Exhibit (d)(4)
FORM OF KPMG CONSULTING, INC. STOCK OPTION AGREEMENT FOR
EMPLOYEES, PURSUANT TO THE KPMG CONSULTING, INC. 2000 LONG-TERM
INCENTIVE PLAN, FOR U.S. PERSONS, INCLUDING FORM OF AWARD NOTICE
KPMG CONSULTING, INC.
STOCK OPTION AGREEMENT
FOR EMPLOYEES
KPMG Consulting, Inc., a Delaware corporation (the "Company"),
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hereby grants to the individual (the "Optionee") named in the award notice
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attached hereto (the "Award Notice") as of the date set forth in the Award
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Notice (the "Option Date"), pursuant to the provisions of the KPMG Consulting,
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Inc. 2000 Long-Term Incentive Plan (the "Plan"), a non-statutory stock option to
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purchase from the Company the number of shares of its common stock, $0.01 par
value ("Stock"), set forth in the Award Notice (the "Option"), at the price per
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share set forth in the Award Notice, upon and subject to the terms and
conditions set forth below, in the Award Notice and in the Plan. Capitalized
terms not defined herein shall have the meanings specified in the Plan.
1. Option Subject to Acceptance of Agreement. The Option shall
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be null and void unless the Optionee shall accept this Agreement by executing
the Award Notice in the space provided therefore and returning an original
execution copy of the Award Notice to the Company.
2. Time and Manner of Exercise of Option.
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2.1. Maximum Term of Option. In no event may the Option be
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exercised, in whole or in part, after the expiration date set forth in the Award
Notice (the "Expiration Date").
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2.2. Exercise of Option. (a) The Option shall become
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exercisable in accordance with the exercise schedule set forth in the Award
Notice (the "Exercise Schedule").
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(b) If the Optionee's employment with the Company terminates
by reason of Disability, the Option shall be exercisable only to the extent it
is exercisable on the effective date of the Optionee's termination of employment
and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative until and including the earlier to occur of (i) the date which is
one year after the effective date of the Optionee's termination of employment
and (ii) the Expiration Date.
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(c) If the Optionee's employment with the Company terminates
by reason of Retirement, the Option shall be exercisable only to the extent it
is exercisable on the effective date of the Optionee's termination of employment
and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative until and including the earlier to occur of (i) the date which is
three months after the effective date of the Optionee's termination of
employment and (ii) the Expiration Date.
(d) If the Optionee's employment with the Company terminates
by reason of death, the Option shall be exercisable only to the extent it is
exercisable on the date of death and may thereafter be exercised by the
Optionee's Legal Representative or Permitted Transferees, as the case may be,
until and including the earlier to occur of (i) the date which is one year after
the date of death and (ii) the Expiration Date.
(e) If the Optionee's employment with the Company terminates
for any reason other than Disability, Retirement or death, the Option shall be
exercisable only to the extent it is exercisable on the effective date of the
Optionee's termination of employment and may thereafter be exercised by the
Optionee or the Optionee's Legal Representative until and including the earlier
to occur of (i) the date which is three months after the effective date of the
Optionee's termination of employment and (ii) the Expiration Date.
(f) If the Optionee dies during the period set forth in
Section 2.2(b) following termination of employment by reason of Disability, or
if the Optionee dies during the period set forth in Section 2.2(c) following
termination of employment by reason of Retirement, or if the Optionee dies
during the period set forth in Section 2.2(e) following termination of
employment for any reason other than Disability or Retirement, the Option shall
be exercisable only to the extent it is exercisable on the date of death and may
thereafter be exercised by the Optionee's Legal Representative or Permitted
Transferees, as the case may be, until and including the earlier to occur of (i)
the date which is one year after the date of death and (ii) the Expiration Date.
(g) Notwithstanding Sections 2.1 and 2.4 and the exercise
periods set forth in the Award Notice and in subsections (b), (c), (d), (e) and
(f) of this Section 2.2, in the event the Company is involved in a business
combination, including a business combination which is intended to be treated as
a pooling of interests for financial accounting purposes (a "Pooling
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Transaction"), in connection with which the Optionee receives a substitute
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option to purchase securities of any entity, including an entity directly or
indirectly acquiring the Company:
(1) if the acquisition of the substitute option by the
Optionee may be treated as a purchase for purposes of Section 16(b) of
the Exchange Act and the Optionee's employment with the Company is
terminated for any reason during the nine-month period beginning three
months prior to the consummation of such business combination, then the
Option (or option in substitution thereof) shall be exercisable to the
extent set forth in the Award Notice and above in this Section 2.2
until and including the latest to occur of (i) the date determined
pursuant to the then applicable subsection (b), (c), (d), (e) or (f) of
this Section 2.2, (ii) the date which is seven months after the
consummation of such business combination and (iii) the Expiration
Date; or
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(2) if the Optionee is restricted from disposing of a security
(or security underlying a security) issued in connection with the
Pooling Transaction and the purpose of such restriction is to ensure
that the Pooling Transaction is accounted for as a pooling of interests
(the "Pooling Restriction") and the Optionee's employment with the
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Company is terminated for any reason during the nine-month period
beginning three months prior to the consummation of such business
combination, then the Option (or option in substitution thereof) shall
be exercisable to the extent set forth in the Award Notice and above in
this Section 2.2 until and including the latest to occur of (i) the
date determined pursuant to the then applicable subsection (b), (c),
(d), (e) or (f) of this Section 2.2, (ii) the date which is one month
after the date of expiration of the Pooling Restriction and (iii) the
Expiration Date.
2.3. Method of Exercise. Subject to the limitations set forth
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in this Agreement, the Option may be exercised by the Optionee (a) by giving
written notice to the Company specifying the number of whole shares of Stock to
be purchased and by accompanying such notice with payment therefor in full (or
by arranging for such payment to the Company's satisfaction) either (i) in cash,
(ii) by delivery to the Company (either actual delivery or by attestation
procedures established by the Company) of Mature Shares having an aggregate Fair
Market Value, determined as of the date of exercise, equal to the aggregate
purchase price payable pursuant to the Option by reason of such exercise, (iii)
in cash by a broker-dealer acceptable to the Company to whom the Optionee has
submitted an irrevocable notice of exercise or (iv) by a combination of (i) and
(ii), and (b) by executing such documents as the Company may reasonably request.
The Company shall have sole discretion to disapprove of an election pursuant to
any of clauses (ii) - (iv). Any fraction of a share of Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
share of Stock shall be delivered until the full purchase price therefor and any
withholding taxes thereon, as described in Section 3.3, have been paid.
2.4. Termination of Option. (a) Subject to Section 2.2(g), in
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no event may the Option be exercised after it terminates as set forth in this
Section 2.4. The Option shall terminate, to the extent not earlier terminated
pursuant to Sections 2.2 or 2.5 or exercised pursuant to Section 2.3, on the
Expiration Date.
(b) In the event that rights to purchase all or a portion of
the shares of Stock subject to the Option expire or are exercised, cancelled or
forfeited, the Optionee shall, upon the Company's request, promptly return this
Agreement to the Company for full or partial cancellation, as the case may be;
provided, however, that such cancellation shall be effective regardless of
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whether the Optionee returns this Agreement. If the Optionee continues to have
rights to purchase shares of Stock hereunder, the Company shall, within 10 days
of the Optionee's delivery of this Agreement to the Company, either (i) mark
this Agreement to indicate the extent to which the Option has expired or been
exercised, cancelled or forfeited or (ii) issue to the Optionee a substitute
option agreement applicable to such rights, which agreement shall otherwise be
substantially similar to this Agreement in form and substance.
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2.5. Termination of Option and Forfeiture of Option Gain. (a)
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If the Optionee:
(1) breaches any covenant concerning confidentiality or
intellectual property or concerning noncompetition or nonsolicitation
of clients, prospective clients or personnel of the Company and its
affiliates to which the Optionee is or may become a party in the
future; or
(2) directly or indirectly engages in any activity which is
contrary, inimical or harmful to the interests of the Company,
including but not limited to (i) violations of Company policies to the
extent then applicable to the Optionee, including the Company's xxxxxxx
xxxxxxx policies, and (ii) participation in any activity not approved
by the Board which could reasonably be foreseen as contributing to or
resulting in a Change in Control of the Company,
then, in addition to and without in any way limiting any remedies under
any of the covenants described above in this Section 2.5(a) or otherwise and any
other provable damages, the Option shall terminate automatically (if not
previously terminated) on the date the Optionee commits such breach or engages
in such activity and the Optionee shall pay the Company, within five business
days of receipt by the Optionee of a written demand therefor, an amount in cash
determined by multiplying the number of shares of Stock purchased pursuant to
each exercise of the Option occurring within three months prior to the date the
Optionee commits such breach or engages in such activity (without reduction for
any shares of Stock delivered by the Optionee or withheld by the Company
pursuant to Section 2.3 or Section 3.3) by the difference between (i) the Fair
Market Value of a share of Stock on the date of such exercise and (ii) the
purchase price per share of Stock set forth in the Award Notice.
(b) The Optionee may be released from the Optionee's
obligations under Section 2.5(a) only if and to the extent the Committee
determines in its sole discretion that such a release is in the best interests
of the Company.
(c) The Optionee agrees that by executing the Award Notice the
Optionee authorizes the Company and its Subsidiaries to deduct any amount or
amounts owed by the Optionee pursuant to Section 2.5(a) from any amounts payable
by the Company or any Subsidiary to the Optionee, including, without limitation,
any amount payable to the Optionee as salary, wages, vacation pay or bonus. This
right of setoff shall not be an exclusive remedy and the Company's or a
Subsidiary's election not to exercise this right of setoff with respect to any
amount payable to the Optionee shall not constitute a waiver of this right of
setoff with respect to any other amount payable to the Optionee or any other
remedy.
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3. Additional Terms and Conditions of Option.
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3.1. Nontransferability of Option; Restriction on Transfer of
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Stock. (a) The Option may not be transferred by the Optionee other than by will
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or the laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the
foregoing sentence, during the Optionee's lifetime the Option is exercisable
only by the Optionee or the Optionee's Legal Representative. Except to the
extent permitted by the second preceding sentence, the Option may not be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of the Option, the Option and
all rights hereunder shall immediately become null and void.
(b) The shares of Stock purchased upon exercise of the Option
may not be transferred by the Optionee prior to the termination of the Lock-Up
Period other than by will or the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Company. Except to the extent
permitted by the foregoing sentence, prior to the termination of the Lock-Up
Period the shares of Stock purchased upon exercise of the Option may not be
sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process.
3.2. Investment Representation. The Optionee hereby represents
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and covenants that (a) any shares of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act unless such purchase has been
registered under the Securities Act and any applicable state securities laws;
(b) any subsequent sale of any such shares shall be made in compliance with
Section 3.1(b) either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, the Optionee shall submit a written
statement, in a form satisfactory to the Company, to the effect that such
representation (x) is true and correct as of the date of any purchase of any
shares hereunder or (y) is true and correct as of the date of any sale of any
such shares, as applicable. As a further condition precedent to any exercise of
the Option, the Optionee shall comply with all regulations and requirements of
any regulatory authority having control of or supervision over the issuance or
delivery of the shares and, in connection therewith, shall execute any documents
which the Board or the Committee shall in its sole discretion deem necessary or
advisable.
3.3. Withholding Taxes. (a) As a condition precedent to
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the delivery of Stock upon exercise of the Option, the Optionee shall, upon
request by the Company, pay to the Company in addition to the purchase price
of the shares, such amount as the Company may be required, under all
applicable federal, state, local or other laws or regulations, to withhold
and pay over as income or other withholding taxes (the "Required Tax
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Payments") with respect to such exercise of the Option. If the Optionee shall
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fail to advance the Required Tax Payments
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after request by the Company, the Company may, in its discretion, deduct any
Required Tax Payments from any amount then or thereafter payable by the Company
to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to
advance the Required Tax Payments by any of the following means: (1) a cash
payment to the Company, (2) delivery to the Company (either actual delivery or
by attestation procedures established by the Company) of Mature Shares having an
aggregate Fair Market Value, determined as of the Tax Date, equal to the
Required Tax Payments, (3) authorizing the Company to withhold whole shares of
Stock which would otherwise be delivered to the Optionee upon exercise of the
Option having an aggregate Fair Market Value, determined as of the Tax Date,
equal to the Required Tax Payments, (4) a cash payment by a broker-dealer
acceptable to the Company to whom the Optionee has submitted an irrevocable
notice of exercise or (5) any combination of (1), (2) and (3). The Company shall
have sole discretion to disapprove of an election pursuant to any of clauses (2)
- (5). Shares of Stock to be delivered or withheld may not have a Fair Market
Value in excess of the minimum amount of the Required Tax Payments. Any fraction
of a share of Stock which would be required to satisfy any such obligation shall
be disregarded and the remaining amount due shall be paid in cash by the
Optionee. No certificate representing a share of Stock shall be delivered until
the Required Tax Payments have been satisfied in full.
3.4. Adjustment. In the event of any stock split, reverse
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stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to holders of
Stock other than a regular cash dividend, the number and class of securities
subject to the Option and the purchase price per security shall be appropriately
adjusted by the Committee without an increase in the aggregate purchase price.
If any adjustment would result in a fractional security being subject to the
Option, the Company shall pay the Optionee, in connection with the first
exercise of the Option occurring after such adjustment, an amount in cash
determined by multiplying (i) the fraction of such security (rounded to the
nearest hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on
the exercise date over (B) the exercise price of the Option. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
3.5. Compliance with Applicable Law. The Option is subject to
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the condition that if the listing, registration or qualification of the shares
subject to the Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the purchase
or delivery of shares hereunder, the Option may not be exercised, in whole or in
part, and such shares may not be delivered, unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company
agrees to use reasonable efforts to effect or obtain any such listing,
registration, qualification, consent, approval or other action.
3.6. Delivery of Certificates. Upon the exercise of the
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Option, in whole or in part, the Company shall deliver or cause to be delivered,
subject to the conditions of this Article 3, one or more certificates
representing the number of shares purchased against full payment
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therefor. The Company shall pay all original issue or transfer taxes and all
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3.
3.7. Option Confers No Rights as Stockholder. The Optionee
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shall not be entitled to any privileges of ownership with respect to shares of
Stock subject to the Option unless and until such shares are purchased and
delivered upon the exercise of the Option, in whole or in part, and the Optionee
becomes a stockholder of record with respect to such delivered shares. The
Optionee shall not be considered a stockholder of the Company with respect to
any such shares not so purchased and delivered.
3.8. Option Confers No Rights to Continued Employment. In no
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event shall the granting of the Option or its acceptance by the Optionee, or any
provision of this Agreement or the Plan, give or be deemed to give the Optionee
any right to continued employment by the Company or any affiliate of the
Company.
3.9. Decisions of Board or Committee. The Board or the
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Committee shall have the right to resolve all questions which may arise in
connection with the Option or its exercise. Any interpretation, determination or
other action made or taken by the Board or the Committee regarding the Plan or
this Agreement shall be final, binding and conclusive.
3.10. Company to Reserve Shares. The Company shall at all
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times prior to the expiration or termination of the Option reserve and keep
available, either in its treasury or out of its authorized but unissued shares
of Stock, the full number of shares of Stock subject to the Option from time to
time.
3.11. Agreement Subject to Plan. This Agreement is subject to
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the provisions of the Plan, including Section 6.8 relating to a Change in
Control, and shall be interpreted in accordance therewith. The Optionee hereby
acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
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4.1. Designation as Non-Statutory Stock Option. The Option is
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hereby designated as not constituting an Incentive Stock Option. This Agreement
shall be interpreted and treated consistently with such designation.
4.2. Meaning of Certain Terms. (a) As used herein, employment
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by the Company shall include employment by a Subsidiary.
(b) As used herein, the following terms shall have the
meanings set forth below:
"Legal Representative" shall include an executor,
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administrator, legal representative, guardian or similar person.
"Lock-Up Period" shall mean the period required by the
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underwriters of an IPO following an IPO during which individuals holding shares
of Common Stock shall be
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prohibited from selling, offering, contracting to sell or otherwise
transferring or disposing of such shares of Common Stock, directly or
indirectly.
"Securities Act" shall mean the Securities Act of 1933, as
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amended, and the rules and regulations thereunder.
"Permitted Transferee" shall include any transferee designated
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as the Optionee's beneficiary in the event of the Optionee's death
pursuant to beneficiary designation procedures approved by the Company.
4.3. Successors. This Agreement shall be binding upon and
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inure to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Optionee, acquire any rights
hereunder in accordance with this Agreement or the Plan.
4.4. Notices. All notices, requests or other communications
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provided for in this Agreement shall be made, if to the Company, to KPMG
Consulting, Inc., c/o Morgan Xxxxxxx Xxxx Xxxxxx, Stock Plan Administration,
Harborside Financial Center, Plaza Two, 7th Floor, Jersey City, NJ 07311 and if
to the Optionee, to the last known mailing address of the Optionee contained in
the records of the Company. All notices, requests or other communications
provided for in this Agreement shall be made in writing either (a) by personal
delivery, (b) by facsimile with confirmation of receipt, (c) by mailing in the
United States mails or (d) by express courier service. The notice, request or
other communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile transmission or upon receipt by the party
entitled thereto if by United States mail or express courier service; provided,
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however, that if a notice, request or other communication sent to the Company is
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not received during regular business hours, it shall be deemed to be received on
the next succeeding business day of the Company.
4.5. Governing Law. This Agreement, the Option and all
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determinations made and actions taken pursuant hereto and thereto, to the extent
not governed by the Code or the laws of the United States, shall be governed by
the laws of the State of Delaware and construed in accordance therewith without
giving effect to principles of conflicts of laws.
4.6. Counterparts. This Award Notice may be executed in two
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counterparts, each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
4.7. Information to Optionees. Prior to the IPO, the Company
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shall provide to the Optionee, at least annually, copies of annual financial
statements required to be provided under Rule 260.140.46 of the California
Corporate Securities Law of 1968, as amended. The Company shall not be required
to provide such statements to key employees whose duties in connection with the
Company assure their access to equivalent information.
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[insert date]
[name and address of optionee]
Re: Award Notice of Stock Option Grant
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Dear [name of optionee]:
Earlier this year, you surrendered certain stock options that had an
exercise price of $55.50 in return for a commitment from KPMG Consulting, Inc.
(the "Company") to issue replacement options at a later date. We are pleased to
notify you that you have now been awarded an option to purchase shares of common
stock of the Company in fulfillment of the Company's commitment to issue
replacement options. Certain terms of your award follow:
Option: You have been awarded a non-statutory stock option to
------ purchase from the Company [insert number] shares of
its common stock, $0.01 par value, subject to
adjustment, as provided in Section 3.4 of the KPMG
Consulting, Inc. Stock Option Agreement for Employees
(the "Agreement").
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Option Date: [insert grant date]
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Exercise Price: [insert price] per share, subject to adjustment as
-------------- provided in Section 3.4 of the Agreement.
Exercise Schedule: Except as otherwise provided in Section 2.2
----------------- of the Agreement and in Section 6.8 of the KPMG
Consulting, Inc. 2000 Long-Term Incentive Plan (the
"Plan"), the Option shall become exercisable (i) on
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the first anniversary of the Option Date with respect
to 33-1/3% of the number of shares subject thereto on
the Option Date, (ii) on the second anniversary of
the Option Date with respect to an additional 33-1/3%
of the number of shares subject thereto on the Option
Date, and (iii) on the third anniversary of the
Option Date with respect to the remaining 33-1/4% of
the number of shares subject thereto on the Option
Date.
Expiration Date: Except to the extent earlier terminated pursuant
--------------- to Section 2.2 or 2.5 of the Agreement or
earlier exercised pursuant to Section 2.3 of the
Agreement, the Option shall terminate at 5:00 p.m.,
New York time, on [insert expiration date].
In addition to the terms stated in this Award Notice, the Option shall
be subject to the terms and conditions of the Agreement and the Plan, copies of
which are attached hereto.
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KPMG CONSULTING, INC.
By: _______________________________________
Name: Xxxxxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
Acknowledgment, Acceptance and Agreement:
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By signing below and returning this two-page Award Notice to KPMG
Consulting, Inc., c/o Morgan Xxxxxxx at the address stated herein, I hereby
acknowledge receipt of the Agreement and the Plan, accept the Option granted to
me and agree to be bound by the terms and conditions of this Award Notice, the
Agreement and the Plan.
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Signature Date
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Print Name Social Security Number
KPMG CONSULTING, INC.
c/o Morgan Xxxxxxx Xxxx Xxxxxx
Stock Plan Administration
Harborside Financial Center
Plaza Two, 7th Floor
Jersey City, NJ 07311
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