Exhibit 4.2
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT (this "Agreement") is entered into as of
_________, 199_, by and between Cobblestone Holdings, Inc., a Delaware
corporation (the "Company") and __________________________ ("Purchaser").
RECITALS
A. Purchaser is a member of the Company's Board of Directors.
B. The Company desires to issue to Purchaser, and Purchaser desires to
accept from the Company, an option (the "Option") to purchase, subject to
adjustment as set forth herein, _______________ shares (such shares issuable
upon exercise of the Option being called the "Common Shares") of the Company's
authorized but unissued Common Stock, par value $.01 per share (the "Common
Stock") upon the terms and conditions specified herein.
C. The Company desires to have, and Purchaser is willing to grant to the
Company, the right and option to repurchase the Common Shares issuable upon
exercise of the Option upon the terms and conditions contained herein, including
the vesting provisions contained herein.
D. It is a condition precedent to the obligations of the Company under this
Agreement that the Purchaser enter into that certain Stockholders' Agreement
dated January 31, 1994, as amended (the "Stockholders' Agreement").
THEREFORE, in consideration of the premises and of the covenants and
conditions contained herein, the parties hereto agree as follows:
1. Purchase and Sale; Closing. (a) The Company hereby issues and grants to
Purchaser, and Purchaser hereby agrees to accept from the Company, the Option.
The Option is exercisable only when and to the extent it become vested (as
described below) and shall remain exercisable for ten (10) years, subject to
earlier expiration as set forth herein. The initial exercise price of the Option
is $____ per share, for an initial aggregate exercise price of $_____.
(b) Upon proper exercise of the Option and payment in cash of the
applicable exercise price and all applicable withholding, the Company shall
deliver to Purchaser certificates evidencing the Common Shares registered in the
name of Purchaser, and concurrently therewith Purchaser shall make payment in
cash of the aggregate purchase price of the Common Shares.
2. Vesting. (a) The Option shall become, vested and exercisable with
respect to ___% of the Common Shares covered thereby on each January 1st of the
years ____, ____, ____, ____ and ____.
The foregoing notwithstanding, no portion of the Option shall become vested
unless Purchaser has been a member of the Company's Board of Directors
continuously from the date of this Stock Option Agreement until each respective
date on which the Common Shares are scheduled to vest; provided, however, that
if such membership is terminated by the Company, with or without cause, the
portion of the Option scheduled to vest in the period in which such termination
occurs shall vest upon such termination.
(b) Anything in this Agreement to the contrary notwithstanding, if the
Company is acquired by a third party through an asset purchase, merger or sale
of 80% (in value) or
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more of the outstanding equity securities of the Company (an "Acquisition"), all
installments of the portion of the Option scheduled or eligible to vest in the
calendar year in which the Acquisition is closed (and not previously repurchased
by the Company pursuant to Section 3) plus the portion of the Option scheduled
to vest in the next succeeding period shall vest immediately prior to the
Acquisition closing date, and all further vesting shall thereupon cease. The
Company will give the Purchaser at least five (5) days prior written notice (the
"Acquisition Notice") of the closing of any Acquisition. Upon an Acquisition,
the Company's board of directors may, in its absolute discretion and upon such
terms and conditions as it deems appropriate, provide by resolution, adopted
prior to such event and incorporated in the Acquisition Notice, that at some
time prior to the effective date of such event this Option shall be exercisable
as to all the shares covered hereby, notwithstanding that this Option may not
yet have become fully exercisable. Otherwise, upon an Acquisition, the Option,
whether vested or unvested in whole or in part, shall expire and cease to be
exercisable.
(c) As used herein, "Termination of Membership" shall mean the time when
Purchaser no longer serves on the Company's Board of Directors for whatever
reason whatsoever, with or without cause.
(d) The Option will expire and may not be exercised after the first to
occur of the following:
(i) The expiration of ten (10) years from the date the Option was
granted; or
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(ii) The time of the Purchaser's Termination of Membership unless such
Termination of Membership results from his death; or
(iii) The expiration of one (1) year from the date of the Purchaser's
death; or
(iv) An Acquisition.
3. Adjustments. The number of shares issuable upon exercise of the Option,
and the exercise price payable, are subject to adjustment as follows: if the
outstanding shares of the class or series then subject to the Option are
increased or decreased, or are changed into or exchanged for a different number
or kind of shares or securities, as a result of one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends or the
like, appropriate adjustments shall be made in the number and/or kind of shares
or securities for which the unexercised portions of the Option may thereafter be
exercised, all without any change in the aggregate exercise price applicable to
such unexercised portions, but with corresponding adjustment in the exercise
price per share or other unit. No fractional share of stock shall be issued
under the Option or in connection with any such adjustment. Such adjustment
shall be made by or under the authority of the Company's board of directors
whose determinations as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. Notwithstanding the foregoing,
the provisions of Section 2(b) shall control and supersede this Section 3 with
respect to a transaction referred to in Section 2(b).
4. Purchaser Representations and Agreements. Purchaser hereby represents
and warrants, and agrees with, the Company as set forth below.
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(a) Purchaser has full power and authority to execute, deliver and perform
his obligations under this Agreement and this Agreement is a valid and binding
obligation of Purchaser, enforceable in accordance with its terms.
(b) Purchaser has received and reviewed this Agreement and all annexes and
schedules hereto (including the Stockholders' Agreement) and has received all
such business, financial and other information as he deems necessary or
appropriate to enable him to evaluate the financial risk inherent in making an
investment in the Common Shares.
(c) Purchaser is acquiring the Option and any Common Shares for investment,
for his own account, and not as a nominee or agent for any other person,
corporation or entity, and not with a view to the sale or distribution of all or
any part thereof, and Purchaser has no present intention of selling, granting
participation in, or otherwise distributing the Option (or any part thereof) or
any Common Shares.
(d) Purchaser understands and agrees that (i) neither the Option nor any of
the Common Shares will be registered under the Securities Act of 1933, as
amended (the "Act"), in part based upon an exemption from the registration
predicated on the accuracy and completeness of his representations and
warranties appearing herein and (ii) he will not be permitted to sell, transfer
or assign all or any portion of the Option or any of the Common Shares issuable
upon exercise thereof until they are registered under the Act or an exemption
from the registration and prospectus delivery requirements of the Act is
available, and (iii) there is no assurance that such an exemption from
registration will ever be available or that the Option or the Common Shares
will ever be able to be sold.
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(e) Purchaser agrees that in no event will he make a disposition of the
Option or any Common Shares or any interest therein, unless such Option and/or
Common Shares are registered under the Act or unless and until (i) he 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) he shall have furnished the Company with an opinion of
counsel reasonably satisfactory in form and content to the Company to the effect
that (A) such disposition will not require registration under the Act or
compliance with applicable state securities laws, or (B) that appropriate action
necessary for compliance with the Act and applicable 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 subsection.
(f) Purchaser does not require the assistance of an investment advisor or
other Purchaser representative to participate 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 his investment in
the Company, has the ability to bear the economic risks of its investment for an
indefinite period of time and has been furnished with and has had access to such
information as would be made available in the form of a registration statement
under the Act 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 is an "accredited investor" (as such term is
deemed in Regulation D promulgated under the Securities Act of 1933, as
amended).
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5. Conditions to Exercise.
The obligations of the Company to issue shares upon exercise of the Option
are subject to the fulfillment of the conditions set forth below.
(a) All permits, consents, approvals, orders and authorizations, if any,
which the Company is required to obtain from, and all registrations,
qualifications, designations, declarations and filings which the Company is
required to make with, any state or Federal governmental authority of the United
States and any stock exchange on which the Common Stock is traded in connection
with the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly
obtained or made.
(b) Purchaser shall have become a party to and agreed to be bound by the
Stockholders' Agreement, which Stockholders' Agreement is hereby incorporated
herein as if set forth in full in this Agreement.
6. Legends.
(a) All certificates evidencing the Common Shares shall bear substantially
the following legends:
(i) "The securities represented by this certificate have not been
registered under the Securities Act. These securities have been acquired
for investment and not with a view to distribution or resale, and may not
be sold, offered for sale, pledged or hypothecated in the absence of an
effective registration statement for such shares under the Act or an
opinion of counsel satisfactory in form and content to the issuer that such
registration is not required under such Act."
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(ii) "The shares represented by this certificate or to be issued upon
exercise hereof are subject to a right of first refusal option in favor of
the Company and drag- along rights in favor of certain stockholders, each
as set forth in an agreement between the Company, its stockholders and the
registered holder, or its predecessor in interest, a copy of which is on
file at the principal office of the Company and will be furnished upon
request to the holder of record of the shares represented by this
certificate."
(b) As and when the facts legally justify, upon the written request of
Purchaser, the Company will deliver to Purchaser a certificate or certificates
representing the Common Shares without those legends which have become
inapplicable.
7. Enforcement.
The parties acknowledge that the remedy at law for any breach or violation
of the provisions of relating to restrictions on transfer contained or
incorporated herein shall be inadequate and that, in the event of any such
breach or violation, the Company shall be entitled to injunctive relief in
addition to any other remedy, at law or in equity, to which he or it may be
entitled.
8. Violation of Transfer Provisions. The Company shall not be required (a)
to transfer on its books any Common Shares which shall have been sold,
transferred, assigned or pledged in violation of any of the provisions of this
Agreement or (b) to treat as owner of such Common Shares or to accord the right
to vote or to pay dividends to any purported transferee of Common Shares in
violation of any of the provisions of this Agreement.
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9. General Provisions.
(a) No Assignments. Except as specifically provided to the contrary in this
Agreement, Purchaser shall not transfer, assign or encumber the Option or any of
his rights, privileges, duties or obligations under this Agreement without the
prior written consent of the Company, and any attempt to so transfer, assign or
encumber shall be void.
(b) Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given and made and served either by personal delivery to the person
for whom it is intended (including by reputable overnight delivery services
which shall be deemed to have effected personal delivery) or by telecopy,
receipt of which is acknowledged by the telecopy number set forth below for the
applicable addressee, or if deposited, postage prepaid, registered or certified
mail, return receipt requested, in the United States mail:
(i) if to Purchaser, addressed to Purchaser at his address shown on
the stock register maintained by the Company, or at such other address as
Purchaser may specify by written notice to the Company, or
(ii) if to the Company, at 3702 Via de la Valle, Suite 202, Del Mar,
California 92014, Attention: President; or at such other address as the
Company may specify in writing, with a copy to David H. Wong, Brentwood
Associates, 11150 Santa Monica Boulevard, Suite 1200 Los Angeles,
California 90025.
Each such notice, request, consent and other communication shall be deemed to
have been given upon receipt thereof as set forth above or, if sooner, three
days after deposit as described above. The addresses for the purposes of this
Section 18(c) may be changed by
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giving written notice of such change in the manner provided herein for giving
notice. Unless and until such written notice is received, the addresses provided
herein shall be deemed to continue in effect for all purposes hereunder.
(c) Choice of Law. This Agreement shall be governed by and construed in
accordance with the internal laws, and not the laws of conflicts of laws, of the
State of Delaware.
(d) Severability. The parties hereto agree that the terms and provisions in
this Agreement are reasonable and shall be binding and enforceable in accordance
with the terms hereof and, in any event, that the terms and provisions of this
Agreement shall be enforced to the fullest extent permissible under law. In the
event that any term or provision of this Agreement shall for any reason be
adjudged to be unenforceable or invalid, then such unenforceable or invalid term
or provision shall not affect the enforceability or validity of the remaining
terms and provisions of this Agreement, and the parties hereto hereby agree to
replace such unenforceable or invalid term or provision with an enforceable and
valid arrangement which in its economic effect shall be as close as possible to
the unenforceable or invalid term or provision.
(e) Parties in Interest. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective permitted successors and assigns of the parties hereto.
(f) Modification, Amendment and Waiver. No modification, amendment or
waiver of any provision of this Agreement shall be effective against the Company
or Purchaser unless approved in writing, and, in the case of the Company,
authorized by its
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Board of Directors. The failure at any time to enforce any of the provisions of
this Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of any of the parties thereafter to enforce, each and
every provision hereof in accordance with its terms.
(g) Integration. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof.
(h) Headings. The headings of the sections and paragraphs of this Agreement
have been inserted for convenience of reference only and do not constitute a
part of this Agreement.
(i) Counterparts. This Agreement may be executed in counterpart with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
COMPANY:
COBBLESTONE HOLDINGS, INC.
By:
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Name:
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Title:
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PURCHASER:
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