EXHIBIT (d)(4)
CROSSROADS 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 of the
board of directors of any Parent or Subsidiary and consultants and other
independent advisors who provide services to 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 maximum 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. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, 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 either as (i) a gift to one or more
family members of Optionee's Immediate Family, to a trust in which Optionee
and/or one or more such family members hold more than fifty percent (50%) of the
beneficial interest or an entity in which more than fifty percent (50%) of the
voting interests are owned by Optionee and/or one or more such family members,
or (ii) 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 and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
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:
(i) Should Optionee cease to remain in Service for
any reason (other than death, Permanent Disability or Misconduct) while
this option is outstanding, then this option shall remain exercisable
until the earlier of (i) the expiration of the three (3)-month period
measured from the date of such cessation of Service or (ii) the
Expiration Date.
(ii) Should Optionee die while holding this option,
then Optionee's Beneficiary shall have the right to exercise this
option until the earlier of (A) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (B) the Expiration
Date.
(iii) Should Optionee cease Service by reason of
Permanent Disability while this option is outstanding, then this option
shall remain exercisable until the earlier of (i) the expiration of the
twelve (12)-month period measured from the date of such cessation of
Service or (ii) the Expiration Date.
(iv) During the applicable post-Service exercise
period, this option may not be exercised in the aggregate for more than
the number of vested Option Shares for which the option is exercisable
on the date of Optionee's cessation of Service. Upon the expiration of
the applicable 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.
However, this option shall, immediately upon Optionee's cessation of
Service for any reason, terminate and cease to be outstanding to the
extent this option is not otherwise at that time exercisable for vested
shares.
(v) Should Optionee's Service be terminated for
Misconduct or should Optionee engage in Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to
be outstanding.
6. SPECIAL ACCELERATION OF OPTION.
(a) In the event of a Change in Control, this option, to
the extent outstanding at that time but not otherwise fully exercisable, shall
automatically accelerate so that this option shall, immediately prior to the
effective date of the Change in Control, become exercisable for all of the
Option Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully-vested shares of Common Stock. No such
acceleration of this option, however, shall occur if and to the extent: (i) this
option is, in connection with the Change in Control, assumed or otherwise
continued in full force and effect by the successor corporation (or parent
thereof) pursuant to the terms of the Change in Control or (ii) this option is
replaced with a cash incentive program of the successor corporation which
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preserves the spread existing at the time of the Change in Control on the Option
Shares for which this option is not otherwise at that time exercisable (the
excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent pay-out in
accordance with the same option exercise schedule set forth in the Grant Notice.
(b) Immediately following the consummation of the Change in
Control, this option shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof) or otherwise
expressly continued in full force and effect pursuant to the terms of the Change
in Control.
(c) If this option is assumed in connection with a Change
in Control, then this option shall be appropriately adjusted, immediately after
such Change in Control, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Change in Control
had the option been exercised immediately prior to such Change in Control, and
appropriate adjustments shall also be made to the Exercise Price, provided the
aggregate Exercise Price shall remain the same.
(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 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 a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION. 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 Notice of
Exercise 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;
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(B) a promissory note payable to the Corporation, but
only to the extent authorized by the Plan Administrator in accordance
with Paragraph 13;
(C) 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) 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 (I) to
a Corporation-approved 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 income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (II) to the 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 Notice of Exercise 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) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all 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. 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.
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(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.
11. 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 and Optionee's assigns and Beneficiaries.
12. 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.
13. 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 by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.
14. 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.
15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of Texas without
resort to that State's conflict-of-laws rules.
16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those 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.
17. 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:
(i) 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
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more Option Shares: (A) more than three (3) months after the date Optionee
ceases to be an Employee for any reason other than death or Permanent
Disability or (B) more than twelve (12) months after the date Optionee
ceases to be an Employee by reason of Permanent Disability.
(ii) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock for which such installment first becomes exercisable hereunder would,
when added to the aggregate value (determined as of the respective date or
dates of grant) of the Common Stock or other securities for which this
option or any 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.
Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in
any calendar year, this option shall nevertheless become exercisable for the
excess shares in such calendar year as a Non-Statutory Option.
(iii) Should the exercisability of this option be accelerated
upon a Change in Control, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which
this option first becomes exercisable in the calendar year in which the
Change in Control occurs does not, when added to the aggregate value
(determined as of the respective date or dates of grant) of the Common Stock
or other securities for which this option or 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. Should the applicable One
Hundred Thousand Dollar ($100,000) limitation be exceeded in the calendar
year of such Change in Control, the option may nevertheless be exercised for
the excess shares in such calendar year as a Non-Statutory Option.
(iv) 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.
18. LEAVE OF ABSENCE. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:
(i) The exercise schedule in effect under the Grant Notice
shall be frozen as of the first day of the authorized leave, and this option
shall not become exercisable for any additional installments of the Option
Shares during the period Optionee remains on such leave.
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(ii) Should Optionee resume active Employee status within
sixty (60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant Notice,
receive Service credit for the entire period of such leave. If Optionee does
not resume active Employee status within such sixty (60)-day period, then no
Service credit shall be given for the period of such leave.
(iii) If this option is designated as an Incentive Option in
the Grant Notice, then the following additional provision shall apply:
(A) If the leave of absence continues for more than
ninety (90) days, then this option shall automatically convert to a
Non-Statutory Option at the end of the three (3)-month period measured
from the ninety-first (91st) day of such leave, unless Optionee's
reemployment rights are guaranteed by statute or by written agreement.
Following any such conversion of this option, all subsequent exercises
of this option, whether effected before or after Optionee's return to
active Employee status, shall result in an immediate taxable event, and
the Corporation shall be required to collect from Optionee the income
and employment withholding taxes applicable to such exercise.
(iv) In no event shall this option become exercisable for any
additional Option Shares or otherwise remain outstanding if Optionee does
not resume Employee status prior to the Expiration Date of the option term.
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EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Crossroads Systems, Inc. (the "Corporation")
that I elect to purchase _________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $___________________________
per share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1999 Stock Incentive Plan on ____________.
Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.
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Date
--------------------------------
Optionee
Address:
------------------------
--------------------------------
Print name in exact manner it is to appear on
the stock certificate:
--------------------------------
Address to which certificate is to be sent, if
different from address above:
--------------------------------
Social Security Number:
Employee Number
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APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BENEFICIARY shall mean, in the event the Plan Administrator
implements a beneficiary designation procedure, the person designated by
Optionee, pursuant to such procedure, to succeed to Optionee's rights under the
option evidenced by this Agreement to the extent the option is held by Optionee
at the time of death. In the absence of such designation or procedure, the
Beneficiary shall be the personal representative of the estate of Optionee or
the person or persons to whom the option is transferred by will or the laws of
descent and distribution.
C. BOARD shall mean the Corporation's Board of Directors.
D. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through any of the following transactions:
(a) a merger, consolidation or 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.
(b) any stockholder-approved transfer or other disposition of all or
substantially all of the Corporation's assets, or
(c) the acquisition, directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the
0000 Xxx) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which
the Board recommends such stockholders to accept.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. COMMON STOCK shall mean the Corporation's common stock.
G. CORPORATION shall mean Crossroads Systems, Inc., a Delaware
corporation.
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.
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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 per share as specified
in the Grant Notice.
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 or any successor system. 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. 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.
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. IMMEDIATE FAMILY of Optionee shall mean Optionee's child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law, including adoptive relationships.
P. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
Q. 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 intentional wrongdoing by Optionee, whether by
omission or commission, which adversely
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affects the business or affairs of the Corporation (or any Parent or Subsidiary)
in a material manner. The foregoing definition shall not limit the grounds for
the dismissal or discharge of Optionee or any other individual in the Service of
the Corporation (or any Parent or Subsidiary).
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
S. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
T. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.
U. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
V. 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.
W. PERMANENT DISABILITY shall mean the inability of Optionee to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which 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.
X. PLAN shall mean the Corporation's 1999 Stock Incentive Plan.
Y. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
Z. SERVICE shall mean 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 a consultant or independent
advisor.
AA. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
BB. 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.
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