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EXHIBIT 10.11.2
CWC INCORPORATED
INCENTIVE
STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT is made as of the 1st day of June, 1998 (the "Option
Date"), between CWC INCORPORATED, a Minnesota corporation (the "Company"), and
Xxxxxx Xxxxxxxx, an employee of the Company or one or more of its subsidiaries
(the "Optionee").
WHEREAS, the Company desires, by affording the Optionee an opportunity to
purchase shares of its Common Stock, $.01 par value (the "Common Stock"), as
hereinafter provided, to carry out the purpose of the 1997 Stock Plan of the
Company, as amended (the "1997 Stock Plan"), approved by its shareholders;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right
and Option (hereinafter called the "Option") to purchase from the Company all or
any part of an aggregate amount of 325,000 shares (the "Option Shares") of the
Common Stock of the Company on the terms and conditions herein set forth. It is
intended that the Option shall constitute an incentive stock option, as defined
in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of the Option Shares shall be $2.63
per share.
3. Term of Option. The term of the Option shall be for a period of ten
(10) years from the Option Date, subject to earlier termination as hereinafter
provided.
4. Exercise of Option. Subject to the provisions of Sections 7 and 8
hereof, the Option may be exercised during the term specified in Section 3
hereof as follows:
(a) from and after twelve (12) months from the Option Date, the Option
may be exercised as to 25% of the total number of Option Shares;
(b) from and after twenty-four (24) months from the Option Date, the
Option may be exercised as to an additional 25% of the total number of
Option Shares;
(c) from and after thirty-six (36) months from the Option Date, the
Option may be exercised as to an additional 25% of the total number of
Option Shares; and
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(d) from and after forty-eight (48) months from the Option Date, the
Option may be exercised as to the remaining 25% of the total number of
Option Shares.
Notwithstanding the foregoing, in the event of a Change of Control (as
hereinafter defined) 50% of the total number of Option Shares shall become
immediately vested and exercisable in full, whether or not this Option or any
portion hereof is vested and exercisable at such time. For purposes hereof, (i)
the term "Change of Control" shall mean a material change in the management
structure of the Company as a result of (a) the consummation of the sale of 51%
or more of the Company to a third party, (b) the consummation of the sale of all
or substantially all of the Company's stock or assets to a third party, or (c)
the consummation of the merger of the Company with an unrelated entity.
5. Non-Transferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Optionee, only by the Optionee. More
particularly (but without limiting the generality of the foregoing), the Option
may not be assigned, transferred (except as provided above), pledged or
hypothecated in any way, nor shall it be assignable by operation of law or
subject to execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition of the Option contrary to
the provisions hereof, and the levy of any execution, attachment, or similar
process upon the Option, shall be null and void and without effect.
6. Not a Contract of Employment. So long as the Optionee shall continue to
be an employee of the Company or one or more of its subsidiaries, the Option
shall not be affected by any change of duties or position. Nothing in this
Option Agreement shall confer upon the Optionee any right to continue in the
employ of the Company or of any of its subsidiaries or interfere in any way with
the right of the Company or any such subsidiary to terminate the employment of
the Optionee at any time.
7. Termination of Employment. Unless otherwise provided by the Company,
and subject to Section 10 hereof, in the event the employment of the Optionee
shall terminate or be terminated, the Option may be exercised (to the extent the
Optionee shall have been entitled to do so at the date of his or her termination
of employment pursuant to Section 4 hereof) by the Optionee at any time:
(a) within three (3) months after such termination of employment if such
termination was by reason of Retirement (as defined in the 1997 Stock
Plan);
(b) within twelve (12) months after such termination of employment if
such termination was by reason of Disability (as defined in the 1997 Stock
Plan);
(c) no later than the date of termination if such termination was for
Cause (as defined in the 1997 Stock Plan); and
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(d) within one month after such termination if such termination was for
any reason other than Retirement, Disability, Cause (as defined in the
1997 Stock Plan) or as provided in Section 8 hereof.
However, in each case, in no event may the Option be exercised later than the
expiration of the term specified in Section 3 hereof. If this Incentive Stock
Option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the Option will thereafter be treated as a
Non-Qualified Stock Option.
8. Death. Unless otherwise provided by the Company, if the Optionee shall
die while still employed by the Company or one or more of its subsidiaries, the
Option may be exercised (to the extent that the Optionee shall have been
entitled to do so at the date of his or her death) by the Optionee's legal
representative or the person to whom the Option is transferred by will or the
applicable laws of descent and distribution, at any time within three (3) months
after the Optionee's death, but in no event later than the expiration of the
term specified in Section 3 hereof.
9. Method of Exercising Option. Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by written notice to the
Chief Financial Officer of the Company at the principal office of the Company.
Such notice shall state the election to exercise the Option and the number of
Option Shares in respect of which it is being exercised, and shall be signed by
the person so exercising the Option. Such notice shall be accompanied by payment
of the full purchase price of such Option Shares, which payment shall be made in
cash or by certified check or bank draft payable to the Company, by any other
form of legal consideration deemed sufficient by the Company and consistent with
the purpose of the 1997 Stock Plan and applicable law, or, in the sole
discretion of the Company, (i) by delivery of shares of Common Stock of the
Company with a Fair Market Value (as defined in the 1997 Stock Plan) equal to
the purchase price or by a combination of cash and shares of Common Stock, the
Fair Market Value of which together shall equal the purchase price, or (ii) by
having the Company withhold from the shares of Common Stock that would otherwise
be issued upon exercise of the Option that number of shares having a Fair Market
Value equal to the aggregate Option purchase price for those Option Shares with
respect to which such election is made. The certificate or certificates for the
shares as to which the Option shall have been so exercised shall be registered
in the name of the person so exercising the Option, or if the Optionee so
elects, in the name of the Optionee or one other person as joint tenants, and
shall be delivered as soon as practicable after the notice shall have been
received. In the event the Option shall be exercised by any person other than
the Optionee, such notice shall be accompanied by appropriate proof of the right
of such person to exercise the Option.
10. Forfeiture of Unexercised Options. In the event Optionee breaches the
terms of the Employee Agreement Regarding Inventions, Confidentiality and
Non-competition (the "Non-competition Agreement") between Optionee and the
Company, the terms of which are expressly incorporated herein by reference, any
Options which have vested but are unexercised at the time of such breach shall
immediately be forfeited and shall not thereafter be exercisable
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by Optionee. Forfeiture of the unexercised portion of the option shall apply to
the unexercised portion held by the Optionee or by any transferee or donee of
such unexercised portion of the Option.
11. Legend. Certificates representing shares of Common Stock issued to the
Optionee upon exercise of this Option shall bear a restrictive legend setting
forth the Company's repurchase rights, as set forth in Sections 12 and 14
hereof, and restricting the transfer of such shares under any circumstances for
a period of one (1) year following the termination of the Optionee's employment
with the Company, except as may be specifically approved in writing by the
Company.
12. Repurchase at the Option of the Company. The Company shall have the
right to purchase all or any part of the Exercised Shares (as defined below) of
the Optionee in the circumstances set forth in this Section 12. Said right is
referred to herein as the "Repurchase Option." "Exercised Shares" shall mean all
shares of Common Stock purchased by Optionee upon exercise of the Option, or any
portion thereof, as of the date the Company exercises the Repurchase Option. The
Repurchase Option is exercisable by the Company in its sole discretion, and
nothing herein shall be interpreted as requiring the Company to repurchase
Exercised Shares under any circumstances.
(a) Circumstances Giving Rise to Repurchase Option. The Repurchase
Option shall be effective and exercisable in the event that Optionee directly or
indirectly competes with the Company, or is employed by or provides consulting
services to a competitor of the Company, or if the Company becomes aware that
the Optionee intends to engage in such competition, at any time within one year
following the termination of the Optionee's employment with the Company, or the
Optionee otherwise breaches any of the terms of the Non-competition Agreement.
(b) Exercise of Repurchase Option. The Company may exercise the
Repurchase Option at any time by written notice to the Optionee.
(c) Purchase Price and Terms of Sale. The purchase price per Exercised
Share under this Section 12 shall be the purchase price per share under this
Option Agreement or the Fair Market Value per share of the Exercised Shares so
repurchased, whichever is lower.
(d) Expiration of Company's Repurchase Option. The Repurchase Option
shall remain in effect until the closing of the first public offering of the
Company's equity securities registered under the Securities Act of 1933, as
amended, or any successor statute, or such other event, including, without
limitation, a sale of all or substantially all of the Company's assets, the
merger or consolidation of the Company with or into another entity or the merger
or consolidation of another entity with or into the Company, as a result of
which outstanding equity securities of the Company (or any successor entity)
shall be publicly traded (a "Liquidity Event").
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13. Payment Upon the Sale of Exercised Shares. In the event that the
Optionee breaches any of the terms of the Non-competition Agreement and prior to
such breach has sold, or following such breach sells, any Exercised Shares, for
each Exercised Share so sold the Optionee hereby agrees to pay to the Company in
cash, upon demand, an amount equal to the difference between the purchase price
per share of the Option Shares and the value per share received by the Optionee,
any member of the Optionee's family or any trust or other entity in which the
Optionee or any member of the Optionee's family has a beneficial interest,
pursuant to such sale of the Exercised Shares.
14. Right of First Refusal on Dispositions.
(a) The Optionee will not sell, assign, transfer, pledge, hypothecate,
give away or in any other manner dispose of or encumber, whether voluntarily or
by operation of law, any of the Exercised Shares until the expiration of the
Repurchase Option set forth in Section 12 and thereafter unless and until the
Optionee shall have complied with the provisions of this Section 14.
(b) If at any time the Optionee desires to sell or otherwise transfer
all or any part of his Exercised Shares pursuant to a bona fide offer from a
third party (the "Proposed Transferee"), the Optionee shall submit a written
offer (the "Offer"), by delivering the Offer to the Company, to sell such
Exercised Shares (the "Offered Shares") to the Company on terms and conditions,
including price, not less favorable than those on which the Optionee proposes to
sell such Offered Shares to the Proposed Transferee. The Offer shall disclose
the identity of the Proposed Transferee, the number of Offered Shares proposed
to be sold, the total number of Exercised Shares owned by the Optionee, the
terms and conditions, including price, of the proposed sale, and any other
material facts relating to the proposed sale. The offer shall further state that
the Company may acquire, in accordance with the provisions of this Option
Agreement, any of the Offered Shares for the price and upon the other terms and
conditions set forth therein.
(c) The Company shall communicate in writing to the Optionee its
election to (i) purchase all or any part of the Offered Shares or (ii) assign
its rights hereunder to any other shareholder of the Company, which
communication shall be provided to the Optionee within 20 days of the date the
Offer was made. Such communication shall, when taken in conjunction with the
Offer, be deemed to constitute a valid, legally binding and enforceable
agreement for the sale and purchase of such Offered Shares. Sales of such
Offered Shares to be sold to the Company or its assignee pursuant to this
Section 14 shall be made at the offices of the Company within 60 days following
the date the Offer was made.
(d) If the Company does not purchase all or any part of the Offered
Shares, such remaining Offered Shares may be sold by the Optionee at any time
within 120 days after the date the Offer was made. Any such sale shall be to the
Proposed Transferee, at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those
specified in the Offer. Any remaining Offered Shares not sold within
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such 120-day period shall continue to be subject to the requirements of a prior
offer pursuant to this Section 14.
(e) The first refusal rights of the Company set forth above shall remain
in effect until the consummation of a Liquidity Event.
(f) If any purported transfer of Exercised Shares is made or attempted
contrary to the provisions of this Section 14, such purported transfer shall be
null and void. In addition to any other legal or equitable remedies which it may
have, the Company may enforce its rights by actions for specific performance (to
the extent permitted by law) and may refuse to recognize any such transferee as
one of its shareholders for any purpose, including without limitation for
purposes of dividend and voting rights, until all applicable provisions of this
Section 14 have been complied with.
15. Withholding Requirements. Upon exercise of the Option by the Optionee
and prior to the delivery of shares purchased pursuant to such exercise, the
Company shall have the right to require the Optionee to remit to the Company
cash in an amount sufficient to satisfy applicable federal and state tax
withholding requirements. The Company shall inform the Optionee as to whether it
will require the Optionee to remit cash for withholding taxes in accordance with
the preceding sentence within two (2) business days after receiving from the
Optionee notice that such Optionee intends to exercise, or has exercised, all or
a portion of the Option.
16. Stock Plan. This Option is subject to certain additional terms and
conditions set forth in the 1997 Stock Plan pursuant to which this Option has
been issued. A copy of the 1997 Stock Plan is on file with the Chief Financial
Officer of the Company and each Option holder by acceptance hereof agrees to and
accepts this Option subject to the terms of the 1997 Stock Plan.
17. General. The Company shall at all times during the term of the
Option reserve and keep available such number of shares of Common Stock as will
be sufficient to satisfy the requirements of this Option Agreement, shall pay
all original issue and transfer taxes with respect to the issue and transfer of
shares pursuant hereto and all other fees and expenses necessarily incurred by
the Company in connection therewith, and will from time to time use its best
efforts to comply with all laws and regulations which, in the opinion of counsel
for the Company, shall be applicable thereto.
18. Investment Certificate. Prior to the receipt of the certificates
pursuant to the exercise of the Option granted hereunder, the Optionee shall, if
required in the Company's discretion, demonstrate an intent to hold the shares
acquired by exercise of the Option for investment and not with a view to resale
or distribution thereof to the public by delivering to the Company an investment
certificate or letter in such form as the Company may require.
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19. Subsidiary. As used herein, the term "subsidiary" shall mean any
current or future corporation which would be a "subsidiary corporation" of the
Company, as that term is defined in Section 425 of the Internal Revenue Code of
1986, as amended.
20. Status. Neither the Optionee nor the Optionee's executor,
administrator, heirs or legatees shall be or have any rights or privileges of a
shareholder of the Company in respect of the shares transferable upon exercise
of the Option granted hereunder, unless and until certificates representing such
shares shall be endorsed, transferred, and delivered and the transferee has
caused the Optionee's name to be entered as the shareholder of record on the
books of the Company.
21. Company Authority. The existence of the Option herein granted shall
not affect in any way the right or power of the Company or its shareholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock of the Company or
the rights thereof, or dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
22. Dispute. As a condition of the granting of the Option herein granted,
the Optionee agrees, for the Optionee and the Optionee's personal
representatives, that any dispute or disagreement which may arise under or as a
result of or pursuant to this Option Agreement shall be determined by the Board
of Directors of the Company, in its sole discretion, and that any interpretation
by the Board of the terms of this Option Agreement shall be final, binding and
conclusive.
23. Binding Effect. This Option Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
24. Governing Law. This Option Agreement is a Minnesota contract and shall
be construed under and be governed in all respects by the laws of Minnesota,
without giving effect to the conflict of laws principles of Minnesota law. Any
legal action or suit related to this Agreement shall be brought exclusively in
the courts of Minnesota. Both parties agree that the courts of Minnesota are a
convenient forum for the resolution of disputes.
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IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed by an officer thereunto duly authorized, and the Optionee has
hereunto set his or her hand, all as of the day and year first above written.
CWC INCORPORATED
By /s/ Xxxxx Xxxxxx
---------------------------------
Its
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/s/ Xxxxxx Xxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxx Optionee
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