EXHIBIT 4.2
EXHIBIT A
LMKI, INC.
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COMMON STOCK PURCHASE AGREEMENT AND
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NOTICE OF EXERCISE
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THIS AGREEMENT is dated as of ___________, ____, between LMKI, Inc.
(the "Company"), and _________________ ("Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and Purchaser are parties to that certain ___
Incentive ___ Nonstatutory Stock Option Agreement dated as of ___________, ____
(the "Option Agreement") pursuant to which the Purchaser has the right to
purchase up to ______ shares of the Company's common stock (the "Option
Shares"); and
WHEREAS, the Option is exercisable with respect to certain of the
Option Shares as of the date hereof; and
WHEREAS, pursuant to the Option Agreement, Purchaser desires to
purchase shares of the Company as herein described, on the terms and conditions
set forth in this Agreement, the Option Agreement and the LMKI, Inc. Amended and
Restated 1999 Stock Option Plan (the "Plan"). Certain capitalized terms used in
this Agreement are defined in the Plan.
NOW, THEREFORE, it is agreed between the parties as follows:
SECTION 1: PURCHASE OF SHARES.
Pursuant to the terms of the Option Agreement, Purchaser hereby agrees
to purchase from the Company and the Company agrees to sell and issue to
Purchaser _________ shares of the Company's common stock (the "Stock") for the
Exercise Price per share specified in the Option Agreement payable by personal
check, cashier's check or money order, if permitted by the Option Agreement, as
follows: _______________________________. Payment shall be delivered at the
Closing, as such term is hereinafter defined.
The closing hereunder (the "Closing") shall occur at the offices of the
Company on __________, ____, or such other time and place as may be designated
by the Company (the "Closing Date").
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(B) REPURCHASE OPTION
All unvested shares of the Stock purchased by the Purchaser pursuant to
this Agreement (sometimes referred to as the "Repurchase Option Stock") shall be
subject to the following option (the "Repurchase Option"):
In the event the Purchaser terminates service with the Company
("Service") for any reason, with or without cause, the Company may exercise the
Repurchase Option.
Purchaser understands that the Stock is being sold in order to induce
Purchaser to become and/or remain associated with the Company and to work
diligently for the success of the Company and that the Repurchase Option Stock
will continue to vest in accordance with the schedule set forth in the Option
Agreement. Accordingly, the Company shall have the right at any time within 90
days after the termination of Service to purchase from the Purchaser all shares
of Stock purchased hereunder which have not vested in accordance with the terms
of such vesting schedule in the Option Agreement. The purchase price for such
unvested shares of Repurchase Option Stock shall be the Exercise Price per share
paid by Purchaser for such shares pursuant to the Option (the "Option Price").
The purchase price shall be paid by certified or cashier's check or by
cancellation of any indebtedness of Purchaser to the Company.
Nothing in this Agreement shall be construed as a right by purchaser to
be employed by Company, or a parent or subsidiary of Company.
(C) EXERCISE OF REPURCHASE OPTION
The Repurchase Option shall be exercised by written notice signed by an
officer of the Company and delivered or mailed as provided in Section 16 of this
Agreement and to the Escrow Agent as provided in Section 16 of the Joint Escrow
Instructions attached as Exhibit B to the Option Agreement.
(D) WAIVER, ASSIGNMENT, EXPIRATION OF REPURCHASE OPTION
If the Company waives or fails to exercise the Repurchase Option as to
all of the shares subject thereto, the Company may, in the discretion of its
Board of Directors, assign the Repurchase Option to any other holder or holders
of preferred or common stock of the Company in such proportions as such Board of
Directors may determine. In the event of such an assignment, the assignee shall
pay to the Company in cash an amount equal to the fair market value of the
Repurchase Option. The Company shall promptly, upon expiration of the 90-day
period referred to in Section 2 above, notify Purchaser of the number of shares
subject to the Repurchase Option assigned to such stockholders and shall notify
both the Purchaser and the assignees of the time, place and date for settlement
of such purchase, which must be made within 90 days from the date of cessation
of continuous employment. In the event that the Company and/or such assignees do
not elect to exercise the Repurchase Option as to all or part of the shares
subject to it, the Repurchase Option shall expire as to all shares which the
Company and/or such assignees have not elected to purchase.
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(E) ESCROW OF SHARES
As security for Purchaser's faithful performance of the terms of this
Agreement and to ensure the availability for delivery of Purchaser's shares upon
exercise of the Repurchase Option herein provided for, Purchaser agrees at the
Closing hereunder, to deliver to and deposit with the Escrow Agent named in the
Joint Escrow Instructions attached to the Option Agreement as Exhibit B, the
certificate or certificates evidencing the Option Stock subject to the
Repurchase Option and two Assignments Separate from Certificate duly executed
(with date and number of shares in blank) in the form attached to the Option
Agreement as Exhibit D. Such documents are to be held by the Escrow Agent and
delivered by the Escrow Agent pursuant to the Joint Escrow Instructions, which
instructions shall also be delivered to the Escrow Agent at the Closing
hereunder.
Within 30 days after the last day of each successive completed calendar
quarter after the Closing Date, if Purchaser so requests, the Escrow Agent will
deliver to Purchaser certificates representing so many shares of Stock as are no
longer subject to the Repurchase Option (less such shares as have been
previously delivered). Ninety days after cessation of Purchaser's employment
with the Company the Company will direct the Escrow Agent to deliver to
Purchaser a certificate or certificates representing the number of shares not
repurchased by the Company or its assignees pursuant to exercise of the
Repurchase Option (less such shares as have been previously delivered).
(F) ADJUSTMENT OF SHARES
Subject to the provisions of the Articles of Incorporation of the
Company, if, from time to time during the term of the Repurchase Option:
(i) there is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company, or
(ii) there is any consolidation, merger or sale of all or substantially
all, of the assets of the Company,
then, in such event, any and all new, substituted or additional
securities or other property to which Purchaser is entitled by reason of
Purchaser's ownership of the shares shall be immediately subject to such
Repurchase Option with the same force and effect as the shares of Option Stock
from time to time subject to the Repurchase Option. While the total Option Price
shall remain the same after each such event, the Option Price per share of
Option Stock upon exercise of the Repurchase Option shall be appropriately and
equitably adjusted as determined by the Board of Directors of the Company.
(G) THE COMPANY'S RIGHT OF FIRST REFUSAL.
Before any shares of Stock registered in the name of Purchaser and not
subject to the Repurchase Option may be sold or transferred, such shares shall
first be offered to the Company as set forth in the Option Agreement.
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(H) PURCHASER'S RIGHTS AFTER EXERCISE OF REPURCHASE OPTION OR
RIGHT OF FIRST REFUSAL.
If the Company makes available, at the time and place and in the amount
and form provided in this Agreement, the consideration for the Stock to be
repurchased in accordance with the provisions of Sections 2 and 7 of this
Agreement, then from and after such time the person from whom such shares are to
be repurchased shall no longer have any rights as a holder of such shares (other
than the right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed to have been repurchased in accordance
with the applicable provisions hereof, whether or not the certificate(s)
therefor have been delivered as required by this Agreement.
(I) TRANSFER BY PURCHASER TO CERTAIN TRUSTS.
Purchaser shall have the right to transfer all or any portion of
Purchaser's interest in the shares issued under this Agreement which have been
delivered to Purchaser under the provisions of Section 5 of this Agreement, to a
trust established by Purchaser for the benefit of Purchaser, Purchaser's spouse
or Purchaser's children, without being subject to the provisions of Section 7
hereof, provided that the trustee on behalf of the trust shall agree in writing
to be bound by the terms and conditions of this Agreement. The transferee shall
execute a copy of Exhibit C attached to the Option Agreement and file the same
with the Secretary of the Company.
(J) LEGEND OF SHARES.
All certificates representing the Stock purchased under this Agreement
shall, where applicable, have endorsed thereon the legends set forth in the
Option Agreement and any other legends required by applicable securities laws.
(K) PURCHASER'S INVESTMENT REPRESENTATIONS.
This Agreement is made with Purchaser in reliance upon Purchaser's
representation to the Company, which by Purchaser's acceptance hereof Purchaser
confirms, that the Stock which Purchaser will receive will be acquired with
Purchaser's own funds for investment for an indefinite period for Purchaser's
own account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that Purchaser has no present intention of
selling, granting participation in, or otherwise distributing the same, but
subject, nevertheless, to any requirement of law that the disposition of
Purchaser's property shall at all times be within Purchaser's control. By
executing this Agreement, Purchaser further represents that Purchaser does not
have any contract, understanding or agreement with any person to sell, transfer,
or grant participation, to such person or to any third person, with respect to
any of the Stock.
Purchaser understands that the Stock will not be registered or
qualified under federal or state securities laws on the ground that the sale
provided for in this Agreement is exempt from registration or qualification
under federal or state securities laws and that the Company's reliance on such
exemption is predicated on Purchaser's representations set forth herein.
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Purchaser agrees that in no event will Purchaser make a disposition of
any of the Stock (including a disposition under Section 9 of this Agreement),
unless and until (i) Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition and (ii) Purchaser shall have
furnished the Company with an opinion of counsel satisfactory to the Company to
the effect that (A) such disposition will not require registration or
qualification of such Stock under federal or state securities laws or (B)
appropriate action necessary for compliance with the federal or state securities
laws has been taken or (iii) the Company shall have waived, expressly and in
writing, its rights under clauses (i) and (ii) of this section.
With respect to a transaction occurring prior to such date as the Plan
and Stock thereunder are covered by a valid Form S-8 or similar federal
registration statement, this subsection shall apply unless the transaction is
covered by the exemption in California Corporations Code ss.25102(o) or a
similar broad based exemption. In connection with the investment representations
made herein, Purchaser represents that Purchaser is able to fend for himself or
herself in the transactions contemplated by this Agreement, has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of Purchaser's investment, has the ability to bear the
economic risks of Purchaser's investment and has been furnished with and has had
access to such information as would be made available in the form of a
registration statement together with such additional information as is necessary
to verify the accuracy of the information supplied and to have all questions
answered by the Company.
Purchaser understands that if the Company does not register with the
Securities and Exchange Commission pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or if a registration
statement covering the Stock (or a filing pursuant to the exemption from
registration under Regulation A of the Securities Act of 1933) under the
Securities Act of 1933 is not in effect when Purchaser desires to sell the
Stock, Purchaser may be required to hold the Stock for an indeterminate period.
Purchaser also acknowledges that Purchaser understands that any sale of the
Stock which might be made by Purchaser in reliance upon Rule 144 under the
Securities Act of 1933 may be made only in limited amounts in accordance with
the terms and conditions of that Rule.
(L) ASSISTANCE TO PURCHASER UNDER RULE 144.
The Company covenants and agrees that (a) at all times after it first
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, it will use its best efforts to comply with the current public
information requirements of Rule 144(c)(1) under the Securities Act of 1933, and
that if prior to becoming subject to such reporting requirements an
over-the-counter market develops for the Stock, it will make publicly available
the information required by Rule 144(c)(2); (b) it will furnish Purchaser, upon
request, with all information required for the preparation and filing of Form
144; and (c) it will on a timely basis use its best efforts to file all reports
required to be filed and make all disclosures, including disclosures of
materially adverse information, required to permit Purchaser to make the
required representations in Form 144.
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(M) NO DUTY TO TRANSFER IN VIOLATION HEREUNDER.
The Company shall not be required (a) to transfer on its books any
shares of Stock of the Company which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement or (b) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
(N) RIGHTS OF PURCHASER.
Except as otherwise provided herein, Purchaser shall, during the term
of this Agreement, exercise all rights and privileges of a stockholder of the
Company with respect to the Stock.
(O) OTHER NECESSARY ACTIONS.
The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
(P) NOTICE.
Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon the earliest of personal delivery,
receipt or the third full day following deposit in the United States Post Office
with postage and fees prepaid, addressed to the other party hereto at the
address last known or at such other address as such party may designate by 10
days' advance written notice to the other party hereto.
(Q) SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser and Purchaser's heirs, executors, administrators,
successors and assigns. The failure of the Company in any instance to exercise
the Repurchase Option or rights of first offer described herein shall not
constitute a waiver of any other Repurchase Option or right of first offer that
may subsequently arise under the provisions of this Agreement. No waiver of any
breach or condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of a like or different nature.
(R) APPLICABLE LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California, as such laws are applied to contracts
entered into and performed in such state.
(S) NO STATE QUALIFICATION.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS
NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100,
25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
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(T) NO ORAL MODIFICATION.
No modification of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
(U) ENTIRE AGREEMENT.
This Agreement and the Option Agreement constitute the entire complete
and final agreement between the parties hereto with regard to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LMKI, INC. PURCHASER
By _________________________ _____________________________
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EXHIBIT B
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JOINT ESCROW INSTRUCTIONS
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Secretary
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Dear Sir or Madam:
As Escrow Agent for both LMKI, Inc. (the "Company"), and
___________________ ("Purchaser"), you are hereby authorized and directed to
hold the documents delivered to you pursuant to the terms of that certain Common
Stock Purchase Agreement (the "Agreement") of even date herewith, to which a
copy of these Joint Escrow Instructions is attached as Exhibit B to a certain
Stock Option dated ________ ("Option Agreement"), in accordance with the
following instructions:
In the event the Company shall elect to exercise the Repurchase Option
set forth in the Agreement, the Company shall give to Purchaser and you a
written notice as provided in the Agreement. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice, including prompt delivery of stock certificates.
At the closing, you are directed (a) to date the stock assignment form
or forms necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
or certificates evidencing the shares to be transferred, to the Company against
the simultaneous delivery to you of the purchase price (by certified or bank
cashier's check) for the number of shares being purchased pursuant to the
exercise of the Repurchase Option.
Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares to be held by you hereunder and any additions and
substitutions to said shares as defined in the Agreement. Purchaser does hereby
irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent
for the term of this escrow to execute with respect to such securities all
documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated. Subject to the provisions of this
Section 3, Purchaser shall exercise all rights and privileges, including but not
limited to, the right to vote and to receive dividends (if any), of a
stockholder of the Company while the shares are held by you.
In accordance with the terms of Section 5 of the Agreement, you may
from time to time deliver to Purchaser a certificate or certificates
representing so many shares as are no longer subject to the Repurchase Option.
This escrow shall terminate upon the release of all shares held under
the terms and provisions hereof.
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If at the time of termination of this escrow you should have in your
possession any documents, securities or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged from all
further obligations hereunder.
Your duties hereunder may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact of Purchaser while acting in good faith and
in the exercise of your own good judgment, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
You shall be entitled to employ such legal counsel and other experts as
you may deem necessary properly to advise you in connection with your
obligations hereunder and may rely upon the advice of such counsel.
Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice of each party. In the event of any such termination, the Company shall
appoint any officer of the Company as successor Escrow Agent.
If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
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It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled.
By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
This instrument shall be governed by and construed in accordance with
the laws of the State of California.
This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Very truly yours,
LMKI, INC.
By ___________________________
ESCROW AGENT: PURCHASER:
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EXHIBIT C
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ACKNOWLEDGMENT OF AND AGREEMENT TO BE BOUND
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BY THE NOTICE OF EXERCISE AND COMMON STOCK PURCHASE AGREEMENT OF
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LMKI, INC.
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The undersigned, as transferee of shares of LMKI, INC., hereby
acknowledges that he or she has read and reviewed the terms of the Notice of
Exercise and Common Stock Purchase Agreement of LMKI, INC. and hereby agrees to
be bound by the terms and conditions thereof, as if the undersigned had executed
said Agreement as an original party thereto.
Dated: ____________________, ____.
By ___________________________
EXHIBIT D
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ASSIGNMENT SEPARATE FROM CERTIFICATE
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FOR VALUE RECEIVED _________________________________ hereby sells,
assigns and transfers unto _________________________ ________________________
(________) shares of the Common Stock of LMKI, INC. (the "Company"), standing in
__________ name on the books of the Company represented by Certificate No.
___________ herewith and hereby irrevocably constitutes and appoints
________________ Attorney to transfer said stock on the books of the Company
with full power of substitution in the premises.
Dated: ____________________, ____.