Exhibit 10.1
STOCK OPTION AGREEMENT
OF
SAND HILL IT SECURITY ACQUISITION CORP.
THIS AGREEMENT (this "Agreement") is made and entered into this ___ day of
January, 2005, between Sand Hill IT Security Acquisition Corp., a Delaware
corporation (the "Company"), and _______________ (the "Advisor") in connection
with the grant of an option (the "Option") to acquire common stock, par value
$.01 (the "Stock") of the Company.
RECITALS:
A. The Company and Advisor wish for Advisor to perform certain services to
the Company, by acting as a member of the Company's Advisory Board (as defined
below), pursuant to an Advisor Agreement dated January 25, 2005 (the "Advisor
Agreement");
B. Advisor wishes to have a right to purchase Stock of the Company and the
Company desires to encourage him to advance the interests of the Company through
the right to purchase Stock upon the terms contained in this Agreement; and
C. The parties acknowledge that the right to purchase Stock is not the
fulfillment of any prior agreement of the parties, either written or oral.
NOW, THEREFORE, in consideration of these premises and covenants contained
herein, the parties agree as follows:
1. Definitions. For purposes of this Agreement, defined terms shall have
the meanings specified below:
(a) "Advisory Board" shall mean a board of independent members
appointed by the Board to serve as advisors to the Company in
connection with its search for a target business and the
structuring of a Business Combination (as defined below).
(b) "Board of Directors" shall mean the Board of Directors of the
Company.
(c) "Business Combination" shall mean the acquisition by the Company,
whether by merger, capital stock exchange, asset or stock
acquisition or other similar type of transaction, of a company
which is an operating business in the information technology
security industry.
(d) "Effective Date" shall mean the date of consummation of a
Business Combination.
(e) "Option Term" shall mean the term beginning on the Effective Date
and ending on the Termination Date (as defined below).
1
(f) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(g) "Termination Date" shall mean the earlier of: (i) the date the
Advisor Agreement is terminated; (ii) five (5) years from the
date hereof; or (iii) January 31, 2006, if a Business Combination
is not consummated on or before that date. The termination of the
Advisor Agreement with the Company may be made by the Company in
its sole discretion.
2. Grant of Option. Subject to the terms and conditions set forth in this
Agreement, the Company grants to Advisor an Option to purchase from the Company
during the Option Term, an aggregate of up to fifteen thousand (15,000) shares
of Stock at an exercise price of $4.75 per share, which Stock shall be subject
to adjustment, if any, as provided in Section 9 of this Agreement. Subject to
the conditions contained in this Agreement, including, but not limited to
Section 3, this Option shall be exercisable by Advisor on or after the Effective
Date and prior to the Termination date.
3. Method of Exercise and Payment.
(a) The Option that has become exercisable pursuant to Section 2 may only
be exercised in whole or in part subsequent to or concurrent with the
consummation of a Business Combination.
(b) The shares of Stock subject to this Option shall vest 50% of the total
number of shares of Stock initially subject to this Option on each of the first
and second anniversary of the date hereof.
(c) The Option must be exercised by written notice to the Company at the
address provided in this Agreement on or following the Effective Date, which
written notice shall:
(i) specify the number of shares of Stock to be purchased;
(ii) if the person exercising this Option is not Advisor himself,
contain or be accompanied by evidence satisfactory to the Board
of Directors of such person's right to exercise this Option;
(iii) be accompanied by payment in full of the purchase price in cash,
by certified or cashier's check, by money order, or by a
combination of the above; provided, however, that the Board of
Directors may, in its discretion, accept a personal check from
Advisor; and
(iv) be effective only if a Business Combination is consummated prior
to the Termination Date.
(d) The Board of Directors may, in its discretion, require Advisor to pay
to the Company at the time of exercise of this Option (or portion of this
Option) the amount that the Company deems necessary to satisfy its obligation to
2
withhold Federal, state or local income or other taxes incurred by reason of the
exercise. Where the exercise of this Option does not give rise to an obligation
to withhold Federal income or other taxes on the date of exercise, the Company
may, if tax laws require the Company to later withhold taxes, require Advisor to
place shares of Stock purchased under this Option in escrow until such time as
Federal income or other tax withholding is no longer required or is satisfied
with respect to such shares. At such later time, the Company, in its discretion,
may require Advisor to pay to the Company the amount that the Company deems
necessary to satisfy its obligation to withhold Federal, state or local income
or other taxes incurred by reason of the exercise of this Option or the
disposition of shares of Stock.
4. Representations of Advisor and Compliance with Securities Laws.
(a) Advisor agrees that this Option and the shares of Stock acquired upon
exercise of this Option shall be acquired for his own account for investment
only and not with a view to, or for resale in connection with, any distribution
or public offering within the meaning of the Securities Act or other applicable
securities laws. Advisor represents that he is knowledgeable in making
investments similar to receiving rights under this Option, and has been given
the opportunity to review such information about the Company as to make a fully
informed decision to acquire this Option. No guaranties have been given by the
Company regarding the value of the Option or the future value of the Stock.
(b) Nothing in this Option shall require the Company to issue any shares
upon exercise of this Option if such issuance would, in the opinion of counsel
for the Company, constitute a violation of the Securities Act, or any similar or
superseding statute or statutes, or any other applicable statute or regulation,
as then in effect. At the time of any exercise of this Option, the Company may,
as a condition precedent to the exercise of this Option, require from Advisor
(or in the event of his death, his legal representatives, heirs, legatees, or
distributees) such written representations, if any, concerning his intentions
with regard to the retention or disposition of the shares being acquired by
exercise of this Option and such written covenants and agreements, if any, as to
the manner of disposal of such shares as, in the opinion of counsel to the
Company, may be necessary to ensure that any disposition by Advisor (or in the
event of his death, his legal representatives, heirs, legatees, or
distributees), will not involve a violation of the Securities Act, or any other
applicable state or federal statute or regulation, as then in effect.
Certificates for shares of Stock, when issued, may have the following or similar
legend, or statements of other applicable restrictions, endorsed on them, and
may not be immediately transferable:
The shares of stock evidenced by this certificate have been
issued to the registered owner in reliance upon written
representations that these shares have been purchased for
investment. These shares have not been registered under the
Securities Act of 1933, as amended, or any applicable state
securities laws, in reliance upon an exemption from registration.
Without such registration, these shares may not be sold,
transferred, assigned or otherwise disposed of unless, in the
opinion of the Company and its legal counsel, such sale,
transfer, assignment or disposition will not be in violation of
the Securities Act of 1933, as amended, applicable rules and
regulations of the Securities and Exchange Commission, and any
applicable state securities laws.
3
5. Transfer and Exercise of Option. This Option shall not be transferable
by Advisor, except by will or by the laws of descent and distribution. No
assignment or transfer of this Option, or any rights hereunder, whether
voluntary or involuntary, by operation of law or otherwise, except a transfer by
will or by the laws of descent or distribution, shall vest in the assignee or
transferee any interest or right whatsoever in this Option or any rights
hereunder. During Advisor's lifetime this Option may be exercised only by him.
Any existence of community property rights of Advisor's spouse shall not permit
any exercise by his spouse.
6. Surrender of Option. If this Option is exercised in part by Advisor,
Advisor shall, if requested, deliver this Agreement and any other written
agreements with respect to this Option to the Company to be endorsed with a
notation of such exercise and returned to Advisor.
7. Expiration of Option Upon Termination Date. That portion of the Option
which has not been exercised shall terminate and be forfeited to the Company on
the Termination Date. Notwithstanding anything contained herein to the contrary,
if a Business Combination has not been consummated prior to the Termination
Date, the Option shall terminate and be forfeited to the Company on the
Termination Date.
8. Status of Advisor. Advisor shall not be deemed a stockholder of the
Company with respect to any of the shares of Stock subject to this Option,
except to the extent that such shares shall have been purchased by him. No
adjustment shall be made for dividends or other distributions or other rights
for which the record date is prior to the date this Option is exercised, except
as provided in Section 9. The Company shall not be required to issue or transfer
any certificates for shares of Stock purchased upon exercise of this Option
until all applicable requirements of law have been satisfied. Advisor agrees to
furnish to the Company all information requested by the Company to enable it to
comply with any reporting requirements imposed on the Company by any applicable
statute or regulation.
9. Adjustment of Shares.
(a) If at any time while unexercised Options are outstanding hereunder,
there shall be any increase or decrease in the number of issued and outstanding
shares of Stock through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, merger, consolidation,
liquidation or any combination or exchange of shares, then, and in such event,
appropriate adjustment shall be made in the number of shares of Stock and the
exercise price per share thereof then subject to this Option.
(b) The Company may change the terms of this Option, with respect to the
exercise price or the number of shares of Stock subject to this Option, or both,
when, in the Company's sole discretion, such adjustments become appropriate by
reason of any significant corporate transaction.
(c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
4
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to the number of or exercise price of Stock then subject to
this Option.
(d) Without limiting the generality of the foregoing, the existence of this
Option shall not affect in any manner the right or power of the Company to make,
authorize or consummate (i) any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business; (ii) any merger or consolidation of the Company; (iii) any issue by
the Company of debt securities, or preferred or preference stock that would rank
above the Stock subject to this Option; (iv) the dissolution or liquidation of
the Company; (v) any sale, transfer or assignment of all or any part of the
assets or business of the Company; or (vi) any other corporate act or
proceeding, whether of a similar character or otherwise.
10. Administration of this Option.
(a) The determinations and the interpretation and construction of any
provision of this Option by the Company shall be final and conclusive.
(b) Subject to the express provisions of this Option, the Company shall
have the authority, in its sole and absolute discretion (i) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to this
Option; (ii) to construe the terms of this Option; (iii) as provided in Section
9, upon certain events to make appropriate adjustments to the exercise price and
number of shares of Stock subject to this Option; and (iv) to make all other
determinations and perform all other acts necessary or advisable for
administering this Option, including the delegation of such ministerial acts and
responsibilities as the Company deems appropriate. The Company may correct any
defect or supply any omission or reconcile any inconsistency in this Option in
the manner and to the extent it shall deem expedient to carry it into effect,
and it shall be the sole and final judge of such expediency. The Company shall
have full discretion to make all determinations on the matters referred to in
this Section 10(b), and such determinations shall be final, binding and
conclusive.
11. Notice. Whenever any notice is required or permitted under this
Agreement, such notice must be in writing and delivered (personally or by
courier) or sent by mail. Any notice required or permitted to be delivered under
this Agreement shall be deemed to be delivered on the date which it is
personally delivered, or, whether actually received or not, on the third
business day after it is deposited in the United States mail, certified or
registered, postage prepaid, addressed to the person who is to receive it at the
address which such person has previously specified by written notice delivered
in accordance with this Agreement. The Company or Advisor may change, at any
time and from time to time, by written notice to the other, the address
previously specified for receiving notices. Until changed in accordance with
this Agreement, the Company and Advisor specify their respective addresses as
set forth below:
Company: Sand Hill IT Security Acquisition Corp.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
5
Advisor: __________________________
__________________________
__________________________
12. Miscellaneous.
(a) Further Assurances. Each party to this Agreement agrees to perform all
further acts and to execute and deliver all further documents that may be
reasonably necessary to carry out the provisions of this Agreement.
(b) Severability. In the event that any provision of this Agreement is held
to be unenforceable or invalid by any court of competent jurisdiction, the
validity and enforceability of the remaining provisions will not be affected,
and such unenforceable provision shall be automatically modified (including
modification of geographic scope and/or length of time) to the extent necessary
so that it may be valid and enforceable.
(c) Use of Terms. Whenever used in this Agreement, the singular number will
include the plural, and the plural number will include the singular, and
pronouns in the masculine, feminine, or neuter gender will include each other
gender. Headings are used for convenience only, and are not to be given
substantive effect.
(d) Applicable Law. THIS AGREEMENT HAS BEEN EXECUTED IN AND WILL BE
GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(e) Liability of the Board. The members of the Board of Directors shall not
be liable for any act, omission or determination taken or made in good faith
with respect to this Option, and members of the Board of Directors shall, in
addition to all other rights of indemnification and reimbursement, be entitled
to indemnification and reimbursement by the Company in respect of any claim,
loss, damage, liability or expense (including attorneys' fees, the costs of
settling any suit, provided such settlement is approved by independent legal
counsel selected by the Company, and amounts paid in satisfaction of a judgment,
except a judgment based on a finding of bad faith) arising from such claim,
loss, damage, liability or expense to the full extent permitted by law and under
any directors' and officers' liability or similar insurance coverage that may
from time to time be in effect.
(f) Binding Effect. Subject to the restrictions against transfer or
assignment as contained in this Agreement, the provisions of this Agreement will
benefit and will be binding on the permitted successors in interest, personal
representatives, estates, heirs and legatees of each of the parties hereto.
(g) Amendment. Other than as set forth herein, this Agreement may only be
amended by the written consent of all of the parties to this Agreement at the
time of such amendment.
6
(h) Entire Agreement. This Agreement, and the Advisor Agreement, contains
the entire understanding between the parties concerning the subject matter
contained herein and therein. There are no representations, agreements,
arrangements or understandings, oral or written, between or among the parties
hereto, relating to the subject matter herein or therein, which are not fully
expressed herein or therein. This Agreement may be signed in one or more
counterparts, all of which shall be considered one and the same agreement.
[Signature Page Follows]
7
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and Advisor has set his hand on the day and year first above written.
"COMPANY" SAND HILL IT SECURITY
ACQUISITION CORP.
By:__________________________________
Name:________________________________
Title:_______________________________
"ADVISOR"
By:__________________________________
8