Exhibit 10.2
EMBEDDED SUPPORT TOOLS CORPORATION
FORM OF INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement (the "Agreement"), effective as
of _________ __, ____ (the "Date of Grant"), is made by and between Embedded
Support Tools Corporation, a Massachusetts corporation (the "Company"), and
__________________ (the "Recipient").
Background
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The Company has established the Embedded Support Tools Corporation
1999 Stock Option Plan (the "Plan"). The Company wishes to grant to the
Recipient an Incentive Stock Option pursuant to the terms of the Plan.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. Grant of Option. In consideration of service to the Company and for other
good and valuable consideration, the Company grants to the Recipient an
Incentive Stock Option to purchase _____ shares of the Company's common
stock in accordance with the terms and conditions of the Plan and this
Agreement (the "Option"). The Option is intended by the parties to be, and
shall be treated as, an "incentive stock option" as such term is defined
under Section 422 of the Internal Revenue Code of 1986, as amended. The
Option is granted in accordance with the terms and conditions of the Plan,
the terms of which are incorporated herein by reference, and the Agreement
shall in all respects be interpreted in accordance with the Plan. Any term
used in the Agreement that is not otherwise defined in the Agreement shall
have the meaning assigned to it by the Plan.
2. Option Price. The purchase price of the shares of stock covered by the
Option shall be $____ per share, which is the Fair Market Value on the Date
of Grant.
3. Adjustments in Option. If a stock dividend, stock split, share
combination, exchange of shares, recapitalization, consolidation, spin-off,
reorganization, or liquidation of or by the Company shall occur, the
Administrator shall adjust the number and class of Shares then subject the
Option, and the price per Share payable upon exercise of the Option to the
extent the Administrator deems appropriate to reflect the applicable
transaction. If a Change In Control occurs, then the Administrator may
elect to (i) reach an agreement with the acquiring or surviving entity that
the acquiring or surviving entity will assume the obligation of the Company
under the Option, (ii) reach an agreement with the acquiring or surviving
entity that the
acquiring or surviving entity will convert the Option into an option of at
least equal value, determined as of the date of the transaction, as to
stock of the acquiring or surviving entity, (iii) terminate the Option
effective upon the date of the applicable transaction and make, within 60
days after the date of the applicable transaction, a cash payment to the
Recipient equal to the difference between the exercise price of the Option
and the Fair Market Value, as of the date of the applicable transaction, of
the Shares subject to the Option, or (iv) accelerate the expiration of the
Option to a date not earlier than the fifteenth day after the date of the
applicable transaction. Notwithstanding the foregoing, however, the
Administrator may, in its sole and absolute discretion, delay for up to
twelve (12) months following a Change in Control, the payment of the
proceeds otherwise payable to the Recipient by virtue of the acceleration
of the vesting of the Recipient's Option to ensure that the Recipient
fulfills his obligation to continue in the employ of the acquiring or
surviving corporation pursuant to Section 8 below. The Administrator shall
not be entitled to withhold any payments payable to Recipient in connection
with the portion of Recipient's Option that had vested prior to the Change
in Control.
4. Person Eligible to Exercise Option. During the lifetime of the Recipient,
only the Recipient may exercise the Option or any portion thereof. After
the death of the Recipient, any exercisable portion of the Option may,
prior to the time when the Option becomes unexercisable under the terms of
the Plan, be exercised by the Recipient's personal representative or by any
other person empowered to do so under the Recipient's will, trust or under
then applicable laws of descent and distribution.
5. Manner of Exercise. The Option, or any portion thereof, may be exercised
only in accordance with the terms of the Plan and solely by delivery to the
Secretary of the Company of all of the following items prior to the time
when the Option or such portion becomes unexercisable under the terms of
the Plan:
(a) Notice in writing signed by the Recipient or the other person then
entitled to exercise the Option or portion thereof, stating that the
Option or portion thereof is thereby exercised, such notice complying
with all applicable rules (if any) established by the Administrator;
(b) Full payment for the shares with respect to which the Option or
portion thereof is exercised;
(c) Full payment (in cash or by certified check) upon demand of an amount
sufficient to satisfy any federal (including FICA and FUTA amounts),
state, and/or local withholding tax requirements at the time the
Recipient or his beneficiary recognizes income for federal, state,
and/or
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local tax purposes as the result of the receipt of Shares
pursuant to the exercise of the Option or portion thereof;
(d) A bona fide written representation and agreement, in a form
satisfactory to the Administrator, signed by the Recipient or other
person then entitled to exercise the Option or portion thereof,
stating that the shares of stock are being acquired for his own
account, for investment and without any present intention of
distributing or reselling said shares or any of them except as may be
permitted under the Securities Act of 1933, as amended (the "Act"),
and then applicable rules and regulations thereunder, and that the
Recipient or other person then entitled to exercise such Option or
portion will indemnify the Company against and hold it free and
harmless from any loss, damage, expense or liability resulting to the
Company if any sale or distribution of the shares by such person is
contrary to the representation and agreement referred to above. The
Administrator may, in its absolute discretion, take whatever
additional actions it deems appropriate to ensure the observance and
performance of such representations and agreement and to effect
compliance with all federal and state securities laws or regulations.
Without limiting the generality of the foregoing, the Administrator
may require an opinion of counsel acceptable to it to the effect that
any subsequent transfer of shares acquired on an Option exercise does
not violate the Act and may issue stop-transfer orders covering such
shares. The written representations and agreement referred to in the
first sentence of this subsection (d), however, shall not be required
if the shares to be issued pursuant to such exercise have been
registered under the Act, and such registration is then effective in
respect of such shares; and
(e) In the event the Option or any portion thereof shall be exercised
pursuant to Section 4 of the Agreement by any person or persons other
than the Recipient, appropriate proof, satisfactory to the
Administrator, of the right of such person or persons to exercise the
Option.
6. Conditions to Issuance of Stock Certificates. The shares of stock
deliverable upon the exercise of the Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which
have been reacquired by the Company. Such shares shall be fully paid and
nonassessable.
7. Rights of Shareholders. The Recipient shall not be, nor have any of the
rights or privileges of, a shareholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and
until
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certificates representing such shares shall have been issued by the Company
to the Recipient.
8. Vesting and Exercisability. The Recipient's interest in the Option shall
vest according to the schedule described in this Section 8 and shall be
exercisable as to not more than the vested portion of the shares subject to
the Option at any point in time. To the extent the Option is either
unexercisable or unexercised, the unexercised portion shall accumulate
until the Option both becomes exercisable and is exercised, subject to the
provisions of Section 9 of the Agreement. The Option shall become vested
according to the following schedule:
Date Cumulative Vested Portion
---- -------------------------
______________ _____
______________ _____
______________ _____
______________ _____
______________ _____
In the event of a Change in Control, the Option shall become 100% vested
upon the earlier of (a) 12 months following a Change in Control in the
event of the Recipient's continued employment on substantially the same
terms and conditions with substantially the same salary and benefits
without any requirement on the part of the Recipient to relocate and (b)
termination of the Recipient's employment by the acquiring or surviving
corporation other than for the reasons specified in Section 9(d) below. In
the event Recipient terminates his or her employment with the acquiring or
surviving corporation or is terminated for any of the reasons specified in
Section 9(d) below during the 12-month period following the Change in
Control, the Recipient shall forfeit his or her rights to any payment for
the portion of this Option that was accelerated as a result of the Change
in Control.
Furthermore, the Administrator, in its sole and absolute discretion, may
accelerate the vesting of the Option at any time.
9. Duration of Option. The Option shall expire on the earliest of September
13, 2009, or the dates described in (a) through (d) of this Section 9.
(a) In the case of the Recipient's death, the Option shall expire on the
one-year anniversary of the Recipient's death.
(b) If the Recipient's employment or affiliation with the Company
terminates as a result of his Disability, the Option will expire on
the one-year anniversary of the recipient's last day of employment or
affiliation.
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(c) If the Recipient ceases employment or affiliation with the Company for
any reason other than death or Disability, the Option shall expire 30
days following the last day of the Recipient's employment or
affiliation.
(d) Notwithstanding any provisions set forth above in this Section 9, if
the Recipient shall (i) commit any act of malfeasance or wrongdoing
affecting the Company or its affiliates, (ii) breach any covenant not
to compete or employment agreement with the Company or any affiliate,
or (iii) engage in conduct that would warrant the Recipient's
discharge for cause, any unexercised part of the Option shall expire
immediately upon the earlier of the occurrence of such event or the
last day the Recipient is employed by the Company.
10. Administration. The Administrator shall have the power to interpret this
Agreement and to adopt such rules for the administration, interpretation
and application of the Agreement as are consistent herewith and to
interpret or revoke any such rules. All actions taken and all
interpretations and determinations made by the Administrator in good faith
shall be final and binding upon the Recipient, the Company and all other
interested persons. No member of the Administrator shall be personally
liable for any action, determination or interpretation made in good faith
with respect to this Agreement or any similar agreement to which the
Company is a party.
11. Options Not Transferable. Neither the Option nor any interest or right
therein or part thereof shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition is voluntary or involuntary or by operation
of law, by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy) and any attempted disposition
thereof shall be null and void and of no effect; provided, however, that
this Section 11 shall not prevent transfers by will or by the applicable
laws of descent and distribution.
12. Matters Relating to S-Election. The Recipient acknowledges and agrees that
as of the Date of Grant, the Company has made a valid election to be
treated as a Subchapter S corporation under the Code. Therefore, the
Recipient hereby agrees to the following additional terms and conditions.
(a) The Recipient hereby represents and warrants to the Company that he or
she is as of the Date of Grant, a qualified S-shareholder under the
code, and that the exercise of this Option by the Recipient will not
adversely affect the Company's S-election.
(b) The Recipient agrees to indemnify and hold the Company and each of its
stockholders harmless from and against any and all claims,
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liabilities, damages, fines, losses and other costs arising out of or
incurred in connection with the Recipient's exercise of this Option
should such exercise adversely affect the Company's S-election. The
Recipient further covenants and agrees not to take any action after he
or she has exercised this Option that could adversely affect the
Company's S-election, including without limitation, transferring or
attempting to transfer any Option Shares to a third party who may not
be a qualified S-shareholder.
13. Company's Right of First Refusal Regarding Option Shares. If the Recipient
desires to Dispose Of any Option Shares acquired upon exercise of the
Option, the Recipient shall first offer such Option Shares to the Company.
The Recipient shall provide notice to the Company indicating the
Recipient's desire to Dispose Of Option Shares. The notice shall also
specify the number of Option Shares that the Recipient intends to Dispose
Of. The Company shall have the irrevocable and exclusive first option, but
not the obligation, to purchase all or a portion of the Option Shares,
provided the Company provides notice of its election to purchase the Option
Shares within 60 days after the Company receives the Recipient's notice.
The purchase price to be paid by the Company for the Option Shares being
offered by the Recipient shall be the Fair Market Value of the Option
Shares on the date of the Recipient's notice, and payment shall be made in
full in cash at closing. If an Initial Public Offering occurs, the
provisions of this Section 13 shall cease to be effective.
14. Company Right to Repurchase Option Shares. The Company shall have the
right to repurchase any Option Shares purchased by a Recipient following
such Recipient's termination of service or affiliation with the Company for
any reason. The price for repurchasing the Option Shares shall be the Fair
Market Value of the Option Shares on the date the Company exercises its
repurchase right. If the Company fails to exercise such repurchase right
within 60 days following the date of such Recipient's termination of
service or affiliation, the Company shall be deemed to have waived such
right. If an Initial Public Offering occurs, the provisions of this Section
14 shall cease to be effective.
15. Shares to be Reserved. The Company shall at all times during the term of
the Option reserve and keep available such number of shares of stock as
will be sufficient to satisfy the requirements of this Agreement.
16. Notices. Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its President and any
notice to be given to the Recipient shall be addressed to him at the
address given beneath his signature below. By a notice given pursuant to
this Section 16, either party may hereafter designate a different address
for
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notices to be given to him. Any notice which is required to be given to
the Recipient shall, if the Recipient is then deceased, be given to the
Recipient's personal representative if such representative has previously
informed the Company of his status and address by written notice under this
Section 16. Any notice shall have been deemed duly given when enclosed in a
properly sealed envelope addressed as aforesaid, deposited (with postage
prepaid) in a United States postal receptacle.
17. Notification of Disposition. The Recipient shall give prompt notice to the
Company of any disposition or other transfer of any Shares acquired under
this Agreement if such disposition or transfer is made within two years
from the date of the grant of the Option or one year from the date of the
exercise of the Option. Such notice shall specify the date of the
disposition or other transfer and the amount realized by the Recipient in
such disposition or other transfer.
18. No Contract of Employment. Nothing contained in this Agreement is to be
construed to change any existing contract of employment for any term of
years, or to confer upon the Recipient any additional rights to continue to
be employed by the Company in Recipient's present capacity or in any other
capacity.
19. Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
The Company and the Recipient have executed this Agreement as of the date
first written above.
EMBEDDED SUPPORT TOOLS CORPORATION, a
Massachusetts corporation
By:________________________________
___________________________________
___________________________________
Signature of Recipient
____________________
____________________
____________________
____________________
____________________________________
Date
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DocInfo: BOS1 #1003649 v1
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