optionee under the terms of the Corporation's 2001 Stock
Option/Stock Issuance Plan, and such provisions shall be effective immediately.
All capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to them in the Option Agreement.
INVOLUNTARY TERMINATION FOLLOWING
CORPORATE TRANSACTION
1. If the Option is to be assumed by the successor
corporation (or the parent thereof) in connection with a Corporate Transaction,
then none of the Option Shares shall, in accordance with Paragraph 6 of the
Option Agreement, vest on an accelerated basis upon the occurrence of that
Corporate Transaction, and Optionee shall accordingly continue, over his or her
period of Service following the Corporate Transaction, to vest in the Option
Shares in one or more installments in accordance with the provisions of the
Option Agreement. However, upon an Involuntary Termination of Optionee's Service
within eighteen (18) months following such Corporate Transaction, all the Option
Shares at the time subject to the Option shall automatically vest in full on an
accelerated basis so that the Option shall immediately become exercisable for
all the Option Shares as fully-vested shares and may be exercised for any or all
of those Option Shares as vested shares. The Option shall remain so exercisable
until the earlier of (i) the Expiration Date or (ii) the expiration of the one
(1)-year period measured from the date of the Involuntary Termination.
2. For purposes of this Addendum, an INVOLUNTARY
TERMINATION shall mean the termination of Optionee's Service by reason of:
(i) Optionee's involuntary dismissal or
discharge by the Corporation for reasons other than for Misconduct, or
(ii) Optionee's voluntary resignation following
(A) a change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
duties and responsibilities or the level of management to which he or
she reports, (B) a reduction in Optionee's level of compensation
(including base salary, fringe benefits and target bonus under any
corporate-performance based incentive programs) by more than fifteen
percent (15%) or (C) a relocation of Optionee's place of employment by
more than fifty (50) miles, provided and only if such change, reduction
or relocation is effected by the Corporation without Optionee's
consent.
3. The provisions of Paragraph 1 of this Addendum shall
govern the period for which the Option is to remain exercisable following the
Involuntary Termination of
Optionee's Service within eighteen (18) months after the Corporate Transaction
and shall supersede any provisions to the contrary in Paragraph 5 of the Option
Agreement. The provisions of this Addendum shall also supersede any provisions
to the contrary in Paragraph 18 of the Option Agreement concerning the deferred
exercisability of the Option.
IN WITNESS WHEREOF, IDS Software Systems, Inc. has caused this
Addendum to be executed by its duly-authorized officer as of the Effective Date
specified below.
IDS SOFTWARE SYSTEMS, INC.
By:________________________________
Title:_____________________________
EFFECTIVE DATE: _________________, ________
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