Exhibit 4.2
Stock Option Agreement Between
the Registrant and X.X.
Xxxxxx & Co.
NON-STATUTORY STOCK OPTION AGREEMENT
THIS NON-STATUTORY STOCK OPTION AGREEMENT ("this Option
Agreement") is entered into as of November 5, 1991, by and between San
Francisco/Moscow Teleport, Inc., a California corporation (the "Company"), and
X.X. Xxxxxx & Co. ("Optionee").
1. Option Agreement Independent of Plan; Defined Terms. This
Option Agreement is entered into pursuant to the mutual agreement of the
parties, and is separate from and not intended to be subject to the 1992 Stock
Option Plan of the Company (the "Plan"). Nevertheless, capitalized terms used in
this Option Agreement shall have the same meanings given to them in the Plan,
unless otherwise indicated in this Agreement.
2. Grant of Option. The Company hereby grants to Optionee the
right and option ("Option") to purchase all or any part of an aggregate of One
Hundred Fifty Thousand (150,000) shares of the common stock of the Company on
the terms and conditions set forth herein ("Optioned Shares"). The Option is
not, and is not intended to meet the requirements for, an incentive stock option
within the meaning in Section 422 of the Internal Revenue Code (the "Code").
3. Exercise Price and Consideration for Exercise.
(a) Exercise Price. The exercise price for the purchase of the
Optioned Shares purchasable upon exercise of the Option shall be $0.80 for each
of the Optioned Shares, for a total exercise price of One Hundred Twenty
Thousand Dollars ($120,000) for 150,000 Optioned Shares.
(b) Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option shall be payment in cash or by check or
with Shares of the Company's Common Stock as provided below.
4. Term and Vesting of Option.
(a) Term. The term of the Option shall commence on December 1,
1991 (the "Grant Date") and terminate on November 30, 2001, or on such earlier
date as provided hereinafter. In no event shall the term of the Option be longer
than ten (10) years and one (1) day from the Grant Date. The vested portion of
the Option shall be exercisable as to any part or all of the aggregate number of
Optioned Shares as provided below.
(b) Vesting. Optionee shall become vested and have the right
to exercise the vested portion of the Option. The Option shall become vested to
the extent of (i) one-third (1/3) of the Optioned Shares as of the December 31
of the calendar year in which the Option is
granted, (ii) two-thirds (2/3) of the Optioned Shares as of the December 31 of
the calendar year immediately following the calendar year in which the Option is
granted, and (iii) all of the Optioned Shares as of the December 31 of the
second calendar year following the calendar year in which the Option is granted,
subject to the Optionee's Continuous Employment during such time. The Option may
not be exercised for fractional shares or for less than ten (10) Shares.
5. Time and Method for Exercising the Option.
(a) Time. Optionee may exercise the Option in one or more
installments and from time to time with respect to the vested portion of the
Option.
(b) Termination; Disability; Retirement; Death.
(1) Termination of Status as Employee or Non-Employee
Director. If Optionee shall cease to be an Employee or Non-Employee Director for
any reason other than permanent and total disability (within the meaning of
Section 22(e)(3) of the Code as determined in the sole discretion of the Board
of Directors of the Company), retirement or death, the Option shall
automatically terminate thirty (30) days following the date he or she ceases to
be an Employee or Non-Employee Director. Prior to such termination of the
Option, the Optionee may exercise his or her Option to the extent that he or she
was entitled to exercise on the termination date, subject to the condition that
no Option shall be exercised after the expiration of the Option period.
(2) Disability of Optionee. In the event of the permanent
and total disability (within the meaning of Section 22(e)(3) of the Code as
determined in the sole discretion of the Board of Directors of the Company)
during the Option period of an Optionee who is at the time of commencement of
such disability, or was within the 90-day period prior thereto, an employee or
Non-Employee Director and who was in Continuous Employment as such from the date
of the grant of the Option until the date of disability or termination, the
Option may be exercised at any time within one (1) year following the date of
disability, but only to the extent that the Optionee was entitled to exercise
the Option at the time of the termination or disability, whichever comes first,
subject to the condition that no Option shall be exercised after the expiration
of the Option period.
(3) Retirement of Optionee. In the event of the retirement
during the Option period of an Optionee who is at the time of such retirement,
or was within the 90-day period prior thereto, an Employee or a Non-Employee
Director and who was in Continuous Employment as such from the date of the grant
of the Option until the date of the retirement, then the Option may be exercised
by the Optionee at any time within ninety (90) days following the retirement
date, but only to the extent that the Optionee was entitled to exercise the
Option at the time of his or her retirement, subject to the condition that no
Option shall be exercised after the expiration of the Option period. For
purposes of this paragraph
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(3), the term "retirement" shall mean voluntary termination of employment by an
Employee who is at least age fifty-five (55) and who has completed five (5)
years of employment with the Company, or termination of service on the Board of
Directors by a Non-Employee Director who is at least age fifty-five (55) and who
has completed five (5) years of service on the Board of Directors.
(4) Death of Optionee. In the event of the death during
the Option period of an Optionee who is, at the time of his or her death, or
was, within the 30-day period immediately prior thereto, an Employee or
Non-Employee Director and who was in Continuous Employment as such from the date
of the grant of the Option until the date of death, the Option may be exercised
for a period of up to one (1) year following the date of death, at any time
prior to the expiration of the Option period, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest, inheritance or
otherwise as a result of the Optionee's death, but only to the extent that the
Optionee was entitled to exercise the Option at the time of death subject to the
condition that no Option shall be exercised after the expiration of the Option
period.
(c) Method.
(1) Notice and Payment. An Option shall be deemed to be
exercised when written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to exercise the
Option and full payment for the Shares with respect to which the Option is
exercised has been received by the Company. As soon as administratively
practicable following the exercise of an Option in the manner set forth above,
the Company shall issue or cause its transfer agent to issue stock certificates
representing the Shares purchased.
(2) Exercise of Option with Stock or Net of Exercise
Price. An Optionee may elect to exercise an Option in whole or in part by (i)
delivering whole shares of the Company's Common Stock previously owned by such
Optionee (whether or not acquired through the prior exercise of a stock option)
having a fair market value equal to the option price; or (ii) directing the
Company to withhold from the Shares that would otherwise be issued upon exercise
of the Option that number of whole Shares having a fair market value equal to
the Option price. Shares of the Company's Common Stock so delivered or withheld
shall be valued at their fair market value at the close of the last business day
immediately preceding the date of exercise of the Option, as determined by the
Board of Directors of the Company. Any balance of the Option price shall be paid
in cash.
(3) Voting and Dividend Rights. Until the issuance of such
stock certificates (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Shares, notwithstanding
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the exercise of the Option. No adjustment will be made for a dividend or other
rights for which the record date occurs prior to the date the stock certificates
are issued.
6. Non-Transferability of Options and Shares of Common Stock.
(a) Options. The Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution and may be exercised, during the lifetime
of the Optionee, only by the Optionee. Notwithstanding the preceding sentence,
the Option may be transferred to a spouse of the Optionee only upon approval of
the Board of Directors of the Company, providing all the conditions of
exercisability and vesting have been met. The Optionee may designate a
beneficiary who may (i) exercise an Option under Section 5(b)(4) above, or (ii)
receive Shares issued pursuant to the exercise of an Option in which the death
of the Optionee occurs between the date on which the Optionee exercises the
Option and the date the Company issues the Shares.
(b) Shares of Common Stock. Except as otherwise provided by
the Board of Directors of the Company, Optioned Shares acquired under an Option
may not be sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent and distribution
(provided the Optionee's assigns or successors to such Optioned Shares remain
subject to the terms and conditions of this Agreement, including the Company's
right of first refusal to repurchase the Optioned Shares) without the Optionee
first offering to the Company the right to purchase the Optioned Shares at the
fair market value of the Shares on the date such offer is received by the
Secretary of the Company. If the Company fails to accept the offer to purchase
such Shares within seven (7) days after receipt of such offer, the Optionee
shall be free to sell or transfer of such Shares at the same fair market value
at which they were offered to the Company. If the Optionee does not sell or
transfer such Shares within Ninety (90) days thereafter, then the restrictions
of this Section 6 shall remain in effect. The certificates representing the
Optioned Shares shall bear a legend that shall give notice of such restrictions
on the transferability of the Optioned Shares.
7. Tax Withholding on the Option. Upon each exercise of the
Option, Optionee agrees to make appropriate arrangements acceptable to the
Company for satisfaction of any applicable federal, state or local income and
employment tax withholding requirements. Without limitation, when an Optionee is
required to pay to the Company an amount with respect to income or employment
tax withholding obligations in connection with the exercise of an option, the
Optionee may elect, prior to the date the amount of such withholding is
determined (the "Tax Date") to make such payment, or such increased payment as
the Optionee elects to make up to the maximum federal, state and local marginal
tax rates (including any related obligation under the Federal Insurance
Contribution Act) applicable to the Optionee and the particular transaction, by
(i) delivering cash; (ii) delivering part or all of the payment in previously
owned stock (whether or not acquired through the prior exercise of a stock
option); or (iii) irrevocably directing the Company to withhold from the Shares
that
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would otherwise be issued upon exercise of the Option that number of whole
Shares having a fair market value equal to the amount of tax required or elected
to be withheld (a "Withholding Election"). If an Optionee's Tax Date is deferred
beyond the date of exercise and the Optionee makes a Withholding Election, the
Optionee will receive the full amount of Shares otherwise issuable upon exercise
of the Option minus the number of Shares necessary to satisfy his or her minimum
withholding requirements measured on the date the Option is exercised (or such
higher payment as he or she may have elected to make) with adjustments to be
made in cash after the Tax Date.
After the Registration Date, any withholding of Shares with
respect to taxes arising in connection with the exercise of an Option by any
person subject to short-swing trading liability under Section 16(b) of the
Exchange Act shall satisfy the following conditions:
(i) An advance election to withhold Shares in settlement of a
tax liability must satisfy the requirements of Exchange Act Rule
16b-3(d)(1)(i), regarding participant-directed transactions;
(ii) Absent such an election, the withholding of Shares to
settle a tax liability may occur only during the quarterly window
period described in Exchange Act Rule 16b-3(e);
(iii) Absent an advance election or window-period withholding,
the Optionee may deliver Shares owned prior to the exercise of an
Option to settle a tax liability arising upon exercise of the Option,
in accordance with Exchange Act Rule 16b-3(f); or
(iv) The delivery of previously acquired Shares (but not the
withholding of newly acquired Shares) will be allowed when an election
under Section 83(b) of the Code accelerates the Tax Date to a day that
occurs less than six months after the advance election and is not
within the quarterly window period described in Exchange Act Rule 16b-
3(e).
Any adverse consequences incurred by an Optionee with respect to his or her
participation in this Agreement, the use of Shares to pay any part of the Option
price or income or employment tax arising in connection with the exercise of an
Option (including, without limitation, any adverse tax consequences arising as a
result of a disqualifying disposition within the meaning of Section 422 of the
Code) shall be the sole responsibility of the Optionee. The Company does not
warrant or represent to the Optionee any tax consequence of any transaction
under this Agreement.
8. Notices. All notices to the Company under this Agreement
shall be in writing and shall be delivered by personal service or telegram,
telecopier, or registered or certified mail (if such service is not available,
then by first class mail), postage prepaid, to
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such address as may be designated from time to time by the Company, and which
shall initially be:
San Francisco/Moscow Teleport, Inc.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: 000-000-0000
Attention: President
All notices shall be deemed given when received.
9. No Effect on Terms of Employment. This Option Agreement
shall not affect any right or power of the Company to terminate or change the
terms of employment of Optionee at any time and for any reason whatsoever, with
or without cause.
10. Integration. This Option Agreement constitutes the entire
agreement between the Company and Optionee pertaining to the subject matter
hereof, and supersedes all oral and prior written or implied agreements and
understandings between the parties.
11. Waiver. Any failure to enforce any terms or conditions of
this Option Agreement by the Company shall not be deemed a waiver of that term
or condition, nor shall any waiver or relinquishment of any right or power at
any one time or times be deemed a waiver or relinquishment of that right or
power for all or any other times.
12. Severability of Provisions. If any provision of this
Option Agreement shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof; and this Option
Agreement shall be construed and enforced as if it did not include such
provision.
13. Successors. This Option Agreement shall be binding upon
and inure to the benefit of any successor or successors of the Company and any
assigns, successors or heirs of Optionee. When the context permits, "Optionee,"
as used in this Option Agreement, shall include Optionee's executor,
administrator or other legal representative or the person or persons to whom
Optionee's rights pass by will or the applicable laws of descent and
distribution. Nothing in this Option Agreement shall be interpreted as imposing
any liability on the Company in favor of Optionee or such transferee of option
rights with respect to any loss, cost or expense that Optionee or transferee may
incur in connection with, or arising out of any transaction involving, the
Option granted hereunder.
14. Amendment of Option Agreement. This Option Agreement
cannot be amended except by a writing executed by the Company and the Optionee.
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15. Applicable Law; Headings. This Option Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of California applicable to agreements made and to be performed exclusively in
the State of California. The headings in this Option Agreement are solely for
convenience of reference and shall not affect its meaning or interpretation.
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IN WITNESS WHEREOF, the parties hereto have executed this
Option Agreement as of the date first written above.
SAN FRANCISCO/MOSCOW OPTIONEE
TELEPORT, INC.
/s/SFMT, Inc. /s/X.X. Xxxxxx & Co.
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