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EXHIBIT 99.2
FORM OF INCENTIVE STOCK OPTION AGREEMENT IN CONNECTION WITH THE
PRECEPT SOFTWARE, INC. 1995 STOCK OPTION PLAN
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EXHIBIT 99.2
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
PRECEPT SOFTWARE, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement") is made
and entered into as of , by and between Precept Software, Inc. and (the
"Optionee").
The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "Option"). The Option shall in all respects be subject to the
terms and conditions of the Precept Software, Inc. 1995 Stock Option Plan (the
"Plan"), the provisions of which are incorporated herein by reference.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "Date of Option Grant" means .
(b) "Number of Option Shares" means shares of Stock, as
adjusted from time to time pursuant to Section 9.
(c) "Exercise Price" means per share of Stock, as adjusted
from time to time pursuant to Section 9.
(d) "Initial Exercise Date" means the Date of Option
Grant.
(e) "Initial Vesting Date" means the date occurring one
(1) year after (check one):
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the Date of Option Grant.
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X , the date the Optionee's Service commenced.
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(f) "Vested Ratio" means, on any relevant date, the
ratio determined as follows:
Vested
Ratio
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's 1/4
Service is continuous from the Date of Option
Grant until the Initial Vesting Date
Plus
For each full month of the Optionee's continuous 1/48
Service from the Initial Vesting Date until
the Vested Ratio equals 1/1, an additional
(g) "Vested Shares" means, on any given date, a number of
shares of Stock equal to the Number of Option Shares multiplied by the Vested
Ratio determined as of such date and rounded down to the nearest whole share.
(h) "Option Expiration Date" means the date ten (10) years
after the Date of Option Grant.
(i) "Company" means Precept Software, Inc., a California
corporation, or any successor corporation thereto.
(j) "Disability" means the inability of the Optionee, in
the opinion of a qualified physician acceptable to the Company, to perform the
major duties of the Optionee's position with the Participating Company Group
because of the sickness or injury of the Optionee.
(k) "Securities Act" means the Securities Act of 1933, as
amended.
(l) "Service" means the Optionee's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no
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interruption or termination of the Optionee's Service. The Optionee's Service
shall be deemed to have terminated either upon an actual termination of Service
or upon the corporation for which the Optionee performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its sole
discretion, shall determine whether the Optionee's Service has terminated and
the effective date of such termination. (NOTE: If the Option is exercised more
than three (3) months after the date on which the Optionee ceased to be an
Employee (other than by reason of death or a permanent and total disability as
defined in Section 22(e)(3) of the Code), the Option will be treated as a
Nonstatutory Stock Option and not as an Incentive Stock Option to the extent
required by Section 422 of the Code.)
1.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. Tax Consequences.
2.1 Tax Status of Option. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such. The
Optionee should consult with the Optionee's own tax advisor regarding the tax
effects of this Option and the requirements necessary to obtain favorable income
tax treatment under Section 422 of the Code, including, but not limited to,
holding period requirements. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. Exercise of the Option.
4.1 Right to Exercise.
(a) Except as otherwise provided herein, the Option shall
be exercisable on and after the Initial Exercise Date and prior to the
termination of the Option (as provided in Section 6) in an amount not to exceed
the Number of Option Shares less the number of shares previously acquired
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upon exercise of the Option, subject to the Optionee's agreement that any shares
purchased upon exercise are subject to the Company's repurchase rights set forth
in Section 11.
Notwithstanding the foregoing, except as provided in Section 4.1(b), the
aggregate Fair Market Value of the shares of Stock with respect to which the
Optionee may exercise the Option for the first time during any calendar year,
when added to the aggregate Fair Market Value of the shares subject to any other
options designated as Incentive Stock Options granted to the Optionee under all
stock option plans of the Participating Company Group prior to the Date of
Option Grant with respect to which such options are exercisable for the first
time during the same calendar year, shall not exceed One Hundred Thousand
Dollars ($100,000). For purposes of the preceding sentence, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of shares of stock shall be
determined as of the time the option with respect to such shares is granted.
Such limitation on exercise shall be referred to in this Option Agreement as the
"ISO Exercise Limitation." If Section 422 of the Code is amended to provide for
a different limitation from that set forth in this Section 4.1(a), the ISO
Exercise Limitation shall be deemed amended effective as of the date required or
permitted by such amendment to the Code. The ISO Exercise Limitation shall
terminate upon the earlier of (i) the Optionee's termination of Service, (ii)
the day immediately prior to the effective date of a Transfer of Control in
which the Option is not assumed or substituted for by the Acquiring Corporation
as provided in Section 8, or (iii) the day ten (10) days prior to the Option
Expiration Date. Upon such termination of the ISO Exercise Limitation, the
Option shall be deemed a Nonstatutory Stock Option to the extent of the number
of shares subject to the Option which would otherwise exceed the ISO Exercise
Limitation.
(b) Notwithstanding any other provision of this Option
Agreement, if compliance with the ISO Exercise Limitation as set forth in
Section 4.1(a) will result in the exercisability of any Vested Shares (as
defined in Section 11.2) being delayed more than thirty (30) days beyond the
date such shares become Vested Shares (the "Vesting Date"), the Option shall be
deemed to be two (2) options. The first option shall be for the maximum portion
of the Number of Option Shares that can comply with the ISO Exercise Limitation
without causing the Option to be unexercisable in the aggregate as to Vested
Shares on the Vesting Date for such shares. The second option, which shall not
be treated as an Incentive Stock Option as described in section 422(b) of the
Code, shall be for the balance of the Number of Option Shares; that is, those
such shares which, on the respective Vesting Date for such shares, would be
unexercisable if included in the first option and thereby made subject to the
ISO Exercise Limitation. Shares treated as subject to the second option shall be
exercisable on the same terms and at the same time as set forth in this Option
Agreement; provided, however, that (i) the second sentence of Section 4.1(a)
shall not apply to the second option and (ii) each such share shall become a
Vested Share on the Vesting Date on which such share must first be allocated to
the second option pursuant to the preceding sentence. Unless the Optionee
specifically elects to the contrary in the Optionee's written notice of
exercise, the first option shall be deemed to be exercised first to the maximum
possible extent and then the second option shall be deemed to be exercised.
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4.2 Method of Exercise. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by (i) full
payment of the aggregate Exercise Price for the number of shares of Stock being
purchased and (ii) an executed copy, if required herein, of the then current
form of escrow agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreement.
4.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by any
combination of the foregoing.
(b) Tender of Stock. Notwithstanding the foregoing, the
Option may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock would constitute a violation of the provisions of
any law, regulation or agreement restricting the redemption of the Company's
stock. The Option may not be exercised by tender to the Company of shares of
Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.
(c) Cashless Exercise. A "Cashless Exercise" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
4.4 Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision
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for (including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the tax withholding obligations of the
Participating Company Group are satisfied. Accordingly, the Optionee may not be
able to exercise the Option when desired even though the Option is vested, and
the Company shall have no obligation to issue a certificate for such shares.
4.5 Certificate Registration. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 Restrictions on Grant of the Option and Issuance of Shares.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
4.7 Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. Nontransferability of the Option. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution.
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Following the death of the Optionee, the Option, to the extent provided in
Section 7, may be exercised by the Optionee's legal representative or by any
person empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) Disability. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. (NOTE: If
the Option is exercised more than three (3) months after the date on which the
Optionee's Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section 22(e)(3) of the
Code, the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)
(b) Death. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's legal representative, or other person who acquired the right to
exercise the Option by reason of the Optionee's death) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee's Service shall be deemed to have terminated on account of death if the
Optionee dies within three (3) months after the Optionee's termination of
Service.
(c) Other Termination of Service. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within three (3) months (or such other longer period
of time as determined by the Board, in its sole discretion) after the date on
which the Optionee's Service terminated, but in any event no later than the
Option Expiration Date.
7.2 Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the
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Option Expiration Date. The Company makes no representation as to the tax
consequences of any such delayed exercise. The Optionee should consult with the
Optionee's own tax advisor as to the tax consequences of any such delayed
exercise.
7.3 Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisor as to the tax consequences of any such delayed exercise.
7.4 Leave of Absence. For purposes of Section 7.1, the Optionee's
Service with the Participating Company Group shall not be deemed to terminate if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to reemployment with the Participating Company Group remains
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or required by law), a leave of absence
shall not be treated as Service for purposes of determining the Optionee's
Vested Ratio.
8. Transfer of Control.
8.1 Definitions.
(a) An "Ownership Change Event" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a
single or series of related transactions by the shareholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company
is a party; or
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "Transfer of Control" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"Transaction") wherein the shareholders
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of the Company immediately before the Transaction do not retain immediately
after the Transaction, in substantially the same proportions as their ownership
of shares of the Company's voting stock immediately before the Transaction,
direct or indirect beneficial ownership of more than fifty percent (50%) of the
total combined voting power of the outstanding voting stock of the Company or
the corporation or corporations to which the assets of the Company were
transferred (the "Transferee Corporation(s)"), as the case may be. For purposes
of the preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one or
more corporations which, as a result of the Transaction, own the Company or the
Transferee Corporation(s), as the case may be, either directly or through one or
more subsidiary corporations. The Board shall have the right to determine
whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.
8.2 Effect of Transfer of Control on Option. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
9. Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares. In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise
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Price be decreased to an amount less than the par value, if any, of the stock
subject to the Option. The adjustments determined by the Board pursuant to this
Section 9 shall be final, binding and conclusive.
10. Rights as a Shareholder, Employee or Consultant. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. Nothing in this Option Agreement shall confer upon the
Optionee any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. Right of First Refusal.
11.1 Grant of Right of First Refusal. Except as provided in
Section 11.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the Option
proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested
Shares (the "Transfer Shares") to any person or entity, including, without
limitation, any shareholder of the Participating Company Group, the Company
shall have the right to repurchase the Transfer Shares under the terms and
subject to the conditions set forth in this Section 11 (the "Right of First
Refusal").
11.2 Notice of Proposed Transfer. Prior to any proposed transfer
of the Transfer Shares, the Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price, and containing such information necessary to show the bona fide nature of
the proposed transfer. In the event of a bona fide gift or involuntary transfer,
the proposed transfer price shall be deemed to be the Fair Market Value of the
Transfer Shares, as determined by the Board in good faith. If the Optionee
proposes to transfer any Transfer Shares to more than one Proposed Transferee,
the Optionee shall provide a separate Transfer Notice for the proposed transfer
to each Proposed Transferee. The Transfer Notice shall be signed by both the
Optionee and the Proposed Transferee and must constitute a binding commitment of
the Optionee and the Proposed Transferee for the transfer of the Transfer Shares
to the Proposed Transferee subject only to the Right of First Refusal.
11.3 Bona Fide Transfer. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient to
establish the bona fide nature of a proposed voluntary transfer, the Company
shall give the Optionee written notice of the Optionee's failure to comply with
the procedure described in this Section 11, and the Optionee shall have no right
to transfer the Transfer Shares without first complying with the procedure
described in this Section 11. The Optionee shall not be permitted to transfer
the Transfer Shares if the proposed transfer is not bona fide.
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11.4 Exercise of Right of First Refusal. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all, but not less than all, of the Transfer Shares (except as
the Company and the Optionee otherwise agree) at the purchase price and on the
terms set forth in the Transfer Notice by delivery to the Optionee of a notice
of exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's right to
exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the present
value cash equivalent of the consideration described in the Transfer Notice as
reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
11.5 Failure to Exercise Right of First Refusal. If the Company
fails to exercise the Right of First Refusal in full (or to such lesser extent
as the Company and the Optionee otherwise agree) within the period specified in
Section 11.4 above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than ninety (90) days
following delivery to the Company of the Transfer Notice. The Company shall have
the right to demand further assurances from the Optionee and the Proposed
Transferee (in a form satisfactory to the Company) that the transfer of the
Transfer Shares was actually carried out on the terms and conditions described
in the Transfer Notice. No Transfer Shares shall be transferred on the books of
the Company until the Company has received such assurances, if so demanded, and
has approved the proposed transfer as bona fide. Any proposed transfer on terms
and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 11.
11.6 Transferees of Transfer Shares. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions
of this Option Agreement, including this Section 11 providing for the Right of
First Refusal with respect to any subsequent transfer. Any sale or transfer of
any shares acquired upon exercise of the Option shall be void unless the
provisions of this Section 11 are met.
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11.7 Transfers Not Subject to Right of First Refusal. The Right
of First Refusal shall not apply to any transfer or exchange of the shares
acquired upon exercise of the Option if such transfer or exchange is in
connection with an Ownership Change Event. If the consideration received
pursuant to such transfer or exchange consists of stock of a Participating
Company, such consideration shall remain subject to the Right of First Refusal
unless the provisions of Section 11.9 below result in a termination of the Right
of First Refusal.
11.8 Assignment of Right of First Refusal. The Company shall have
the right to assign the Right of First Refusal at any time, whether or not there
has been an attempted transfer, to one or more persons as may be selected by the
Company.
11.9 Early Termination of Right of First Refusal. The other
provisions of this Option Agreement notwithstanding, the Right of First Refusal
shall terminate and be of no further force and effect upon (a) the occurrence of
a Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
the existence of a public market for the class of shares subject to the Right of
First Refusal. A "public market" shall be deemed to exist if (i) such stock is
listed on a national securities exchange (as that term is used in the Exchange
Act) or (ii) such stock is traded on the over-the-counter market and prices
therefor are published daily on business days in a recognized financial journal.
12. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date of the Optionee exercises all or part of the Option or
within two (2) years after the Date of Option Grant. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, unless otherwise expressly authorized by the Company, the
Optionee shall hold all shares acquired pursuant to the Option in the Optionee's
name (and not in the name of any nominee) for the one-year period immediately
after the exercise of the Option and the two-year period immediately after Date
of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares
acquired pursuant to the Option requesting the transfer agent for the Company's
stock to notify the Company of any such transfers. The obligation of the
Optionee to notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the certificate pursuant to the
preceding sentence.
13. Rules of the Commissioner of Corporations. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following text
are references to the California Corporations Code.
260.141.11. Restriction on Transfer.
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(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be
delivered to each issuee or transferee of such security at the
time the certificate evidencing the security is delivered to the
issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest
therein, without the prior written consent of the Commissioner
(until this condition is removed pursuant to Section 260.141.12
of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse,
or any custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee by a
trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants, or spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed wider the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the
knowledge of the broker-dealer, nor actually present in this state if
the sale of such securities is not in violation of any securities law of
the foreign state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a
principal transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or
other lien given by the purchaser to the seller upon a sale of the
security for which the Commissioner's written consent is obtained or
under this rule not required;
(10) by way of a sale qualified under Sections 25111,
25112, 25113, or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or subdivision (a) of Section
25143 is in effect with respect to such qualification;
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(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111,
25112 or 25113 of the Code, provided that no order under Section 25140
or subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed
Property Law or to the administrator of the unclaimed property law of
another state; or
(15) by the State Controller pursuant to the Unclaimed
Property Law or by the administrator of the unclaimed property law of
another state if, in either such case, such person (i) discloses to
potential purchasers at the sale that transfer of the securities is
restricted under this rule, (ii) delivers to each purchaser a copy of
this rule, and (iii) advises the Commissioner of the name of each
purchaser;
(16) by a trustee to a successor trustee when such
transfer does not involve a change in the beneficial ownership of the
securities;
(17) by way of an offer and sale of outstanding securities
in an issuer transaction that is subject to the qualification
requirement of Section 25110 of the Code but exempt from that
qualification requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to
such a restriction on transfer, whether upon initial issuance or upon
any transfer thereof, shall bear on their face a legend prominently
stamped or printed thereon in capital letters of not less than 10-point
size reading as follows: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES."
14. Legends. The Company may at any time place legends referencing the
Right of First Refusal, and any applicable federal, state or foreign securities
law restrictions on all certificates representing shares of stock subject to the
provisions of this Option Agreement. The Optionee shall, at the request of the
Company, promptly present to the Company any and all certificates representing
shares acquired pursuant to the Option in the possession of the Optionee in
order to carry out the
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provisions of this Section. Unless otherwise specified by the Company, legends
placed on such certificates may include, but shall not be limited to, the
following:
14.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
14.2 Any legend required to be placed thereon by the Commissioner
of Corporations of the State of California.
14.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
14.4 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION
AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE
SHARES SHOULD NOT BE TRANSFERRED PRIOR TO____________. SHOULD THE REGISTERED
HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX
TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION
IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE
INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF
ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE."
15. Public Offering. The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including an initial public offering of
stock, made by the Company pursuant to an effective registration statement filed
under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in
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the public offering under the Securities Act. The Optionee shall be subject to
this Section provided and only if the officers and directors of the Company are
also subject to similar arrangements.
16. Binding Effect. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
17. Termination or Amendment. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation or is required to enable
the Option to qualify as an Incentive Stock Option. No amendment or addition to
this Option Agreement shall be effective unless in writing.
18. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein or therein and
there are no agreements, understandings, restrictions, representations, or
warranties among the Optionee and the Participating Company Group with respect
to such subject matter other than those as set forth or provided for herein or
therein. To the extent contemplated herein or therein, the provisions of this
Option Agreement shall survive any exercise of the Option and shall remain in
full force and effect.
190 Applicable Law. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
PRECEPT SOFTWARE, INC.
By:
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇,
President and Chief Executive Officer
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Right of First Refusal set
forth in Section 11, and hereby accepts the Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement. The undersigned acknowledges
receipt of a copy of the Plan and a copy of Section 260.141.11 of the Rules of
the Commissioner of Corporations of the State of California regarding
restrictions on transfer.
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OPTIONEE
Date: ____________________ ___________________________
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